More than a year ago, Renesas Mobile, as it struggled to expand its
business beyond Japan, chose not to stay in the stranglehold of NTT
Docomo, Japan’s cellular network giant. In contrast, the SoC businesses
of Panasonic and Fujitsu remain focused on serving NTT Docomo.
beyond the mobile chips the two companies supply to NTT Docomo, it
remains unclear how Fujitsu and Panasonic find the common cause driving
the two companies’ combined SoC businesses in the future.
Despite the constant drumbeat of what almost looked like a national
industrial policy to ditch the memory business and focus on SoCs,
which has captivated Japan since the late 90's, no Japanese company
has genuinely succeeded in the SoC business in ways that matter to the
Panasonic, for one, developed an effective SoC
platform called "Unifier," designed for a variety of digital consumer
electronics systems. While the platform proved useful for the company’s
internal products, it was never spread to OEMs and ODMs in Asia. In
contrast, Taiwan’s MediaTek has almost single-handedly won the global
digital consumer SoC battle. Meanwhile, Panasonic’s TV and other digital
consumer systems business has started to decline on the global scale.
Semiconductor, on the other hand, designs, manufactures and sells a
variety of chips that include microcontrollers, ASICs, ASSPs, and power
management ICs. Fujitsu is also known for its focus on mobile, imaging,
security, automotive and other high-end applications. Its chips are also
known for high reliability. But the company has never succeeded in
developing an SoC platform widely recognized in the global market.
This brings us full-circle to the original questions: What is the new Fujitsu-Panasonic SoC JV for? How viable will it be?
The short answer is that this particular JV appears to be driven by NTT Docomo, and it’s a nonstarter.
believes that it makes far more sense for the JV to become a chip division
for NTT Docomo. He also believes it’s better for Renesas to just home in on the automotive IC market and become a chip division of Toyota or
Denso. It’s a bold idea, but if the biggest customers are identified,
and they’re the ones agitating for such mergers in order to keep the
supply chain alive, it makes sense. There’s no need to continue the
intrigue or prolong the merger drama. The customers should pay for it.
Japanese electronics industry is too wedded to manufacturing. Japan focused on the science of manufacturing and were very successful. Unfortunately, there are diminishing returns to this strategy, especially when standards of living improve and costs rise. When it became clear that creative distruction was necessary for Japanese industry to survive, the Japanese business culture could not allow that to happen.
I don't think that's the primary reason. 30 years ago, easy for Japanese to dissect a German camera or British TV and reproduce and improve on design for cheaper manufacturing. Not so easy these days with micro-scale integrated products. Can't dissect a Samsung TV or Apple Iphone so easily.
I thought Handle Jones put his finger on a core issue this week at the Common Platform event in Silicon Valley when he said:
Japan is hampered by its slow decision-making process. “They have not adapted to a very fast moving world,” he said.
Everything comes in a big circle, it wants to be an IDM - NTTDocomo again. I am wondering how big NTT docomo's market outside Japan? Japan need to face the reality - world is not buying Japanese electronics for various reasons. NTT docomo will not make money if they need to support empty fabs and so much personnel. Just drag down another company if you can't face the reality.
The biggest obstacle for a company to stay vertically integrated is separating out the various groups into separate profit/loss groups. For simple minded (i.e. short term) investors, this allows them to make short term decisions that are almost always tactical rather than strategic. A protectionist policy (whether it's government or a large company) will increase the liklihood of remaining vertically integrated.. The Japanese govt. is less likely to be focussing on the short term.
There is another angle here. It's less about giving the semi operation a chance to "thrive" on its own. It's about saving the parent company! The difference in Japan is that none of the execs wants to be known as the person who killed semiconductors. It happens in two steps: spin out the operations, then in a couple of years it survives on its own or goes softly into the night - like elpida. Hitachi is far healthier without elpida and renesas.
I agree that the most interesting thing is that Renesas is not involved. It could mean that they have found a buyer for Renesas Mobile who will also take the surplus SOC designers as well. Apple is in sore need of baseband technology to embed on their APs. Its either renesas mobile or st-ericcson
Fascinating article Junko, thanks. Extraordinary how the ebb and flow of fortunes in this business has gone - who could have predicted this at the height of the Japan success in the 80s/90s? Is it too simplistic to ask whether education and the importance of innovation is at the heart of this? The Japanese were so good at improving what already existed but seem to struggle to take it further. Discuss...!