Can Government Involvement Help Increase Japan’s Competitiveness?

To increase international competitiveness, the government intends to encourage reorganization in the semiconductor materials industry through the acquisition of a company by a government-affiliated fund. The hope is that the government will draw up an effective strategy to further hone Japan’s areas of strength.

Japan Investment Corp., a state-backed fund under the jurisdiction of the Economy, Trade and Industry Ministry, has announced that it will acquire JSR Corp., a major semiconductor materials manufacturer. The total purchase price is expected to be about ¥900 billion.

JIC intends to make JSR a wholly owned subsidiary through a tender offer for the company, and then delist it. After that, JIC plans to enhance JSR’s corporate value through such measures as expanding its business scale through restructuring and improving the efficiency of research and development, and to take the company public again in five to seven years.

Japan lags behind Taiwan, South Korea and others in semiconductor chip manufacturing, but it has an advantage in the field of related materials. It is important to shore up this realm and strengthen semiconductor supply chains.

JSR has a 30% share of the global market for photoresists, which are used to make patterns on semiconductor substrates. Although photoresists are an indispensable material for printing minute circuits on the substrates, the market for them is small compared to the semiconductor industry as a whole. Likewise, JSR’s corporate scale is not large.

In addition to JSR, there are other major manufacturers of photoresists in Japan, and the nation boasts a large share of the photoresist market.

However, the development of cutting-edge semiconductors with finer circuit line widths means that competition in photoresist development is accelerating around the world. Expanding the size of a company through restructuring would be one way to make the company able to respond to large investments.

JSR will be able to make swift and flexible management decisions without worrying about the opinions of many shareholders by going private, in addition to gaining the backing of a government fund. It is hoped that effective restructuring measures will be considered both in the company’s photoresist sector and in other sectors of semiconductor materials.

The government has positioned semiconductors as an important material for Japan’s economic security and has been working to strengthen the nation’s industrial base in that area.

In addition to attracting a plant of Taiwan Semiconductor Manufacturing Co., a world-class semiconductor maker, to Kumamoto Prefecture, the Japanese government has taken the initiative in establishing a new company for next-generation semiconductors, Rapidus Corp.

It is important to make the semiconductor materials sector even stronger through this acquisition, and to utilize it to shore up the level of the entire semiconductor industry, including the manufacture of advanced semiconductors.

On the other hand, the history of government involvement in industrial reorganization has been fraught with failure. Elpida Memory Inc., which was formed by merging the semiconductor divisions of major electronics companies, went bankrupt in 2012.

In the past, there were many examples of the government rescuing companies in fields where competitiveness had declined, but now it will attempt to do so in a field where Japan has maintained its strength. It can be said that for this reason, the government-affiliated fund is taking on a heavy responsibility.

(From The Yomiuri Shimbun, July 7, 2023)