As can be seen from the above observations of Japan's technology development strategy, at the heart of Japan's electronics industry infrastructure is a highly focused market orientation that influences all activities from research to refinement of assembly processes. Although not all Japanese firms approach the market with identical strategies, there are a number of commonalities in their approaches. After examining Japan's microelectronics industry, the JTEC panel recognized the product development strategy's dependency on materials, component technologies, and production equipment, as shown in Figure 3.5.
Figure 3.5. Japan's product development strategy ((William R. Boulton & Assoc., 1994).
In Japan, electronic component and packaging leadership is based on continuous advances in both materials and manufacturing technologies. Japanese suppliers of advanced components frequently provide the manufacturing equipment necessary for further applications of their components into final products. Key products such as cellular telephones, portable video cameras, and portable computers have provided the demand for development of advanced materials, equipment, component, and packaging technologies.
Competitive Advantages in Component Technologies
Component technologies provide the greatest opportunities for Japanese companies to apply their manufacturing expertise to competitive advantage, because the mechanical and electrical components for most consumer products have long life cycles. Sony developed its CCD and Sharp its LCD in the mid-1980s. While external design changes in product color, shape, or features may occur every six months for products like Sony's Walkman or annually for products like Sharp's ViewCam, major improvements in component technologies occur only every three to five years. For example, during a time period that Sony introduced over 160 models of the Walkman, there were only five changes in its mechanical component "platform."
After developing key component technologies, Japanese companies have been able to design and introduce a wide range of products based on those technologies. Huge industries have evolved from development of components for such products as personal computers, VCRs, video disks, and cellular telephones. Sharp, for example, is applying LCD technology for home entertainment, audio equipment, home appliances, and medical equipment. Key components with broad applications provide long-term growth potential. Semiconductor and communications technologies have been the basis for many of today's product developments. In essence, these new products have created new market demands through a strategy of "technology push." When Sharp's president encouraged managers to apply LCD technology to their product lines, he implemented a technology-push strategy.
Competing in Next-Generation Components
Every industry has its own "rules of conduct" and strategies for targeting market segments to stimulate market share growth. With regard to high-volume electronic assembly, Japan's strategy has been to lower costs, reduce size and weight, and improve functionality. Camcorders, cellular telephones, VCRs, stereos, and CD players have all been subjected to this strategy. These product demands have then generated the roadmaps for component and packaging development.
Microprocessors are one of the few components that are still controlled by U.S. firms. According to Gordon Moore, CEO of Intel, the complexity of integrated circuit devices will roughly double every device generation, one generation lasting about 18 months, resulting in a straight-line on a log scale as shown in Figure 3.6. The semiconductor industry sees no short-term departure from this trend. As a consequence, feature size and resolution of geometries used in production follow the same trend, with feature size reductions of about 20% per component generation. At the same time, increased functional integration has lead to larger chip sizes, which has required materials development for increased wafer size and equipment development for handling larger wafers. The projected characteristics of next-generation IC components allow designers to plan for next-generation products.
Figure 3.6. Moore's Law of Active Element Density.
Recent Intel advertisements have clearly presented the company's progress in improving processor performance. For example, using Intel's performance computations, the following ratings have been achieved with its most recent microprocessors:
Relative Performance Rating i486 SX-25 100 i486 SX-33 133 i486 DX-33 160 IntelDX2-50 233 IntelDX2-66 290 Pentium Processor-60 525 Pentium Processor-66 560
By adding increased capability with each component generation, microprocessor designers give potential customers a broader range of design capabilities. Moore once stated that while he did not know what people will do with all of the transistors being manufactured, he was confident that demand will exist for increased functions, power, and speed that give added design options to the innovative users of these advanced components. Indeed, demand continues to grow as new applications are developed for each new component introduction or update. In addition to providing next-generation complex instruction set chip (CISC) microprocessors, Intel provides a full range of processors to fit a wide range of product applications from servers to notebook computers. The United States has dominated the high-end semiconductor device market by continuing such rapid developments.
Higher Component Density and Better Assembly Equipment
The goal of Japanese companies involved in electronics products competition is to meet customer requirements. Of all customer requirements, five seem to dominate: lower cost, higher reliability, better performance, longer life before battery recharge, and lighter weight/smaller size. All five factors depend on a few key, "lower-tech" capabilities related to making more-integrated components; these in turn depend on good assembly equipment that can put a large number of small components into smaller and smaller areas.
With increased component density also comes an increase in the density of component assembly. For Matsushita's video camera, the component density increased between 1990 and 1993 from 8.5 components per square centimeter to 13.0 components, a 50% increase. Matsushita's and Sharp's most recent consumer products have average component densities of 16 units per square centimeter. As customers seek smaller, lighter-weight, more sophisticated products, pressures mount for increased component integration and higher-density assembly technologies. Sony's model TR1 video camera was introduced at the end of 1992 with a component density of 20 components per square centimeter, and its component density is expected to reach 30 components per square centimeter.
The manufacturing law in electronic assembly that might be equated to Moore's law of chip element density is, "the density of assembled components will double every generation." Sony has suggested that PC board component densities could reach 50 pieces per square centimeters by 1998, as Figure 3.7. shows.
Figure 3.7. PC board component density.
Doubling component density every generation is a clear objective in Japan's electronics industry. As in the semiconductor industry where there is a cascade of new technology resulting from following Moore's Law, there is a cascade of technology resulting from following the "higher density law of electronic assemblies." In the latter case, this is a consequence of better, more reliable, highly flexible electronic assembly equipment.
New-Technology-Based Innovations Versus Process-Based Improvements
It has repeatedly been stated that U.S. research and development is driven by a technology push, in contrast to Japanese research and development, which is primarily driven by a product or market pull. There are, of course, occasions when the technology is virtually indistinguishable from the product driven by the technology; microprocessor technology, for example, is ubiquitous to digital electronics, but when referring to an Intel '486 or Pentium, it is often the personal computer product that comes to mind. Thus a technology innovation can spawn a new product and, at times, spawn a whole new industry.
Indeed, in the past several decades "new technology" has supported the development of many new electronics industries. Examples include the personal computer, VCR, CD-ROM, and cellular telephone, satellite communications, neural networks, expert systems, semiconductor memories for electronics, and information-sciences-based products. In the case of the personal computer, an entire industry that now affects the global economy developed from an innovation for making video games available to the home market.
When a new market is created around a new product based on a new technology, market demand is created largely by the customers' interest in the newness of the product. As the market develops, the technology creator can maintain market advantage by continuously enhancing the technology and introducing newer and more improved products in response to customer demands, as discussed in Chapters 2 and 4. The product enhancements initiated by repeated introduction of new technology keep competitors in a continuous state of playing "catch-up." If successful, the technology leader captures a major share of the market long before the competition can respond, and the leader can sustain that position as long as the product family continues to be improved and meets customer demands. As pointed out in Chapter 2, Sony and Sharp are two Japanese firms that have market strength based on introduction of innovative products.
In general, the United States has long operated under the belief that technology innovations will, by themselves, sustain industrial growth and market strength. New technology and resulting new products often originate in university or industrial research laboratories. The better and more attractive the technology, the broader the range of product applications is expected, and the stronger the customer demand for newer and more enhanced products based on the technology. The more rapidly the market develops, the greater the advantage for the technology developer.
In contrast to this U.S. R&D operating scenario, Japan has operated under the belief that new technology developments have to be focused on continually upgrading products to meet customer demands for highest possible quality at lowest possible cost. The leader stays ahead of the competition by being faster or less expensive in bringing out upgraded products. Over time, however, process technology improvements can often be a deciding factor in whether or how fast product quality can be improved and cost reduced. Depending on the nature of the product and its state of market maturity, an aggressive manufacturer can take the lead away from the product or technology innovator and become a market giant. Matsushita did this in the VCR market, and Compaq appears to be doing this in the PC market.
The Importance of Process Technology
There is a clear market transition from the stage when an innovative product is first introduced, to the stage of continuing development of the product in response to consumer demands. In the first phase, the consumer is attracted to the product largely because of its novelty, and the innovator is temporarily unchallenged in the market. In the second phase, the consumer becomes increasingly cost and quality conscious, and many competitors may enter the market; then the emphasis on manufacturing technology takes over from the emphasis on new technology.
The camcorder, the cellular telephone, the Walkman, the CD-ROM, and the personal computer all appear to be maturing into more manufacturing-process-influenced industries. With the resulting increased competition in the marketplace, there is increased pressure to lower cost, improve performance, make the product easier to use, etc. At this stage, process technologies and component upgrade technologies can easily become more important than the original technology innovations. The market for Dynamic Random Access Memory (DRAM) invented by Intel is now dominated by innovative and highly competitive manufacturers, predominantly Japanese (Fujitsu, NEC, etc.) or Korean (Samsung, Gold Star, etc.). The market for VCRs, for which the fundamental technology was invented by Ampex, is now dominated by Matsushita and Sony.
Technology development activities of the Japanese manufacturing leaders are customer- and product-driven. Dominant market position is occupied by suppliers that best understand how to meet and increase market needs. The criteria for success are attention to detail, clear understanding of customer needs, and flawless execution. Clearly, with regard to high-volume electronic assembly, customers demand lower cost, improved functionality, smaller size, and lighter weight, especially for more mobile products. Japanese packaging, component, and process technology development is driven by these parameters.
While it might be reasonably argued that the U.S. "technology push" approach to R&D produces more Nobel Prize winners, the Japanese "customer (or product) pull" approach to R&D has produced market leadership for Japan, especially thanks to its emphasis on process technology R&D. U.S. automakers were pushed by Japanese competition into learning how to make cars quality-competitive with those made by the Japanese. Automated electronic assembly factories in the United States, such as SCI and AVEX, are now as good as any Japanese factory, although many use Japanese-built equipment. However, manufacturing in the electronic assembly and packaging arena has not been targeted as an area for U.S. attention, as in the case of the automobile industry. The implications of this omission may be truly ominous.