Based on Tamura Hideo’s economic commentary, this article examines the foresight of Fujitsu’s Toshio Ikeda, who helped inspire Japan’s successful VLSI technology project in the 1970s, and traces the subsequent rise and decline of Japan’s semiconductor industry. It argues for the necessity of a comprehensive national strategy spanning fiscal, monetary, and industrial policy.

2020-01-08
Ikeda was revered as a “genius” even by the heads of rival companies.
His goal was not limited to standing up to the giant IBM.
The following is a continuation of the previous chapter.
Readers will surely feel keenly that the author, Tamura Hideo, is one of the few genuine economic commentators in Japan, where the great majority of economic commentators possess little more than knowledge borrowed wholesale from the Ministry of Finance.
This month’s issue of the monthly magazine Sound Argument is filled with content that every Japanese citizen should go to the nearest bookstore to purchase.
An Urgent Need to Rebuild Strategy
Then what should be done?
Are public-private funds unnecessary?
The author believes that, under the economic environment described above, unless money begins to move under private-sector initiative, public-private funds still have great significance and an important role to play.
Compared with the United States, where countless venture capital firms and investment funds have literally operated under private-sector initiative, investing in emerging companies in places such as Silicon Valley and producing tremendous results, Japan and Europe do not possess such a business climate.
Even so, with regard to industry, an enormous amount of information gathers every moment at the Ministry of Economy, Trade and Industry, and with regard to money, at the Ministry of Finance.
For venture companies lacking sufficient information, official information and the government’s analytical capacity should become reinforcements alongside funding.
Of course, that is not the only thing missing.
As stated earlier, half-baked imported neoliberalism and shareholder capitalism do not suit Japanese soil, and Japan should pursue a Japanese-style fund.
In doing so, the prerequisite must be a firm will and ardor for national revival that connects the public and private sectors.
There is a precedent.
It is the VLSI Technology Research Association, the semiconductor development project that achieved remarkable results in the 1970s.
The Ministry of International Trade and Industry, now the Ministry of Economy, Trade and Industry, joined forces with five companies—Fujitsu, NEC, Hitachi, Toshiba, and Mitsubishi Electric—in an ambitious research and development project aimed at catching up with and overtaking the United States in semiconductors.
The companies spared no effort in assigning their finest researchers and engineers, gathering roughly one hundred people, adopting a structure in which the basic research division was shared while commercialization was left to competition among the individual companies, and they succeeded in developing high-density semiconductor manufacturing equipment.
The man who set this project in motion was Fujitsu Executive Managing Director Ikeda Toshio, who died in 1974 at the young age of fifty-one.
Ikeda was revered as a “genius” even by the heads of rival companies.
His goal was not limited to standing up to the giant IBM.
Ikeda spoke passionately to the author, who at the time was a rookie reporter, saying, “VLSI and computers using it will continue to evolve rapidly, and before long, super-large computers will shrink to the size of the palm of your hand.”
He had foreseen the emergence of today’s personal computers and smartphones.
It was Ikeda’s dream that moved both the government and the private sector.
Many corporate leaders belonged to the wartime generation and were filled with a national consciousness that said, “We will not be cowed by America.”
Beginning in fiscal 1976, the government provided a total of 70 billion yen in subsidies over four years.
That amount, just over 0.05 percent of the general account budget at the time, became the seed money through which Japan’s semiconductor technology made a dramatic advance, and by the mid-1980s Japan came to overwhelm American forces in semiconductor memory.
However, since the collapse of the bubble economy in the early 1990s, Japan’s semiconductor industry has continued to decline.
Many causes of failure can be listed, including voluntary export restraints toward the United States under the Japan-U.S. Semiconductor Agreement, misreading the business cycle peculiar to semiconductor memory, errors in investment strategy, and the rise of South Korea and Taiwan.
But the greatest factor, in the author’s view, was the great tide of neoliberalism that swept over Japan’s public and private sectors after the bubble collapsed, together with fiscal and monetary policies that tolerated a strong yen and deflation.
Neoliberalism swept away the “Hinomaru” consciousness from both the public and private sectors.
In the 2000s, the American-style idea that “a company belongs to its shareholders” spread, and companies came to place greater importance on global investors than on the national economy.
In step with the globalization of finance and industry, fiscal policy moved toward austerity, while monetary policy tilted toward tolerating deflation.
The result was a strong yen.
By contrast, South Korea adopted a weak-won policy, and in semiconductors, companies such as Samsung Electronics came to overwhelm Japanese firms, leading to the present situation.
Major semiconductor manufacturers successively spun off their semiconductor divisions, formed corporate alliances, and received support from the Innovation Network Corporation of Japan, yet even so, Elpida was acquired by America’s Micron, and Toshiba Memory was sold to a U.S.-South Korea-Japan corporate consortium that included South Korean manufacturers.
And recently, Panasonic decided to sell its semiconductor division to Chinese capital.
Public-private funds are indispensable for Japan’s revival, but unless a comprehensive national strategy encompassing fiscal policy, monetary policy, and industrial policy is rebuilt, the drift will continue.