The lesson from Japan

China must establish a collaborative mechanism between government, research institutions and private businesses to thwart the US' new chip war

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Semiconductors and integrated circuits were invented in the United States in the 1940s and 1950s. In the 1970s, Japan, with the transfer of technology from the US, built up its technology in the chip sector. From 1980 to 1986, the share of US chips in the global market dropped from 61 percent to 43 percent, while that of Japanese products rose from 26 percent to 44 percent, making Japan the world's largest chip producer. In 1990, Japanese companies took up six positions among the top 10 chip companies in the world, with NEC Corp, Toshiba Corp and Hitachi Ltd ranking among the top three.

With the rapid development of Japan's high technology, trade frictions between Japan and the US intensified, which was also known as the semiconductor war. Washington forced Tokyo to open up its market and transfer its economic interests through the trade war, a move that contained Japan's technological catch-up from a strategic level. The US also employed its market weapons to cultivate a large number of opponents for Tokyo. In the mid-to-late 1990s, the chip and electronic sector in the Republic of Korea and the Taiwan region began to flood the world market with products, posing a comprehensive challenge to Japan.

By 2021, Japan's share in the global semiconductor market was only 6 percent, compared with 54 percent for the US and 22 percent for the ROK.

There are several lessons worth noting from this, as China's integrated circuit industry is also being unreasonably contained by the US.

First, as an industrialized economy, Japan quickly absorbed and built on the imported technologies and managed to find a large market for its products (such as calculators, computers, and telecommunication products). In the 1970s and 1980s, it took less than a year to build a manufacturing plant of very-large-scale integration and quickly realized mass production at low cost.

Second, Japanese companies emphasize team spirit and the loyalty of employees, and they have enjoyed a relatively long life span. According to a survey, the average life span of Japanese companies is 52 years, while that of US companies is 24 years and that of Chinese companies is only 3 years.

Japanese chip companies have long been committed to the chip sector, starting from the development of transistors in the 1950s and then the development of integrated circuits. Chip companies and their employees have boosted their technological expertise for a long time, and the most important factor for the success of the chip industry is the long-term technological buildup of managers and engineers.

Third, semiconductor technology, especially chips, is a cause of collective innovation requiring a great sense of teamwork and lifelong learning. Therefore, China should not only pay attention to individual talents but also give priority to attracting and supporting teams with various technological expertise, such as chip design, micro machining, process control and device testing. Retired engineers from the Taiwan region and Japan could be a key source of talent.

Fourth, there are now tens of thousands of companies devoted to chip design, manufacturing and packaging in China. But there are rare examples of chip companies cooperating with each other to overcome shared technical problems. Cases for cooperation between chip producers and manufacturers of chip manufacturing equipment are especially rare. It is important to learn from the experience of Japan and establish a collaborative innovation mechanism between the government, national research institutions, and private businesses.

In doing so, collaboration between chip manufacturers and equipment suppliers can be developed so that they can jointly move forward with the development of manufacturing equipment, materials, and improve the chip manufacturing process.

Fifth, the chip industry is an open industry chain that requires the participation of suppliers from all over the world. According to analysis and statistics by industry insiders, the production of some high-end chips involves over 1,000 processes and requires over 70 times of cooperation between companies from different countries. This means that no country, even the US, can develop its chip industry independently from the global industrial chain. The core technological edge of the US lies not only in the long-term buildup of its industrial process and technologies, but also in the Washington-led Western alliances backed by leading countries in technologies such as Japan and the Netherlands.

The US government has vigorously contained China and cut off supplies to Chinese businesses in high-tech sectors such as chips. This could be the new normal in future China-US relations. However, private enterprises are an important driving force for globalization. The US government has its own geopolitical logic, while businesses and markets have their own. China is the world's largest chip market. In 2021, the US exported semiconductors and components that were worth $14.1 billion to China. They were the main items for US exports to China. It is impossible for chip sector companies in the US, Japan, South Korea, Israel and Europe to reject the Chinese market.

In recent years, while Washington was doing everything possible to contain China's high-tech industry, the high-tech industry of the US was striving for changes in the situation. Many US chip manufacturers, including the Intel Corp, which has already set up fabrication facilities in China, were communicating with US government officials, hoping to reduce the so-called "technical guardrails" against China, and to free up their China operations from the proposed chip bill and to allow them to grow their business in China.

China is currently the world's largest market for chips, and the market size will continue to grow. We must further expand openingup, continue to widen market access, give greater priority to the protection of intellectual property rights, continue to attract foreign investment through the importing of chips and related products in large numbers and thwart the US attempt to unite its allies in isolating China. It is entirely possible that the nation will gradually change the situation that its core technologies are being controlled by others, as the nation continues to refine the supply chain of its chip sector. Meanwhile, China should work harder to change its geopolitical environment in order to obtain more room for international exchanges in the chip industry.

The author is an honorary member of the Chinese Academy of Social Sciences, a researcher of the Institute of Japanese Studies and a senior fellow of the National Institute for Global Strategy at the CASS. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn