Working in the highly specialized field of ion implanters, Sumitomo Heavy Industries Ion Technology Co, Ltd. (SMIT) was first established in 1983 and has forged an enviable international reputation in the years since with four different types of machine currently available in-house.
Over the last 25 to 30 years, Japan has seen the rise of regional manufacturing competitors who have replicated the Japanese monozukuri process but doing so at a cheaper labor cost, pushing Japan out of mass production markets. However, many Japanese firms are still leaders in niche B2B fields. How have Japanese firms been able to maintain their leadership despite this stiff price competition?
Japan was defeated in the field of advanced semiconductors, which is not due to monozukuri or manufacturing power; rather, it was because of the dynamic side of business management. Japan was not able to catch up with the speed of massive investment. General electronic companies formerly led the Japanese semiconductor industry. The cycle or the speed of management in manufacturing TVs, washing machines or other electronic appliances totally differs from what is required in the semiconductor industry. The semiconductor industry requires a dynamic cycle of management. Even if we build an advanced factory to produce advanced devices, there is only a short period in which we can sell the products at a high price. The price quickly goes down, so we have to be able to collect the investment and use the surplus to invest in new projects. However, this dynamic management did not apply to the Japanese business culture.
I imagine the device engineers wondered why Japan had to exit advanced semiconductors because they were actually competing well. Japanese are still prevailing in the manufacturing equipment for semiconductor production and material field because compared to device production, these two fields are more applicable to the Japanese business culture that focuses on monozukuri or manufacturing. Unlike devices, the price of manufacturing equipment does not go down. For example, the price of our ion implanters or other company’s equipment does not drop in a year or two to one-tenth from its starting price. The stable price allows manufacturing to continue. The engineers for the equipment continuously engage in research and development or listen to VOC for high-performance equipment. Although the price of equipment may stay the same, the required features become more advanced and more high-performance products are demanded at a rapid pace. Nevertheless, Japanese engineers are excellent at adapting and being flexible to those changes in demand and advancement in technology.
One of the unique features of Japan’s research and development is the engineers working closely with the customers. The ideas are sometimes born from discussions instead of the customers giving a definite numerical value or the target they want to achieve, which is often the case in Europe or the US. Since the clients’ requests and requirements are vague, the engineers often have to interpret them and collaborate with the customers to achieve something that is applicable and adaptable. Japanese products are made through this process. When the requirements of the customer, the demand of the market and the technology of the engineer match, it becomes a great strength for Japan.
In the evolution of Japanese semiconductors, we have seen them as leaders in denki products, specifically in DRAMs and memories, as well as in equipment and materials. In addition to the management style, there is also a challenge of the business model. TSMC’s pure play model challenged Toshiba, which is integrated, but today, we are seeing the comeback of Japanese semiconductor makers. TSMC and Sony Semiconductor are opening a fab in Kumamoto, and it is the first time TSMC has pursued a joint venture with a foreign company. Why is Japan an interesting ecosystem for opening foundries?
I think the semiconductor industry could be divided into a dynamic zone and a survival zone. I feel that 70% of the turnover is made in the dynamic zone, while most of the news, especially about semiconductor device shortage, comes from the survival zone. It is my interpretation, but there are exceptions.
The Kumamoto fab that is under construction is trying to produce the ultra-type of node, which is 20 or 28 nodes. Currently, 5-nano and 7-nano are considered advanced, and 2-nano is under research and development. The dynamic zone I labeled has a dynamic cycle of investment, where the company produces advanced devices sold at a high price for a short time. The investment collected is utilized for the next investment in high-level nanodevices. For example, let’s look at the latest cutting-edge memory and processor produced for smartphones, PCs and data centers. Analyzing TSMC’s turnover, the majority of its income comes from 5-nano, 7-nano or 16-nano devices, which are considered advanced. Not much of its income or turnover originates from the older types since their prices go down. The applications for the advanced nano devices include smartphones and high-level computers, among others.
Through time, that technology has changed and advanced. The ultra-technology was cutting-edge at the time. Even though the price of the older products has decreased, the company has been trying to find a niche market that can provide a stable income since the return on investment in the factory has already been collected. It is up to them to continue to earn and generate a surplus. Rather than updating miniaturization technology, companies in the survival zone retain and maximize the technology by searching for new applications or entering a niche market. The devices chosen in this way would be industrial or automotive devices that require customization. And it can be said that niche and customization are the cause of the current shortage of semiconductors.
Japan had competed in the dynamic zone until the 1990s. However, since then, it was pushed out of the dynamic zone and entered the survival zone, where companies have to find a new field of applications for their technologies. It has evolved into the power semiconductor field or automotive field. For Japanese companies to survive, they have applied their technologies in areas where they are required and customized their products. With this accumulation, Japan is now able to compete in this niche B2B market. I believe that Japanese device companies did not want to enter the survival zone, but it became inevitable for them to use their existing facility and find a market that is reasonably priced. Some Japanese companies excel in niche B2B fields because there is an accumulation of experience in the survival zone.
I am struggling to answer your question because TSMC is a player in the dynamic zone, but it is trying to build a 20-nano fab that is moving from the dynamic zone to the survival zone. Probably it is that production in Japan, even for 20-nano generation devices, was well worth the business against the risk of global semiconductor shortages and fragmentation of the semiconductor supply chain. This is difficult for me to answer because it seems somewhat of an exception to the flow of the semiconductor industry to date.
SAion is one of your most notable products. It is an all-in-one implanter that can reduce fine particles successfully while achieving a technical throughput of 500 pieces per hour. It is not only used for 300-millimeter wafers, but also up to 450 millimeters. How were you able to achieve these unique features of the SAion during its development?
If we exclude the high energy implanter, which is somewhat special, there are generally high current and medium current implanters, and zoning is based on implant dosage. Each manufacturer makes their own product to achieve this various required implant dosage. The structure of the high-current and mid-level current is totally different.
Unlike other companies that usually make a different structure for high-current and mid-level current implanters, we combine these because we have established a commonality between these two types. It is not something simple as changing the power supply to combine high-current and mid-current devices. We have to provide a dynamic range that can reach up to six digits and needs to be very precise in controlling the dose. That is the technology required to achieve the combination of the dynamic range. We were able to produce our all-in-one implanter with the help of the similarity in the system structure as well as our technology that allows us to precisely control the dynamic range.
Why do you think it is important to have the four types of machines in-house: high-current, mid-current, high-energy and all-in-one machines? What are some of the advantages it brings?
As an example, automotive can be classified in terms of speed and load capacity. Sports cars are automobiles that have a higher speed but a lower load capacity. Meanwhile, trucks have a lower speed but a higher load capacity, and conventional vehicles belong to the medium range. Similarly, ion implanters can be divided into energy and dose range. Sports cars correspond high-energy implanters, and trucks correspond high-current implanters, while conventional vehicles correspond mid-current or implanters with the energy level and doses that are approximately at the mid-range. Instead of flat-type conventional vehicles, SUVs or vans are becoming popular, which combine speed and load. When we invented SAion as an all-in-one implanter, we thought that it would be a perfect fit to be as the SUV of ion implantation.
It was different from our expectations. Those in the power semiconductor industry purchase equipment in low quantities, so they welcome our all-in-one type because it enables them to cater to various dose ranges. On the other hand, since mass-production semiconductor manufacturers purchase a large quantity of mid-current and high-current machinery, they do not need this combined or all-in-one type.
Every individual ion produces many point defects when it comes to the target crystal, which can lead to amorphization or costly damage recovery efforts. How does your technology help limit these challenges?
Hot implantation is a common technology among implanters, in which the substrate is heated to decrease the damage caused to the crystals. If you heat it up and cool it down, the throughput of the machinery goes down. It has become a big competition among companies to increase the throughput through hot implantation. We cannot disclose more information, but we are working on our unique technology.
What role does collaboration play in your business model? Are you currently looking for overseas co-creation partners?
We are actively seeking collaboration. Regardless of whether it is domestic or overseas, we find a common theme and try to find the best-suited partner. I have three approaches to collaboration: the first focuses on the Sumitomo Heavy Industries Group itself. Ion implanters can be divided into two technologies - beaming technology and wafer transportation, and we have strong collaborating partners within the group in both fields. We produce ions to implant them into the wafer. A sector in SHI Group uses a similar beam-technology for cancer treatment, so we collaborate with them to elevate this technology. For wafer transportation, we cooperate with a sector in the group that does motion control.
The second is ion technology or the study of ion sources and the calculation embedded in the creation of ions, which gives attention to scientific studies as elemental technologies. We collaborate with universities and research institutes for joint development or research in the field. The third is collaboration with the customers, especially in the research and development phase. We learn about their requirements and provide our technology to create a win-win situation from an early stage and develop the appropriate manufacturing equipment. On top of these three approaches to collaboration, we are now contacting several companies to work together in overseas management and operation.
We are considering a sales agent, and we are trying to find a partner, specifically from North America and Europe, with whom we can collaborate to secure the supply chain and do research and development. Diversifying the supply chain has recently become important; hence, we are trying to diversify and create a stable supply chain.
With the recent advancement of digital technologies, we are seeing completely new applications across the board, such as electric vehicles leading to autonomous driving cars and the meta-verse in digital tools. Looking at the future, what do you think will be your company's next vectors and applications of growth?
Our implanter products are for the production of semiconductor devices, so we are not directly correlated to the end product. If there is a demand in a certain new field, then there will be a demand for a new type of semiconductor. The examples you have mentioned are a good driving force for enhancing the demand for semiconductors. I believe there will be an explosion in demand, especially in the metaverse.
There were many supply chain disruptions due to COVID-19, such as the shortage of chips that has now been met by what people believe to be overproduction. Moreover, there have been political disruptions like China's Zero-COVID policy and repeated lockdowns. How were you able to manage these big disruptions since COVID?
Like many other companies, we have been affected by disruptions in the supply chain. As a result, the delivery of our equipment has been delayed, but that was still within our controlled time frame. However, we really feel the need to rethink the supply chain and find the right solution to plan the strategy. COVID will probably cease soon, but the China-US conflict continues. Also, the semiconductor supply chain and the political power balances are the key driving force that may extinguish the ideas and intentions of a single company.
In terms of having a physical presence, what countries or regions have you identified for further expansion?
Twelve years ago, we could not sell our products overseas due to contractual issues with both of our parent companies. However, when Sumitomo Heavy Industry became our sole parent, we were able to go abroad on our own. We started in Taiwan and went to China and Korea. This year, we established a base in North America to support the TSMC fab in Arizona. Europe will probably be next. That is the flow of our international expansion. Even if it may have been 12 years since we became a 100% subsidiary under Sumitomo Heavy Industries, we are still a novice in this global market. Therefore, we are trying to enter wherever there is a need.
TSMC has fabs in Arizona, Japan and Germany, and Intel is also rolling out plans to open fabs around the world. What opportunities does the regionalization of semiconductor production create for your company?
We feel that the regionalization of semiconductor production has restrictions imposed on us. On a positive note, the fabs were completely efficient before when the fabs were only established in terms of economic rationalization. Nevertheless, having multiple regional locations across the globe means each region must have its own unique production style, and there would be a restriction. Suppose a fab in North America makes semiconductors used in devices for the North American market. They may prioritize North American companies and suppliers instead of talking to Japanese companies like us. In that sense, we do not feel that there is an increased business opportunity for us. It is difficult to judge if the positive impact outweighs the negative.
Imagine we come back to have an interview with you again on the last day of your presidency. Is there an ultimate goal that you would like to achieve during your time as President?
My objective may not sound business-like, but I strongly believe that the most essential component as the company manager is to focus on the company's sustainability. I see new graduates entering the company right after high school or university every year. They have these bright faces full of expectations, and they will be working for the company for the next 40-50 years. It is the company's responsibility to meet their expectations. Also, we have to consider that these young people’s parents wish the best for their children. I will not be the president for the next 40 or 50 years while these people work for the company, so it is essential for me to lay out the foundation for the next generation and pass the baton to them. They will then hand it to the next generation. For that to happen, it is important to establish the foundation for the next 10 years for sustainability. When I retire as the president, I hope to say that I was able to plant enough seeds that were needed and prune the branches accordingly to help the next generation flourish continuously.