22 November 2010

What Japanese Automakers Can Learn from the Semiconductor Industry

Since February 2008, Toyo Keizai Weekly magazine (東洋経済, in Japanese) has been running a thought-provoking weekly segment translated here as, “Major Transformations Following Economic Crisis—Choices for Japan” (経済危機後の大転換――ニッポンの選択) written by Yukio Noguchi*. His column explores the changing economic climate facing Japan and how those changes are likely to impact various aspects of Japanese business going forward.

In the November 13, 2010, issue, installment 39 titled “The Decline of Japan’s Once World-leading Semiconductor Industry” (かつて世界を制覇した日本半導体産業の凋落, in Japanese), Noguchi looks at factors behind why Japanese companies NEC, Toshiba, and Hitachi are no longer ranked among the world's top four semiconductor manufacturers as they were back in 1990 (today Intel, Samsung, and Texas Instruments hold the top three spots). He notes that efforts to reorganize—such as in the form of Elpida Memory established by NEC and Hitachi, and Renesas Technology established by Hitachi and Mitsubishi Electric—did not fully address new demands posed by shifts in the market from the 1980s to the 1990s.

Going forward, Noguchi warns that Japan’s motor vehicle industry could meet a fate similar to that of its semiconductor industry. He points out that if Japanese industry fails to change, venture companies such as those based in Silicon Valley might be better suited to meet potential growing demand for electric vehicles in the high-tech segment, and demand in the low price category might be better met by Chinese automakers.

Finally, the article winds up noting that NEC and its 9801 personal computer lost out to Microsoft, and that software and Internet venture companies, such as those launched in Silicon Valley, ultimately did not emerge in Japan. As a result, Noguchi laments, Japan today lags decisively behind in the increasingly crucial IT and software industries.

* Yukio Noguchi, the author of the weekly series, is currently a professor of finance at Tokyo’s prestigious Waseda University. His background includes experience in Japan’s Ministry of Finance, a Ph.D. in economics from Yale University, and a stint as a visiting professor at Stanford University. He is regularly quoted in the English-language media on business and economic issues (see, In Toyota Mess, Lesson for Japan, The New York Times)