Nikkei Electronics Asia -- December 2009
Analysis
Fujitsu Microelectronics, Toshiba Re-Invent SICs

Many people in Japan's system integrated circuit (SIC) industry wondered if the bottom would continue to drop out from under them, but two firms deep in quicksand - Fujitsu Microelectronics Ltd and Toshiba Corp, both of Japan - forged ahead with complete innovation. They said goodbye to the business model of the past few decades, investing massive amounts of capital in state-of-the-art fabs, and instead did the unthinkable: reduced the number of product sectors covered.

"The company is making a profit, and its value is finally being recognized. We totally revamped ourselves because we are in the middle of the biggest slump since the Lehman Shock, and we're confident that we've found one solution to the structural problems facing all Japanese semiconductor manufacturers," Haruki Okada, president of Fujitsu Microelectronics. Shozo Saito, president and CEO of Toshiba Semiconductor, executive officer, corporate senior vice president of Toshiba, explains. "We're not going to be the one-stop solution anymore. Instead of continuing to invest into expanding system IC production, we'll be using outside silicon foundries."

Major domestic semiconductor manufacturers like Fujitsu Microelectronics and Toshiba, troubled by massive losses, are rebuilding their system IC strategies (Table 1). They are abandoning the business model they've followed for the last few decades and searching for survival on their own.

The goal is to find a way to secure stable profitability. Fujitsu Microelectronics is one firm in the industry that has launched an aggressive plan to restore profitability (Fig 1). The company posted an operating loss of about Yen60 billion for fiscal 2008, but announced plans to slim that down to about a Yen15 billion loss for fiscal 2009, then improve to about Yen10 billion profit in fiscal 2010 and "...at least Yen15 billion profit, a new record, in fiscal 2011.

We will maintain an average annual growth rate in operating profit of 8% from fiscal 2012 though 2014," predicts Fujitsu Microelectronic's Okada.

Six Products to be Cut

Fujitsu Microelectronics is implementing two major changes to achieve these goals. The first is abandoning the business model that demands cutting-edge microfabrication process technology, and the capital-intensive fabs needed to make it possible. Until now the firm has insisted on making its own chips, but under the new policy it will manufacture through 45nm itself, and outsource manufacturing to Taiwan Semiconductor Manufacturing Co Ltd (TSMC) of Taiwan for 40nm and beyond. Development now under way on 40nm-generation process technology is being cancelled. The agreement with TSMC had already been announced, but this time the firm revealed it will jointly develop 28nm manufacturing technology with TSMC, under an agreement designed to make Fujitsu Microelectronics the first application-specific IC (ASIC) vendor in the world offering 28nm chips, said a source at the firm.

The other change is a fundamental revamping of the product line-up (Fig 1b), defining four key growth pillars: (1) mobile/ecological, covering mobile phones, personal computers, etc, (2) automotive, for automotive equipment, (3) advanced imaging, including digital cameras, camcorders, etc, and (4) high-performance (industrial), such as supercomputers and optical transmission equipment. Of the 20 major products the firm once handled, six will be cancelled, leaving 14, and some 400 technical people will be reassigned. The six products for which new development has been reduced or frozen are ICs for WiMAX base stations, general-purpose 16-bit microcontrollers, digital TV engines, fast-cycle random-access memory (FCRAM^*) for mobile phones, one-segment demodulators, and 40nm customer-owned tooling (COT, for silicon foundries).

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