The Chip Insider®– How Japan Lost its Semiconductor Industry

Author: G. Dan Hutcheson

The Chip Insider – How Japan Lost its Semiconductor Industry


How Japan Lost its Semiconductor Industry: In all the discussions around China’s effort to gain leadership in semiconductors, the question of how Japan lost its position – with such a huge advantage – keeps coming up. Since I’ve been studying the industry since the ’70s, I was able to witness it. So here goes:

Japan’s semiconductor market share gains through the 70s and 80s peaked in 1988 at 46%... Japan’s slippage in market share started slow … until it started to fall in 1992. By 1994 … having shed 10% in just six years, matching the share it had held in 1983. Over three decades, Japan had climbed Mount Semiconductor to its wintery peak and descended it.

I recall … discussing the question of how to stop Japan with Bob Noyce … Bob described the semiconductor business as being “like driving in the fog. Japan has been following us, which is easy because all they’ve had to do is follow the taillights of the car ahead…“ … in those few words, he had predicted Japan’s downfall which would come from its own strategic errors and the cruel nature of probability. He also described why semiconductors are the extreme sport of business.

In the end, there were six strategic causes behind the long-term failure of Japan’s semiconductor industry:

  • Success Leads to Arrogance
  • Missing the Demand Driver
  • Technology and Workforce Gaps
  • Wrong Manufacturing Strategy
  • Finance and Exchange Rates
  • Competitors’ Strategies

Let’s go through them...

Maxims: Business is a game of faults. You don’t win markets, you lose them. You don’t win customers — Your competitor loses them. Incumbents have the edge.

“History never repeats itself but it often rhymes” – as Mark Twain is reputed to have said

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