＜prologue＞
I started a blog called “The Baby Boomer Generation’s Miscellaneous Blog”（Dankai-sedai no garakutatyou:団塊世代の我楽多（がらくた）帳） in July 2018, about a year before I fully retired. More than six years have passed since then, and the number of articles has increased considerably.
So, in order to make them accessible to people who don’t understand Japanese, I decided to translate my past articles into English and publish them.
It may sound a bit exaggerated, but I would like to make this my life’s work.
It should be noted that haiku and waka （Japanese short fixed form poems） are quite difficult to translate into English, so some parts are written in Japanese.
If you are interested in haiku or waka and would like to know more, please read introductory or specialized books on haiku or waka written in English.
I also write many articles about the Japanese language. I would be happy if these inspire more people to want to learn Japanese.
my blog’s URL:団塊世代の我楽多（がらくた）帳 | 団塊世代が雑学や面白い話を発信しています
my X’s URL:団塊世代の我楽多帳（@historia49) on X
(Reference) Original article in Japanese
Around April of this year (2021), shocking news was reported on television and other media outlets about a global “timber shortage” that was beginning to have a serious impact on Japan’s new construction industry, including delays in delivery and increases in construction costs. For those who were thinking of buying a house soon, this “wood shock” is said to be a significant blow.
However, recently, the “semiconductor shock” has been frequently mentioned.
1. What is the “semiconductor shock”?
(1) What are Semiconductors?
Materials that conduct electricity well, such as metals, are called “conductors,” while materials that hardly conduct electricity, such as rubber, are called “insulators.”
A “semiconductor” is a substance or material that has properties intermediate between those of a conductor and an insulator. Silicon is an example of this. The term “semiconductor” is also sometimes used to refer to transistors and integrated circuits made from semiconductor materials.
Semiconductors have functions for storing information and performing numerical calculations, and are now indispensable components in all kinds of electrical products and devices, including automobiles, home appliances such as televisions, personal computers, smartphones, and digital cameras.
Semiconductors are also used as sensors and control devices in washing machines, rice cookers, and air conditioners. Furthermore, they play a crucial role in infrastructure that supports society. Bank ATMs and train operations also require semiconductors. Therefore, “semiconductors” are sometimes called the “rice of industry.”
(2) Semiconductor Shock
The “semiconductor shock” refers to the global shortage of semiconductors that began to attract attention as a problem in 2021.
2. Causes of the “Semiconductor Shock”
As the COVID-19 pandemic spread globally, lockdowns occurred worldwide, production plants stopped, and people spent more time at home, including working remotely. The increased demand for home-based products such as work PCs and indoor gaming consoles also boosted demand. Both of these products heavily utilize semiconductors.
While demand for semiconductors increased, increasing supply proved difficult. Building more silicon wafer factories, essential for semiconductors, requires significant investment and time.
Furthermore, fires at major semiconductor production plants of Renesas and Asahi Kasei (now approximately 90% recovered) and the temporary shutdown of semiconductor factories due to a cold snap in Texas exacerbated the situation, leading to a global shortage.
3. The Impact of the “Semiconductor Shock”
The semiconductor shortage, which is severely impacting global industries, is affecting not only electronics but also Japan’s core industry, the automotive sector.
Among Japan’s major automakers, Honda has been particularly hard hit. Subaru and Nissan have also revised their earnings forecasts downward for the fiscal year ending March 2021.
On the other hand, Toyota, having been forced to reduce production due to disruptions in parts supply during the earthquake, launched its supply chain information system, “Rescue,” in 2013. This system visualizes supply risks within the complex supply chain, including secondary and tertiary suppliers for each component. Regarding semiconductors, Toyota stated that they “maintained a 1-4 month supply chain,” and therefore “have not experienced production cuts due to the semiconductor shortage.”
This “semiconductor shock” is also impacting an unexpected aspect of home construction: solar power generation systems.
In recent years, the installation of solar power generation systems in private homes has been increasing due to growing decarbonization and eco-consciousness, expectations for power supply during disasters, and the desire to reduce utility costs.
While the image that generally comes to mind when people hear “solar power generation” might be the black panels on the roof, the part affected by the semiconductor shock is the “power conditioner” (power conversion device) that converts the electricity generated by these panels.
In fact, Panasonic, a major Japanese manufacturer, announced a production halt and supply delay for power conditioners in the summer of 2021, and this is expected to lead to reduced orders and construction delays for solar power generation systems in home building.
4. Japanese Semiconductors Were Once World Leaders, But Crushed by America
In the 1980s, Japan’s semiconductor industry surpassed America’s to become the world leader, but was crushed by America, while South Korea caught up during that time.
In the mid-1980s, Japanese semiconductors dominated the world and were at their peak. Not only in terms of technological prowess, but also in sales, Japan surpassed America to become the top, and at one point held over 50% of the global market share. DRAM (Dynamic Random Access Memory) in particular was a Japanese specialty and was also inexpensive.
In response, the United States has consistently criticized Japan’s semiconductor industry policy since the late 1970s, filing lawsuits under Section 301 of the Trade Act and anti-dumping lawsuits.
One of the arguments for U.S. criticism of Japan was that “Japanese semiconductors entering the U.S. market poses a security risk, threatening the foundation of America’s high-tech or defense industries.” Even towards Japan, a supposed “ally” with which the U.S.-Japan Security Treaty was signed, the U.S. launched fierce criticism, claiming that Japan’s actions posed a security risk, threatening the foundation of America’s defense industry.
This was even before President Trump’s time. America had always prioritized “America First.”
This led to the signing of the “U.S.-Japan Semiconductor Agreement” (First Agreement) in July 1986.
The agreement included provisions favorable to the U.S., such as “the Japanese government encouraging domestic users to utilize foreign-made (effectively U.S.-made) semiconductors,” and thoroughly monitored Japan.
In April 1987, then-President Reagan increased pressure on Japan by imposing high tariffs (100%) on high-tech products such as personal computers and color televisions, citing “dumping of Japanese exports to third countries” and “the lack of growth in the market share of American semiconductors in Japan.”
When the first agreement expired in July 1991, the U.S. forced the second “U.S.-Japan Semiconductor Agreement” in August of the same year, demanding that Japan align the standards of semiconductors produced domestically with U.S. standards and increase the market share of American semiconductors in Japan to 20%.
By the time the second agreement expired in July 1997, after confirming that Japan’s semiconductor market had completely lost momentum, the U.S. finally acknowledged the expiration of the U.S.-Japan Semiconductor Agreement.
5. Current Major Japanese Semiconductor Manufacturers and Market Share
According to market research firm OMDIA, the sales ranking for the first quarter of 2020 is as shown in the table above.
Furthermore, regarding global market share by country, US research firm IC Insights has published its 2020 sales share by country and region. The highest share was held by US companies at 55%. This was followed by South Korea at 21%, Taiwan at 7%, Europe at 6%, Japan at 6%, and China at 5%.
However, while Japan’s share of semiconductors themselves is low, it is characterized by a high share of related materials and equipment. This includes silicon wafers, photoresists, and cleaning equipment.
6. Future Outlook for the “Semiconductor Shock”
ITmedia’s three manufacturing-focused publications—MONOist, EE Times Japan, and EDN Japan—conducted two surveys on the supply shortage of semiconductors and electronic components in February-March and July-August 2021. Even a comparison of the results of these two surveys reveals a changing situation and the signs of a long-term battle.
In the first survey, the most common response regarding when the supply shortage would be resolved was “no prospect” (33.3%). Other responses included “October-December 2021” (25.2%), “July-September 2021” (17.1%), and “2022 or later” (13.0%).
In the second survey, while “no prospect” remained the most common response (42.6%), the number of respondents expecting a resolution within 2021 (3.6%) decreased significantly. In chronological order, the responses were “within fiscal year 2021 = March 2022” (12.9%), “April-June 2022” (20.9%), and “July 2022 or later” (19.7%), indicating that some respondents anticipated the shortage continuing until next summer.
In a second survey regarding delivery times, the most common responses compared to the previous survey were “several months behind” (36.9%) and “six months to one year behind” (36.9%). EE Times Japan reporter Murao points to several factors contributing to this semiconductor shortage, including quality issues with substitutes, the circulation of counterfeit and substandard products, and hoarding and over-ordering by some companies and suppliers.
While the exact situation is unclear, it may take considerable time to resolve the semiconductor shortage.
7. Taiwan’s TSMC Plans to Build Semiconductor Factory in Japan
TSMC, the world’s largest contract semiconductor manufacturer based in Taiwan (established in 1987), announced on October 14th its plan to build a new semiconductor factory in Japan.
According to sources, TSMC is in discussions with the Sony Group to establish a factory in Kumamoto Prefecture, and the Japanese government is reportedly coordinating to provide a certain amount of financial assistance. Construction is expected to begin next year, with operations scheduled to start in 2024.
Furthermore, the Japanese government is considering providing a certain level of financial support, recognizing the importance of having a stable domestic production base from the perspective of industrial competitiveness.
The company is reportedly considering producing highly versatile products used in industrial equipment and automobiles.
While demand for semiconductors is expected to grow in various fields such as electric vehicles and robotics, there is currently a global shortage, and countries like the United States and Europe are working to strengthen production within their own countries and regions.
In this context, the construction of a factory by a world-class semiconductor giant is likely to lead to an improvement in Japan’s domestic manufacturing capacity.
TSMC has bases in the United States, Europe, China, and South Korea, and last year announced the construction of a state-of-the-art factory in the United States. As of the end of December last year, it had approximately 56,000 employees.
8. Japan’s Semiconductor Strategy
In June of this year, the Ministry of Economy, Trade and Industry compiled a future semiconductor strategy that will be undertaken jointly by the public and private sectors.
The analysis of Japan’s semiconductor industry reveals that while it once dominated the world market, it failed to adapt to a new industrial structure after the late 1990s, as the trend shifted from a vertically integrated model (where companies handled everything in-house) to a horizontally specialized model.
The analysis argues that other countries have achieved greater competitiveness than Japan’s semiconductor industry by providing long-term support to their domestic companies through large-scale subsidies and tax breaks.
Furthermore, it states that strengthening domestic semiconductor development and production systems is necessary as a national project.
Currently, Japan does not have a system to directly subsidize semiconductor manufacturers when they build factories.
Therefore, the government is considering implementing measures similar to those overseas, providing support of several hundred billion yen per company.
Within the Liberal Democratic Party, a parliamentary league was established in May of this year to discuss strategies from the perspective of strengthening the semiconductor industry. Secretary-General Amari, who chairs this league, stated at a May meeting, “It is no exaggeration to say that whoever controls semiconductors controls the world. We want to aim for ‘Japan as Number One Again’ in 40 years.”
Furthermore, on the 13th, Prime Minister Kishida stated in a representative question session held in the House of Councillors, “Semiconductors are used in all fields, so to speak, the ‘brain of industry,’ and building a stable supply system is extremely important. We will work to strengthen the supply chain by promoting the location of production bases in Japan.”