Established as a printing company over 150 years ago, SCREEN produced Japan’s first photographic glass screens in 1938 and throughout its history the company has sought to continuously refine technologies in its three core areas: surface processing, direct imaging and image processing. From energy, semiconductors and electronics to pharmaceuticals and bio-sciences, there are incredible and transformative developments happening in these innovation-driven industries, and SCREEN Holdings is proud to be playing a fundamental role behind the scenes in all of them. We sat down with president Toshio Hiroe to find out more about SCREEN’s work across all of these industries.
From the 80s to the 90s, Japan dominated the global semiconductor industry thanks to its expertise in the production of DRAM memories. The period that followed saw two major transformations in the market. First, the demand for LSIs such as microcontrollers and microprocessors overtook that of memories. Second, new innovative players, especially TSMC, revolutionized the industry thanks to their pure-play semiconductor foundry model. Today, while Japan has lost its former dominance in terms of device production and fab capacity, Japanese enterprises still dominate certain segments of the supply chain, including semiconductor materials and production equipment. What is your analysis of the ‘rise and fall’ of the Japanese semiconductor industry? What role does Japan play in the global semiconductor industry today?
I believe Japan lost its competitiveness in the semiconductor field because of trade friction with the United States. I lived in the USA from 1997 to 2001. At that time many Japanese semiconductor-related companies established plants and supply chains in that country, manufacturing and supplying for the local semiconductor market. We even had many Japanese clients who suggested or encouraged us to enter the U.S. market. As the United States had high tariffs on semiconductors imported from Japan, many companies chose to establish their production site in the United States. For this reason, Japanese firms were forced to have high-cost operations and therefore lost the capability to stay competitive. As a result, they ended up shifting their business to higher-valued-added (to say higher price) semiconductors.
The other factor that contributed to the loss of Japan’s competitiveness relates to the development of the internet in the USA during the 1980s and its subsequent worldwide expansion. The US market was particularly motivated to apply internet technology to diverse fields. During this software revolution, which was led by Microsoft, software developers grew significantly and US firms began to embrace a horizontal work model. At that time, Japanese companies were only focused on vertical integration, especially in the electronic industry. While the U.S. pursued the horizontal splitting of work, Japanese companies only wanted to capture a certain segment of the customer base and tried to enhance the functionality of their own products. They used to produce some general-purpose memories in Japan, but many semiconductor-related companies exported their technologies to other Asian countries. They thus acquired the know-how and capabilities from Japan to produce such semiconductor devices. Therefore, another key reason why Japan lost its competitiveness is because it helped other neighbouring countries accumulate manufacturing knowledge. Manufacturers from these countries then embraced a horizontal splitting of work. We soon noticed that these countries were producing memories or devices at a much cheaper cost utilizing their own resources.
During the COVID-19 pandemic, the semiconductor sector experienced a global chip shortage. This shortage was quickly responded to by Intel and TSMC who promised new investments to build world-wide foundries. How is SCREEN Holdings reacting to these trends and what is your strategy to navigate this highly intense environment?
We are ready to go anywhere our clients want us to go. To that end we have shipped our equipment to all over the world and if our clients want us to do the same in the United States, we’re willing to do so. However, unless the cost per bit drops, I don’t think semiconductor manufacturing in the United States can be very competitive.
As you know, TSMC’s new foundry fab will be built in the U.S., If a country’s government is able to provide long-term support for low-cost manufacturing, the industry will continue to grow. If support expires however, the competitiveness will be lost. Now we are observing this trend closely.
In November 2020 previous prime minister Yoshihide Suga declared that Japan will become a carbon-neutral society by 2050. Since his mandate industrial players are rushing to develop new green technologies and rely more on renewable sources such as hydrogen or solar power. We understand that at the beginning of this year, SCREEN Holdings, in collaboration with Tokyo Gas, developed a water electrolysis cell stack, a key component to creating low-cost hydrogen as a fuel source. Can you tell us what opportunities the global need to produce renewable sources has generated for you at SCREEN Holdings, and to that end, what other initiatives are you developing?
Back in the middle of the 1970s, we found great potential in the semiconductor market, not only in the private sector, but also through the government. Some part of growth in the semiconductor field has been supported by government initiatives. In the past 40 to 50 years we’ve expanded to a larger market, as we had aimed for. If we look at the energy sector, it emerged in earnest around the year 2000. At that time people were really taking notice of the significant environmental burden of human industry, and resulting abnormal climate changes. Many international agreements regarding environmental protection, such as the Kyoto protocol, were signed at this time. When the Suga administration announced its policy for carbon neutrality by 2050 last year, we saw a direct parallel to the emergence of the semiconductor field in the 1970s. We are currently at the starting point, staring at an immense challenge, but with great potential. We began the development of equipment to manufacture fuel cells at a low cost in 2013 and are now able to produce them automatically. Furthermore, the water electrolysis cell stack system we started the development in collaboration with Tokyo Gas this time is targeting to produce clean hydrogen at a low cost in near future. The market for fuel cells and water electrolysis will undoubtedly grow, and 40-50 years from now, it will be a major industry.
Compared to OECD nations, Japan is lagging behind in its digital transformation. According to the 2020 IMD digital competitive index Japan ranks 27th in the world for implementation of digital technologies. With SCREEN Advanced System Solutions, SCREEN Holdings is currently focusing on 3 main IT areas: augmented reality (AR), artificial intelligence (AI) and visualization technologies. What kind of opportunities is Japan’s lagging adoption of digital technologies creating for you at SCREEN Holdings and what kind of applications you’re planning on using your new IT focuses for?
The fact that Japan is lagging behind other OECD nations in its digitalization efforts is something we should be ashamed of. In this covid-19 situation however, business managers in Japan have been forced to reckon with this truth. That we need to change, and that digital transformation is a must. By digitalizing we will become more efficient and increase our business opportunities. At SCREEN Holdings, we focus mainly on semiconductors but when it comes to pursuing further digital transformation, technological advancement is required for all electronic fields. Large scale transformation is happening in every business field such as semiconductors, displays, or PCBs, and we are looking to find business opportunities in this transformation.
The handling and analysis of big data will be incredibly important for pushing digital transformation. We should be capable of not just handling information coming from every source, but of analysing it to take meaningful action. In 2018 we established a company called AS to install AI technology into the equipment we are producing. That is the first priority for that business. What we’re aiming for in this business field is to be able to analyse and handle the complicated data that we can extract from our equipment and use it to make predictions. We’ll be able to achieve many things if we utilize AI, thus this type of technology is truly attractive for equipment manufactures as it will contribute to the promotion of digital transformation in society as a whole.
SCREEN Holdings has recently entered the life science market. We noticed you just released the Cell3iMager which uses your core imaging processing technology to analyse changes in cells in real time, and your OMINITO inkjet printing system for medicinal tablet packaging. Why did you decide to enter the life science market and what expectations do you have for this division moving forward?
Our history began in 1868 when we were founded as a printing company. At that time we also manufactured plates and supplied the materials needed for printing. Sometime in 1970 we internally discussed expanding our technology into new fields and decided to enter the electronics business. Back in the year 2000 we had another discussion to find new business areas for the next generation. We wanted to utilize our three core technologies: surface treatment, image processing, and direct imaging. We found that we could apply all of them for life science, and through our market research, saw great growth potential in the life science market.
Another field we focused on is energy. We want to be part of an energy revolution, and utilize our technologies for the vital mission of tackling climate change.
The other matter we focused on is Japan’s declining population. We’re seeing a sharp decrease in Japan’s working population, and the trend for an ageing society along with the falling birth rate is getting considerably more serious. As a result, the need to improve the medical system will grow moving forward. In Kyoto especially, we have a good environment to work with academia. At Kyoto University we have Professor Yamanaka, who received a Nobel Prize for iPS cells. We therefore decided to enter the regenerative medicine field and to apply our imaging technology to this unprecedented area.
Since the working population is declining, we’re always trying to find ways we can utilize our technology to enhance the efficiency of production operations. As inspection is a part of manufacturing that typically requires manual work, we made it a goal to automate that process. In the area of metal inspection equipment, we thought that if we were able to automate the inspection process, we could greatly enhance the efficiency of the overall manufacturing operation in a simple but impactful way.
I’d like to ask you about Extreme ultraviolet lithography or EUV. While its use is still limited, there’s a lot of buzz surrounding the future mainstream integration of EUV in semiconductor manufacturing. However, decreasing multi-patterning as a result of EUV may result in decreasing the number of cleaning processes, which we understand is a major focus of SCREEN’s machines. What opportunities or challenges does the emergence of EUV pose to SCREEN?
EUV actually started emerging around the time of the 5 nano generation. As the nano generations progressed the number of layers used for EUV increased as well, but during history the sales of our equipment have never declined. This is because as EUV technology advances, new cleaning processes are required. For example, EUV exposure is very sensitive for wafer surface flatness, so the backside of the wafer should be cleaned more efficiently, which means they will need a new type of cleaning equipment. As we are constantly listening and responding to new cleaning demands, we can maintain our large market share. Even with this transformation, I doubt that our share for this market will decline. We currently have a 40% market share for the single wafer cleaning field and are especially competitive in the cleaning processes for front end semiconductor production. As for the middle or back-end of the line, we have strong competitors. That is a challenge we are facing now, trying to become more competitive by proposing new processes for cleaning such as for new EUV technologies. As the middle and back-end of lines are getting smaller and more complicated, they require new cleaning technologies. I believe there are plenty of business opportunities there.
I’d like to ask you more about your Batch-type cleaning equipment, the FC-3100, a semiconductor manufacturing machine for which you have 70% of the global market share. The Batch FC-3100 cleans multiple wafers simultaneously in a bath, as opposed to spraying them individually. What are the advantages of a multiple bath-type cleaning machine compared to a single-spraying machine, and why has this particular machine been able to achieve and maintain such a high global market share?
Have you ever been to a Japanese public bath? Batch type cleaning equipment works on a similar principle; while you’re taking a bath, you are exposed to other people’s dirt in a sense. On the other hand, single wafer cleaning is like a shower, the wafer is individually cleaned and washed out, and is therefore cleaner. There is a trend towards single-wafer cleaning technology, while the demand for the batch-type cleaning equipment is declining. That being said, it’s still necessary for some specialized applications. For example, for the NAND memory’s deep contact, which has more than 120 layers, the batch cleaning process is better as the solution needs to permeate into a small structure. That is just one example, but there are still niche needs for that batch-type cleaning technology. Our mission is to refine our technology for such niche demand.
Since opening its first overseas office in 1966 in Los Angeles, SCREEN has evolved into a global company. Your firm has more than 30 locations in Japan, other Asian countries, Europe, North America, and Oceania. Can you run us through your international strategy and what markets you’re looking to prioritize looking forward?
Our business model, which is to create solutions together with our customers, whatever their needs may be, remains unchanged. Beginning with our printing business, we have always pursued this model. We go to our customers in the global market and establish the agencies, plants, or service operations they need. The same applies for our other business areas such as semiconductors or displays: we go to the markets where our customers are and we work together with them to find the solutions to their problems. Based on the needs of our customers we might establish a research centre overseas. We will always be eager to find solutions for our customers.
As the head of a long-established firm, is there a particular goal that you have set for your presidency? What would you like to have achieved when you step down and look back at your time as the president of SCREEN Holdings?
It was the second SCREEN president, back in the 1970s, that entered the electronics industry and the semiconductor field. I entered this company in 1983, in the early stages of this expansion. At that time, we struggled quite a bit and the semiconductor business division wasn’t profitable for about 10 years. Eventually, we turned this business around and established a strong presence in the electronics industry. Therefore, what I want to do next is to pave the road for the next generation. There will be many changes moving forward and the road I’m going to pave may not be perfect, so it must be flexible and adaptable. Historically, while it has been difficult to produce appropriate income from our existing businesses, it’s necessary to establish a mechanism to create cash and invest it into future opportunities. My mission will be to establish said mechanism. I believe that the excellence of the people working at this company will ensure that SCREEN will follow the right path.