It's about time. Two of Japan's major semiconductor companies-Hitachi and NEC-have finally made a brave move to break with tradition and form a joint venture that will allow them to share the hefty development costs associated with producing DRAMs. That's one step in the right direction to cure Japan's worrisome economic maladies.
Sorry Simon, I think I'm right.
Simon, a Westerner living in Japan, whom I met at a dinner party in Tokyo recently, became testy during our conversation over whether Japan had showed any convincing signs of a turnaround-a discussion I couldn't help but start.
On the streets of Tokyo, one would never know that the country is suffering from serious economic problems, and that the government's debt has climbed to disturbing levels. Department stores were filled with shoppers, restaurants were packed with diners, airports were bustling with travelers-the nation's consumers were surely out in droves.
I didn't think my questions to Simon were rude, but I guess my opinions were.
What I said was that Japan's conglomerates need to make changes: For instance, spin off their chip operations into separate entities and float initial public offerings to raise capital for growth; form partnerships with each other and foreign counterparts; and even include U.S. executives on their boards.
The Japanese government, too, needs to expedite a revision in the country's tax laws that would make it more financially favorable for companies to spin off parts of their operations and partner with others. It certainly beats rationalizing the companies. Layoffs would not only be socially sensitive in a country where lifetime employment was once enshrined; they would also shake consumer confidence, which would in turn cut into spending, widening the country's debt level.
Simon replied, "Japan has been the most successful industrialized nation since World War II-you shouldn't criticize it." Ouch.
I certainly do criticize Japan's policy makers for failing to come up with real structural solutions. After spending several days listening to the country's leading DRAM executives discuss their plans for the future, I believe that much more change needs to take place.
For DRAM makers, trying to capture a larger percentage of non-PC memory sales wouldn't solve these companies' financial problems and stop the red ink flowing from their income statements, especially when every other DRAM company is trying to do the same. That's like putting a band-aid on an open wound.
That's why I applaud Hitachi and NEC's cooperative effort, and believe that the industry will see more of Japan's and Asia-Pacific's component makers forming such alliances with each other-and with overseas partners-to make them more viable competitors.
Simon, this is exactly what I was suggesting.
Ismini Scouras (email@example.com) is EBN's executive editor.