By David Lammers

The announcement that Elpida Memory Inc. is declaring bankruptcy essentially takes Japan out of the DRAM sector which Japanese companies came to dominate in the mid-1980s.

What happened in Japan that took out all the once-leading DRAM makers over three decades?

Three things come to mind: First, the yen tripled in value vis a vis the dollar. Secondly, Japanese managers lacked strategic direction and became overly cautious. Third, Samsung and others, sensing opportunity, pounced on the opening.

Go back 30 years to the lovely, green island of Kyushu in southern Japan. Toshiba embarked on a gamble there — one that eventually earned the company billions of dollars in profits — moving from NMOS to the more power-efficient CMOS transistor technology. At Toshiba’s Oita Works in the early 1980s, Toshiba DRAM engineers had a single, parts-starved implanter and were staying up all night, starting at 11 pm every night, to boost the single-digit yields of their one megabit CMOS DRAM.

By the mid-1980s, Tsuyoshi Kawanishi, the general manager of Toshiba’s semiconductor operations, and his staff had taken yields for the 1-Mbit CMOS DRAM to respectable levels. Kawanishi was a charismatic manager, confident without being arrogant, who knew that CMOS at the megabit density was a winning combo in a memory IC sector that was growing rapidly as the computer boom got fully underway. His staff idolized him and – similar to the positive momentum built by Jim Morgan at the helm of Applied Materials – the positive wave at Toshiba carried over into successes in notebooks computers, displays, and other products.

An equally talented Toshiba semiconductor division manager, Taizo Nishimuro, was at that time in charge of sales and marketing. He was making sure that Toshiba’s limited supplies of CMOS DRAMs were allocated fairly to the world’s computer makers, which were all were clamoring for parts. “We know where every single one mega DRAM is going. We have to, because of the trade frictions,” Nishimuro told me in an a 1986 interview.

Nishimuro-san was right to be worried. In 1985 the United States Dept. of Commerce had slammed DRAM dumping duties on Japan, setting off a series of events which led to the 1986 U.S.-Japan Semiconductor trade agreement, which formally called for an expectation that U.S. companies would hold a 20 percent share of an open Japan chip market.

It took a year for NEC, Hitachi, Mitsubishi Electric, Fujitsu, Matsushita Electric, Oki Electric, and others to catch up with Toshiba’s lead in CMOS DRAMs. But they did it, and Japanese semiconductor companies came to hold six of the top 10 spots in the world semiconductor rankings. At one point, investments in Japan’s semiconductor fabs were more than half of all Japan’s capital investments – an astounding amount of money was going into memory fab building. It was enough to scare Intel and other U.S.-based DRAM makers out of the memory sector and into MPUs – a fortuitous change in direction for Intel.

As exports of DRAMs and other well-made products soared, Japan’s trade surpluses ballooned. The imbalances were made worse by the country’s shima kuni konjo (literally, island country mentality, which came to mean an arguably insular belief by many Japanese that nearly everything done in Japan, by Japanese people, was more reliable and more valuable than products made outside of the Japanese islands). With an anti-import bias entrenched in the national mentality, Japan’s trade imbalance proved nearly intractable.

As a result, the dollar, worth about 240 yen in early 1985, quickly started rising in value to the 120- 130 range. The yen now regularly trades at 75-80 yen to the dollar, which is in sharp contrast to the relatively stable rate seen for the Korean won over the past decade.

The dollar's value has declined against the yen over the past decade. (Source: Forecastchart.com)

Over the past decade, the Korean won has remained stable against the U.S. dollar. (Source: Forecastchart.com)

Thus, just a few years after Toshiba’s success with its CMOS megabit DRAM, Japanese managers had twin headaches: how to deal with the higher yen and the insistent market-opening demands from the U.S. Semiconductor Industry Association, led by Bob Noyce, Gordon Moore, Wilf Corrigan, Jerry Sanders, Charlie Sporck, and other battle-hardened executives.

The persistent trade imbalances which Washington and the SIA railed against led to en daka (too high value of the yen). The yen’s value became a ever-heavier weight bearing down on the Japanese semiconductor industry.

As the yen was rising, the confidence of Japan’s top managers – who had computer and telecom operations as well as semiconductors to deal with– began sagging. The executives leading Japan’s electronics industry moved away from a stance of bold initiative — exemplified by Toshiba’s Kawanishi and the CMOS move – to a more hesitant, bottom-line-driven mentality.

Again, cultural perceptions played a role. During this early 1990s period I interviewed Kazuo Kimbara, who ran Hitachi’s semiconductor operations. He fretted that the United States economy would be dragged down by social challenges such as crime, education, racial conflicts, divorce, and the like. Kimbara-san, and others, couldn’t quite see beyond the headlines to the basic realities of the U.S. economy, which proceeded to do quite well as software, networking, personal computers, and mobile products combined to form the tech-driven economy we have today.

As Japan’s confidence and chip investments faltered, Samsung pounced. Everything broke right for Samsung, as the Korean won remained relatively stable while the yen rose sharply in value. Investments in and revenues from NAND complemented its DRAM base. And Samsung invested during the industry down cycles, and in 200-mm and then 300mm wafer equipment while Japanese companies did not, relatively speaking.

Caption: Hajime Sasaki at the NEC Foundation’s 2011 C&C Prize ceremony.

Another point has to do with the sequence of development of Japan’s semiconductor industry. Hajime Sasaki, who ran NEC’s semiconductor operations in its heyday, famously said Japan’s chip industry was “like a dog chasing two rabbits” — logic and memory — ending up with neither. Samsung seemed to uncoil like a baseball slugger, initially seizing the DRAM opportunity, then building into NAND, and – having built a solid base in commodity memory – moving on to the logic and foundry opportunity.

A few words about Elpida. Its president, Yukio Sakamoto, was a vice president at Texas Instruments Japan until 1993. TI operated several fabs in Japan, and Sakamoto moved up the ladder by solving tough problems, recalled Mentor Graphics CEO Wally Rhines, who also worked at TI then.

“When a customer would call up and say it needed a rush shipment by Friday, Sakamoto would tell us, ‘I’ll take care of it.’ And he would. He did that over and over again, saying ‘I’ll take care of it.’ That is how he gained everyone’s respect, by taking care of the tough challenges that come up when you are running a semiconductor operation,” Rhines said.

As talented and committed as Sakamoto-san surely is, he and his colleagues at Elpida ran up against a set of new realities in the DRAM industry. They were among the leaders in the drive to 20nm design rules, to Wide I/O DRAM and Mobile DRAM. Elpida remains a major supplier to Apple. But is it enough? Will the Japanese government move to save Elpida and its jobs, or let it go just as Germany let Qimonda die?

Without NAND and facing a bleak future for DRAMs, Elpida may in fact go bankrupt. Japanese chip manufacturers simply can’t thrive in an era of 78 yen to the dollar.

Barring a phoenix-like miracle by Elpida, it is a sad end to a remarkable run by a long line of Japanese DRAM makers.

By David Lammers

Do you remember how you were first exposed to the semiconductor industry, to the idea that the field might be a good place in which to work?

For me, it happened to be in the early 1980s, reading an article in National Geographic magazine while manning the night editing desk at the Associated Press bureau in Tokyo. I remember the author wrote that making semiconductors was “basically a chemical process.” I had enjoyed my chemistry classes and a brief part-time job helping a chemist, cleaning beakers, watching the gas chromatograph, and the like. “Hey, maybe I could write about that,” I thought.

Perhaps a similar confidence-boosting process is underway for some of the 22 boys and 22 girls – high school students from Austin area schools — who attended the SEMI High Tech U program held largely at Samsung Austin Semiconductor recently.

Lisa Anderson manages the High Tech U program, which is part of the SEMI Foundation. In Austin, the students spent three full days rubbing shoulders with technicians from Samsung, listening to volunteer speakers from semiconductor equipment companies, and others. “We seek the good to average students, kids who could be even better. Our goal is to get them excited about math and science, to show them how what they learn in their chemistry classes can be applied. Getting them into an industrial setting can make a huge difference,” Anderson said.

On the day I visited, Samsung engineer Kim Gabor, a chemical engineer by training, was demonstrating what a Samsung technician does. She had several girls and boys working as a team with electronics kits, connecting wires to terminals and the like.

High Tech U includes the “soft skills” students will need when applying for jobs, how to speak clearly, dress properly for a job interview, and the like. Tom Ortman, CEO of Concurrent Design, led a session on critical thinking, for example. As one of the Austin teachers at the event said, “Generally speaking, the students who are good at math and science often are not the most social. They want to learn the soft skills, and this is a place that affords them that opportunity.”

The Austin event was the 25^th High Tech U program for students, including a program in Singapore where the students (including a group which traveled from Abu Dhabi) went inside an Applied Materials Singapore cleanroom.  Another 103 teacher-training sessions have been held, Anderson said. Programs about LEDs and nanotech are being developed.

About half of the money to put on the Austin event came from the Fab Owners Association. Samsung Austin Semiconductor hosted the students for part of three-day event, and other support came from Applied Materials, Horiba, Microbinc, MKS Instruments, Tokyo Electron, Austin Community College, and Texas State University.

Anderson said in the early going it was fairly easy to get big companies such as Intel and Applied to underwrite most of a High Tech U program. While they continue to provide support, she said that in general “companies are strapped for funds, and it is not that easy anymore.” One solution is to get smaller amounts from a number of companies. It costs about $600-$700 per student to organize and put on the three-day programs.

Much of the organizational work in Austin was done by Judy Andersen, who is the CEO of a company, Microbinc, which provides clean rooms and contamination control supplies to data centers, bio-tech, and semiconductor companies. Andersen told the SEMI Austin committee, “It is never too early to start pulling in funds for the next event. Though we don’t have a date yet, we’d like to roll it out every six months. Samsung probably will want to be involved, but we do want to move it around.”

Catherine Morse, the general counsel at Samsung Austin, said the company had to work hard to recruit 1,400 technically savvy workers over the past couple of years. That awakened Samsung to the need to support career development activities, including bringing busloads of students to tour the Austin site. “During the last hiring cycle we realized we needed a strategy for galvanizing the STEM pipeline in Central Texas,” Morse said.

Who knows? By the time Samsung gets ready to build another fab in Austin, some of the students who took the High Tech U course may be graduated and looking for good jobs.