“By supporting our clients with this approach, they trust us to provide the necessary equipment for their manufacturing processes,” says president Chiharu Miyata.
It is our view that Japan is at a very exciting time for manufacturing. On one hand, we have had major supply chain disruptions in the last three years, caused by the COVID-19 pandemic as well as tension from the China-US decoupling situation. As a result, we are seeing many multinational groups try to diversify their supply chains with a focus on reliability. This is where Japan can enter; a country known for decades of high reliability, trustworthiness, and short lead times when it comes to production. Now, with a depreciated JPY, it is our view that there’s never been a more opportune moment for Japanese manufacturers to meet the pressing needs of this macroeconomic environment. Do you agree with this premise, and why or why not?
The escalating tensions between the US and China have become a matter of great sensitivity, particularly for companies like ours. In terms of the macroeconomic environment, some may perceive it as favoring Japanese companies, especially with the weakened JPY and the significant momentum in exports. While it is true that the macroeconomic conditions have been advantageous, certain shortcomings on the part of manufacturing companies have exposed us to potential risks. A formidable situation awaits us, and personally, I feel a strong sense of urgency and concern.
Japan stands out as one of the few countries with a central plan for easy monetary policy, and this has contributed to the weakening of the JPY due to the disparity in interest rates. In my view, the Bank of Japan should maintain its easy monetary policy until the Inflation target value reaches around 3-4%. This approach is warranted as the wages of Japanese workers have not seen significant growth yet, and the resources imported from overseas are becoming increasingly expensive for Japanese companies. We must be diligent in managing costs and endeavor not to burden customers with price increases. However, the current situation has placed Japanese companies under immense pressure to maintain stable prices while facing continuous hikes in imports and raw material costs.
Over the past 3 years, numerous Japanese component manufacturers have shut their overseas production facilities, resulting in supply shortages amidst escalating demand. These factors have undeniably stretched Japanese companies to their limits. Consequently, I firmly believe that the Bank of Japan should steadfastly maintain its current policy for the time being, as increasing interest rates would further burden repayments, intensifying the challenges faced by smaller Japanese firms.
It is important to bear in mind that my opinion represents just one perspective, and Japanese companies are indeed making efforts to enhance Japan's appeal from an overseas standpoint. Foreign currency exchange is just one aspect, and solely focusing on the weak JPY might lead to misconceptions about the overall situation. While the Bank of Japan sustains its policy, we must also capitalize on investments in manufacturing equipment and research and development (R&D). These two factors are critical for fostering innovation in Japanese companies, ensuring we maintain our position and rendering all our efforts fruitful.
I would like to get your take on the semiconductor industry as it relates to capital expenditure (CapEx). If we turn our attention back to the 1980s, semiconductor products such as dynamic random access memory (DRAM) were completely dominated by Japanese firms like Hitachi and Toshiba. Now if we look ahead to the 2000s this has been completely reversed. These firms completely lost their dominant market share and have switched to more capital-based investments. Companies have emerged like Tokyo Electron, and today no power semiconductor can be produced without their EUV Lithography Coater. Can you give us your take on why this happened, and perhaps most importantly, why does Japan continue to dominate functional chemicals and machinery for manufacturing semiconductors?
You are absolutely right in your observations, and I have personal experience living in the United States, precisely in Boston, during the 1980s. At that time, a semiconductor war between Japan and the US was unfolding, leading to the signing of the US-Japan semiconductor treaty in 1986. Unfortunately, after the treaty was established, our market share started to decline. I couldn't help but wonder why this matter became so politically charged. It seemed that the US, with its adoption of Reaganomics, was prioritizing its own economic strength. Consequently, political considerations took precedence over the semiconductor industry, diverting funds away from Silicon Valley and the Republican party.
In contrast, the Texas oil businesses held considerable influence, actively contributing to US politics. The West Coast, known for its Democratic leanings, did not substantially fund the Republican party. As a result of these dynamics, Japanese companies felt a sense of urgency due to the lobbying activities of their US counterparts, coupled with concerns regarding Taiwan's role in the situation. Viewing the broader picture, it can be argued that the US also suffered a loss in the semiconductor business, as they had sought to position themselves advantageously by the late 1980s. Prominent companies like Texas Instruments and Fairchild Semiconductor experienced setbacks during this period. The pivotal factor, in my opinion, was the shift in production overseas, undertaken by both Japan and the US. This led to the rise of companies such as Samsung, TSMC, and Huawei, and consequently, the transfer of technology from Japan to these entities. In hindsight, this transfer was a significant mistake, and I believe we should have retained that technological advantage. After all, IT is an infrastructure-driven business, and that infrastructure should ideally be located where the users are.
Today, Japanese companies continue to dominate the market for semiconductor manufacturing equipment, maintaining a strong market share. However, in certain areas like semiconductor pre-processing, Japan's market share has been declining. To address this, I see the crux of the matter lying in revisiting the transfer of technology once again. Had we avoided that past mistake, I am confident that Japanese firms would be in a stronger position today. Given the current situation, I firmly believe that Japanese companies must focus on technological development to overcome the challenges ahead effectively. Only through such efforts can we find meaningful solutions.
5G, AI, and IoT are really driving innovation in the semiconductor field recently, and of course, semiconductors allow for very energy-efficient and fast processes. In fact, they allow for integration into various different industries. Can you give us your take on what you believe are the key driving forces behind recent developments in the semiconductor industry, and specifically can you give us some examples of applications that you find interesting for the next generation of technologies?
My primary focus right now is on packaging technology, which is rapidly evolving. I am hopeful for strong innovations in the packaging industry. Many discussions revolve around the obsolescence of Moore’s Law, and semiconductors are no longer flat; instead, they contain multiple layers. In terms of stacking technology, Japan's advancements are poised to become highly valuable.
Living in the countryside and running my own ICT business, I am committed to exploring emerging technologies and their potential applications in unique ways. Given Japan's shrinking population, I view this as an opportune moment to leverage emerging technologies to alleviate societal burdens. While 5G is essential, I am also looking forward to the possibilities that next-gen 6G can bring, especially in improving mobility, which remains challenging in rural areas.
Our company initially ventured into the medical business with the goal of developing applications that enable medical care to be provided at home. This is an area I hold in high regard and a major focus of our efforts. Over the past 30 years, my development work heavily relied on the technologies available at the time, with no 5G or AI. Looking forward, I believe we must prioritize advancements in medical and mobility technologies to address Japan's pressing social issues, particularly considering the significant rural population. For these purposes, we must invest in energy-saving, highly functional chips capable of powering future applications that are yet to be developed.
To bring this vision to fruition, I emphasize the need for more data centers, not necessarily on the scale of Amazon or Google, but rather smaller regional data centers that enhance data transfers in remote areas. These micro data centers are witnessing increasing demand. However, with the proliferation of data centers, concerns arise regarding utilities and energy consumption, as massive amounts of heat are generated. Managing this heat, and consequently maintaining the infrastructure, places immense importance on the chips' capabilities. I'm closely monitoring the Japanese government's 3D-Chip project in Hokkaido, although I do maintain some reservations despite my high expectations. Our company, Miyatsu, deploys container devices for data centers, sized around 40 feet and strategically placed in various locations. We are currently conducting trials by offering optical fiber networking to 10,000 households through Fibre to the Home (FTTH) protocols. Notably, data from the trial will be analyzed at the location itself, rather than sending it to the cloud. Presently, we are at the data analysis stage, and I eagerly anticipate the results.
I agree with your beliefs here, and in fact, I would go as far as to say that networking is becoming almost as important as water or electricity in terms of regional revitalization. Access to very fast internet is vital to everyday life. Is there anything you would like to expand on regarding this topic?
I want to address the reason behind our involvement in a diverse range of businesses. Although we are primarily an equipment manufacturer, solely focusing on manufacturing carries the risk of becoming short-sighted. While a technology-centric approach might provide a micro viewpoint, our role as a manufacturer requires us to fully understand our clients' businesses and cater to their specific needs. Merely considering ourselves as suppliers might make things easier, but as a small company, we must proactively seek ways to thrive. In my view, this involves contemplating the applications our clients require and the technology necessary to support their pursuits. Embracing this mindset allows us to discover niches, leading to opportunities for corporate growth.
Beyond equipment manufacturing, we actively engage ourselves in the ICT business, carefully considering the applications our clients need. Miyatsu believes that by supporting our clients with this approach, we will attract potential clients who trust us to provide the necessary equipment for their manufacturing processes.
While companies like TSMC can sustain themselves by being suppliers for large companies like Samsung and holding tier-1 status in the semiconductor infrastructure, Miyatsu, as a smaller company, is perceived as less significant. To make our mark and establish our presence, having a clear vision of how to approach business becomes crucial. This is why we are involved in diverse types of businesses, as it allows us to expand our influence and showcase our capabilities.
You of course are a device maker, and one of the key products you sell today is called the MG6500R, which is a batch-ashing device. The idea behind ashing, or plasma etching, is to remove impurities or organic matter from the wafer, a vital part of semiconductor manufacturing. The cleaner a wafer is, the better the final outcome is. We’ve heard through our interview the analogy that it is like sweeping a baseball field with a toothbrush, basically an endless endeavor that is almost impossible to complete 100%. Can you give us some insight into the challenges you’ve faced developing a machine that is capable of achieving such high levels of cleanliness?
At the heart of our MG Series lies the plasma emitter, a vital component that has been a cornerstone of our machinery for over two decades. Ashing, also known as plasma etching, serves as an entry process and may seem daunting to some, but in reality, it is not as difficult as perceived. Once the plasma emitter achieves stability, it efficiently cleans the wafer surfaces, making it a crucial element in maintaining clean and smooth surfaces, as you mentioned. This equipment has been highly acclaimed by our customers due to its safety and user-friendly nature.
In truth, this equipment represents a refined iteration of past processes, carefully tailored based on customer requests and needs. Our commitment to customer satisfaction drives us to continually adjust and modify our equipment. Given the limited number of companies in this field, we are currently striving to establish our position as the third-leading company. By creating products that stand the test of time and serve our customers for over 20 years, we are confident in achieving this goal and solidifying our position in the industry.
You are a very international president having spent years in the United States. Are you looking for any partnerships currently, particularly in overseas markets?
Yes, of course. If I were to single out particular regions, I would emphasize Asia, Europe, and the United States as crucial markets. To successfully penetrate these regions, we must prioritize the replacement of our older tools with newer, more advanced models. It has come to our attention that some of our clients have been relying on the same tools for over 20 years, making their maintenance increasingly challenging. Consequently, we have urged these clients to consider investing in new tools, which will not only enhance their capabilities but also align with their evolving needs. By equipping our clients with cutting-edge equipment, we aim to strengthen our presence in these key markets and foster mutually beneficial relationships.
In the 1960s you catered to ICT, and of course, in the 1980s you started catering to the semiconductor industry. Like many Japanese SMEs, in the 2000s you looked overseas, beginning Miyatsu’s journey abroad in Hanoi Vietnam in 2012. Could you give us an insight into your overseas business over the past decade and some of the biggest lessons you’ve learned outside of the domestic market?
We initially started with software development rather than designing semiconductors. The reason behind this choice is the scarcity of resources in Vietnam. Establishing a plant for manufacturing semiconductor tools in Vietnam would entail sourcing over 60% of the materials from outside the country, which would not be practical. Thus, we decided to focus on providing services instead. To serve our clients in the Southeast Asian region effectively, I invited the staff there to come to our HQ in Japan for a comprehensive 5-year training program. Once they are well-trained, they return to Hanoi and play a crucial role in serving our clients in the region.
Recruiting talent outside of Japan is inherently challenging for any Japanese firm, and we face similar difficulties. To ensure that our staff meets our high standards and expectations, we bring engineers to Japan for training. This approach allows us to carefully develop their skills and expertise, aligning with our commitment to delivering quality services.