With 150 years of history, SCREEN Holdings is a supplier of vital manufacturing equipment to the semiconductor industry. While it continues to provide technology that cater to latest needs of the semiconductor industry, the company is also branching out into new segments, including energy and healthcare.
As a result of ongoing supply chain disruptions of semiconductor devices, major manufacturers such as TSMC are for the first time establishing fabs overseas to help meet demand, and as such many countries (India, Japan, Malaysia etc.) are attempting to curry favor and present themselves as ideal industry partners. From your point of view, what makes Japan the most ideal or interesting environment to open up fabs?
Japan used to have a great semiconductor industry. I believe Japan still has an excellent supply chain, with a 40% share in semiconductor materials and a 30% share in equipment for semiconductor manufacturing. Kyushu, where several industries are gathered, is an ideal place for a foundry. A newspaper quoted an official from a Taiwanese foundry who said that the costs for several goods and materials have not significantly increased in Japan due to the long-term deflation. Besides that, I think any overseas company can establish a competitive fab in Japan because it has great infrastructure and a lot of exceptional talent. The Japanese government has already announced its support for such plans, and has decided to increase subsidies for that initiative considering the trade friction between the US and China. From a BCP perspective, Taiwanese companies chose Japan.
The increasing complexity of chip structure and microfabrication have created new opportunities. However, it has also presented challenges, especially in inspection, front-end processes, and in the risk of damaging the integrity of the chip structure. What impact have developments in microfabrication had on your business? What solutions have you provided to your clients to keep up with the rapid advancement in this area?
Technological challenges have grown in tandem with the increasing complexity of device structure and advanced microfabrication. In logic, the gate structure is getting smaller and becoming three-dimensional, which is almost like a floating structure. Thus, the need to clean the surroundings of the wafer and keep the pattern for drying requires even more advanced technology.
DRAMs are also becoming more complex, as three-dimensional structures are beginning to be explored. As a result, the demands for the cleaning equipment and cutting-edge technologies needed for such structures have been amplified daily. I think the need to eliminate extremely fine dust to enhance the yield will be a good opportunity for the manufacturers of the cleaning equipment. We work closely with manufacturers through our pipeline to explore their needs for various devices with 3D structures. We try to provide what our customers want; may it be next generation or even more next generation technologies. That is our competitive edge in this industry. However, it is very difficult to develop new technologies independently, so we collaborate with research institutes and other companies like Imec and Leti in Europe, SUNY in New York and Applied Materials. The Japanese government has announced the establishment of advanced evaluation facilities in Tsukuba, and we want to capitalize on that opportunity as well.
When we interviewed Mr. Kawai of Tokyo Electron, we talked about the new drivers for growth in the semiconductor field, where the majority of the demand which used to come from electronics in the past decade is now shifting to cars. With the incredible advancements in microfabrication in chip capacity, what do you think will be the next driver for growth in the semiconductor field in the next 15 years?
I am comfortable that automobiles will lead the way, but I also believe that IoT applications to advance DX and communication tools in virtual space such as AR and metaverse will also develop. Investment in telecommunications infrastructure and data centers to support them will also flourish. To achieve this, high-speed and low-power consumption chip performance will be required in the future. In order to realize an affluent society, we must also focus on efforts to reduce the burden on the environment and realize a sustainable society. To this end, it will be important to continue to develop microfabrication technology, but it will also be important to develop new mounting technology centered on chiplet technology. In addition, the size of chips in the future will also move in the direction of dividing and downsizing to avoid larger chips due to higher performance, resulting in higher yields and further evolution of chiplet technology, which is expected to further expand its applications in the future.
As an equipment manufacturer, what do you believe to be the key steps necessary to reduce the environmental impact of semiconductor manufacturing?
It is very important to have the technology for microfabrication. Nevertheless, we have to admit the fact that semiconductor plants use a lot of chemical substances, gases, clean water, and exhaust and heat and generate considerable emissions, which have a significant environmental impact. As a manufacturer of manufacturing equipment, we need to address this issue from both sides. We have to reduce the emissions in the equipment manufacturing process from the equipment. After supplying our products to our clients, we likewise need to think about how to reduce the emissions in the client's manufacturing process or minimize the use of water or heat.
We have participated in the international initiative called SBT. The first two tenets so-called ‘Scope 1, 2’of SBT mention that we should reduce our emissions in the equipment manufacturing process, while the third indicates the need to focus on reducing CO2 emissions from the equipment we manufacture throughout the supply chain. Thus, we should work together with our partners who supply us with parts and components as well as our service partners to address this issue. Within the company, ideas and programs that contribute to the environment are solicited, and awards are given for achievements. We reflect these environmentally-related activities in our compensation for our management members and employees. Through our efforts, we are trying to raise the interest of everyone in our company to keep working toward solving environmental issues.
Can you provide a specific example of a technology you have developed or implemented for your equipment that has been recognized within your company?
Coming up with new ideas for the Semiconductor manufacturing processes process is a source of our competitiveness. One of our products is called Flash Lamp Annealer which heats the wafer instantly using the flash of light to activate the surface. Through this technology, we are contributing to energy conservation since it significantly reduces both the time and energy required for this step in the process. As microfabrication advances, there will be more demands for these types of technologies because the junctions will be shallower and the activation areas will be smaller. This technology used to be only applied to a very limited area of logic, but we believe it will be increasingly used for memory in the future.
Green by Digital is a new trend of using digital technologies to live a greener life. However, to achieve this, there will be a big demand for digital products, which in the end, puts the burden on the semiconductor manufacturers who must create more advanced chips. As we enter the era of Green by Digital, what kind of sectors will be most disrupted?
I personally prefer face-to-face meetings to virtual meetings, but I think it is true that there should be fewer useless unnecessary in-person business meetings. The number of train passengers in Japan has considerably decreased since the pandemic. I think this trend will continue as technologies give us more convenience, and there will be a higher demand for VR communication. We believe that we need to be part of the realization and enhancement of the functionalities necessary for this kind of technology. We have to be responsible for making the technological innovations necessary to generate more applications. The transportation industry will experience some negative impacts from this trend. On the contrary, the communication sector is going to press forward even further. We will have more opportunities to use digital technologies in the medical field because unlike before when we used to heavily rely on human skills, the technology support for this field is also expanding. Along with that expansion, quality of life is going to notably improve. Although some industries like transportation will be negatively affected by digital advancements, I think we will still have a lot of opportunities in the other industries.
In our previous interview you spoke to us about your goal of growing SCREEN’s presence in the field of regenerative medicine, seeking to apply your imaging technology to the Nobel Prize winning iPS stem cell research of Dr. Shinya Yamanaka. At that time, we discussed the recent release of your jointly developed cell sorting and analysis systems ELESTA® CROSSORTER® with AFI Corporation and your new Cell3iMager monitoring system. Now a year later, how have these products' performance compared to your expectations, and what is the current direction of your medical and life science division?
Our objective for our cellular field of life science division is to observe live cells, and our equipment has been deployed to universities and laboratories. We want to go to the next step based on this success. Recently, we announced our joint project with Kyoto University, AFI and Kyo-Diagnostics.
For cancer patients, we aim to separate the cancer cells from healthy cells to culture them and find out which anti-cancer drugs will work best for individual. At this moment, patients have to suffer through the side effects of the different formulations of various cancer treatments. Due to all the pain that patients have to experience, many discontinue taking the drugs before they find the best solution. We want to mitigate the suffering of patients through our project. The success of this project can bring about big business opportunities, and at the same time improve the quality of life for those suffering from cancer. We also invested into AFI to make it a subsidiary of our group. In order to steadily go forward, we are taking each step carefully.
Within this framework, AFI has the technology for cell sorting, and Kyo-Diagnostics provides a cell-culturing technology. Screen has the equipment to observe cells for analysis and measurement, which is evaluated based on the medical knowledge provided by Kyoto University.
LeVina is another breakthrough technology that you have recently developed, a direct imaging system for next-generation patterning which can achieve the world's highest resolution of five microns. This technology is said to mark Screen's expansion into this new step of semiconductor manufacturing. Why did you decide to increase your investment in the packaging step of the semiconductor production process? How does LeVina meet the need for greater productivity and efficiency?
We need to pursue more electricity-saving features and develop higher-speed semiconductors. Otherwise, we cannot launch chiplets in the current market. I believe that chips can be mass-produced, but we expect the need for chiplets to be customized. Because chiplets can be produced only in small lots, we are required to change the circuit's design through customization. LeVina can easily be the answer to high-mix, small lot production because it is a technology for direct patterning. Next year, we are developing this technology with a view to reducing the current resolution of 5 microns to 2 microns. Our strength is that our subsidiary that has the technology for optical MEMS provides us with its own laser tuning technology to enhance the sophistication of our equipment, which gives us more flexibility for production and enhances our patterning technology. We aspire to support the transformation of technology in this area as well.
Besides the major disruptions in logistics due to staff shortages in ports and airports, there have also been semiconductor chip shortages caused by the imbalance of the supply and demand at the beginning of COVID. In the semiconductor industry, many manufacturers of equipment localize their production in response to the government's call to do so. While such localization is taking place, foundries are being opened across the world. Chip manufacturers are expanding their products internationally, but equipment and material makers are staying domestic. How has Screen reacted to these disruptions, and what is your analysis of the advantages of keeping production centralized when production is becoming global?
The logistics disruptions impacted us greatly. We made several unnecessary stops because we failed to manage and control the supply chain before. Learning from that experience, we asked our clients to determine their specifications as soon as possible. We also provided the information and shared the long-term forecast with our suppliers to the extent possible so that we can be ready for future disruptions. At that time, we experienced a scarcity of semiconductors, but this measure also saved the day. It is very important to have a reliable relationship with suppliers. If we provide a long-term forecast to our domestic suppliers, they can help to prepare their investments and equipment ahead of time. I believe that keeping our domestic supply chain is critical to our business. I have heard that an American equipment manufacturer is now struggling because of the disruptions caused by the pandemic to their global supply chain. On the other hand, most Japanese equipment manufacturers have successfully localized their supply chain in Japan. From a long-term perspective, however, we should keep our eyes on the risks of BCP for domestic-specific supply chains as well.
Can you briefly comment on Screen's most recent financial results, which show a significant increase in revenue & operating and real income, and the key reasons for those positive numbers?
One of the reasons for our success is our great and reliable relationship with our clients in the semiconductor industry, from whom we receive requests in equipment development. In addition, based on those orders we received, we were able to do the production according to plan. We were also able to reduce unnecessary costs throughout the supply chain. In short, we have successfully achieved smart production. The measures implemented to take advantage of the fully automated plant, it enabled us to maintain full capacity utilization. To enhance profitability, we need to strengthen our in-house efforts and continue to make developments for our clients. By doing so, we can put a higher value on our technologies. I believe that the next phase is going to be even tougher.
What are some goals or targets that you have set yourself for the upcoming year that you would like to share with us in our next interview?
In the current fiscal year, we are working on achieving record high performance. Next year will be the final year of our mid-term management plan, and we will strive to set even higher goals and achieve them. Our business efficiency and cash flow condition have significantly improved mainly due to introduction of ROIC management. Of course, investments in the semiconductor field are very important to enhance our competitiveness and profitability, but we would like to allocate a portion of our cash flow to new areas to create a complete portfolio that will allow us to continue to see the future. We are targeting the life sciences as well as the energy field, which we believe will be a critical time for us. As a company that has been in business for more than 150 years, we would like to keep appealing our purpose of our business. And we want to move forward to bring business opportunities to the next generation.