EXECUTIVE SUMMARY

This study of electronic manufacturing and packaging in Japan grew out of a widespread interest on the part of U.S. government and industry leaders to understand the strengths of Japan’s electronics industry as a step towards improving the vitality of the U.S. electronics industry. The Japanese Technology Evaluation Center (JTEC) assembled the electronic packaging and manufacturing panel in 1993 at the request of four U.S. Government agencies: the Advanced Research Projects Agency of the Department of Defense, the Department of Commerce, the National Aeronautics and Space Administration, and the National Science Foundation. The purpose of the study was defined in consultation with industry advisors: to evaluate the technologies, processes, priorities, and supporting infrastructures that have allowed Japan to achieve dominance of the global electronics marketplace. The JTEC electronics packaging and manufacturing panel visited Japan from October 1-9, 1993, then reported its findings at an open meeting in Washington, D.C., on January 12, 1994. This written report is based on the panel’s observations during site visits; on dialogues with colleagues in Japanese companies, universities, and professional associations; and on literature published subsequent to the panel’s site visits.

PRINCIPAL CONCLUSIONS

The JTEC panel on electronic manufacturing and packaging confirmed its expectations: Japan has the most advanced electronic assembly manufacturing processes in the world. The United States must learn the lessons of Japan and become a world-class manufacturer.

1. Japan leads the United States in almost every electronics packaging technology. Comparisons of electronic packaging technologies in Japan and the United States (as in Table E.1) reveal that, while some U.S. companies lead in specific ceramic technologies and in the technologies of thin film multichip modules (MCMs), flip chip assembly, and package design, Japanese firms are the leaders in all other packaging categories.

2. Japan clearly has achieved a strategic advantage in electronics production and process technologies. Panel members believe that Japanese competitors could be leading U.S. firms by as much as a decade in some electronic process technologies.

  • Because process technology improvements allow for quality improvements and cost reductions in end products, Japan’s continuous perfection of its electronics manufacturing systems has enabled it to take market leadership away from technology innovators in the United States.
  • Furthermore, it is apparent that due to its successes in process improvement, Japan will be a primary world supplier not only of electronics products and components, but also of electronics manufacturing equipment.

Table E.1

Packaging Technology Leadership (U.S. Compared to Japan)

Technology
Leadership / Manufacturing
Leadership
Single Chip
Plastic
Ceramic / Japan
U.S.* / Japan
Japan
Multichip
Thin Film
Ceramic
PWB
COB, COG / U.S.
U.S.*
Japan
Japan / U.S.
Japan
Japan
Japan
Chip Assembly
Flip Chip
TAB
Wire Bond / U.S.
Japan
Japan / Japan
Japan
Japan
Package Assembly
Processes, Tools, Density
Passive Components
PWB
Flex
Connectors (Elastomeric, Anisotropic)
Package Design / Japan
Japan
Japan
Japan
Japan
U.S. / Japan
Japan
Japan
Japan
Japan
U.S.

* Indicates status of IBM only in high-performance ceramics for single-chip and multichip applications; other U.S. companies are generally behind Japan in this area.

3. Japan has established this marked competitive advantage in electronics as a consequence of developing low-cost, high-volume consumer products.

  • Japan's success is not a consequence of major technological breakthroughs, but rather a process of continuous and incremental improvements in the technologies of mass production — driven by products such as camcorders and cellular telephones, for which the emphasis has been on miniaturization, low cost, lighter weight, and portability. Those same features are now apparent in notebook and subnotebook computers and in personal and wearable digital assistants, which further demonstrate Japan's product “portability” strategy.
  • This strategy permits Japanese industry to take full advantage of its existing infrastructure, capital investments, and skilled labor force as well as new production facilities in order to bring replaceable, lower-cost products to the marketplace in shorter and shorter intervals.

4. Japan’s infrastructure, and the remarkable cohesiveness of vision and purpose in government and industry, are key factors in the success of Japan’s electronics industry.

  • Long-term product development roadmaps provide the technology pull required to stimulate supplier investments in critical technologies and equipment essential for timely introduction of next-generation consumer electronic products.
  • Overall industry structure and supporting institutions promote continuous, long-term technical and process improvements that sustain Japan’s competitive position in low-cost consumer electronics and ensure the quality and reliability of products.
  • Product development involves the highest levels of management to ensure that resources are available for concurrent engineering of new products.
  • Weaknesses in these areas are major contributors to U.S. industry being unable to fully exploit technological innovations derived from extensive R&D investments, as occurred with integrated circuits and flat panel displays.

5. Although Japan will continue to dominate consumer electronics in the foreseeable future, opportunities exist for the United States and other industrial countries to capture an increasingly large share of the market.

  • The United States in particular controls much of the technology that will drive future consumer electronics: telecommunications, computers, microprocessors, and software.
  • The challenge for the United States is to exploit its technological advantages by becoming the low-cost producer of high-volume electronic products. Recent streamlining and restructuring of U.S. industry, combined with increased capital investments, have paid big dividends. The U.S. worker is now the most productive in the world. These developments provide the United States with major competitive advantages.

6. The JTEC panel identified no insurmountable barriers that would prevent the United States from regaining a significant share of the consumer electronics market; in fact, there was ample evidence that the United States needs to aggressively pursue high-volume, low-cost electronic assembly, because it is a critical path leading to high-performance electronic systems.

  • The United States has the technological edge, as was demonstrated recently by its advances in high definition television. Japan has the edge in production technology, and it is expected to continue to be the world leader in high-precision electronic assembly. The country that excels in both new technology and production technology will lead the world in consumer electronics.
  • Advanced technology continues to be the heritage of the United States; if a similar focus can be placed on production technology, the United States can capture a dominant share of the consumer market. Continuous corporate reengineering, an emphasis on concurrent development, partnering between suppliers and customers, and further commitment to enhancing the skills of the workforce are critical success factors that must be addressed. In the words of Robert Hayes (1981, 66), “We must compete with the Japanese as they do with us: by always putting our best resources and talent to work doing the basic things a little better, every day, over a long period of time. It is that simple — and that difficult.”

The Japanese can do it; Americans can do it. The issue that separates the United States from Japan in high-volume, low-cost electronic assembly is neither technology nor manufacturing; it is primarily the will to take the measures necessary to compete and succeed.

BACKGROUND

The electronics industry is a vital part of the U.S. economy. It is "the largest manufacturing employer in the United States…[accounting] for nearly 11% of the U.S. gross domestic product. It is expected to grow at a rate of 4% per year throughout the remainder of the 1990s" (MCC 1992). The United States has developed or is developing many of the state-of-the-art technologies on which the world electronics trade depends; also, the U.S. electronics industry has invested more money in R&D than have its foreign competitors. Despite these strengths, U.S. electronics manufacturers have steadily lost market share to foreign-owned or foreign-based manufacturers in practically every electronics sector. According to Ross (1992), “the U.S. electronics industry has been losing about 3% of world market share per year since the mid-1980s, a market that today is about three-quarters of a trillion dollars and is expected to be $2trillion by the beginning of the next century."

While the United States has lost ground in the world electronics marketplace, Japan has steadily improved its competitive position; it is now the recognized world leader in the production of consumer electronics products. U.S. firms have abandoned the markets for many consumer electronics products, and so there has been little incentive to keep up with Japanese firms in improving low-cost, high-volume electronic packaging and assembly equipment technologies. Without the incentives and profits of staying competitive in the consumer marketplace, however, there is much evidence that the U.S. electronics industry has lost its ability to efficiently produce top-notch, reasonably priced electronics components for the industrial and military — as well as the consumer — sectors. Furthermore, electronics products have come to represent a significant portion of the U.S.-Japan trade imbalance. In 1992 Japan's electronic exports to the United States were valued at $30.4 billion, 32% of its total exports to the United States; in that year the United States had a negative trade balance with Japan of $7.3 billion in consumer electronics and $7.8 billion in computers and peripheral equipment (ITTRI 1994). These trends give U.S. policymakers and electronics manufacturers ample cause for concern.

The term “electronic packaging” today means the production and assembly of a great many types of increasingly tiny and complex electronic circuitry components and boards central to the design and low-cost assembly of electronic products. Japan’s manufacture of products like camcorders, palmcorders, handycams, VCRs, and cellular phones has simultaneously driven the miniaturization of electronic packaging and a corresponding advancement of assembly technologies. These popular consumer electronic products utilize a relatively large amount of analog circuitry, which has pushed the Japanese to develop cost-effective processes for assembling high-density miniaturized passive components. The use of “1005” packages (100mm x 50 mm) and smaller formats requires both leading-edge surface mount process capabilities and ultrasmall component developments. That is, Japan’s successes derive not only from production of advanced devices but also from development of new equipment and procedures to manufacture and emplace those devices. This study investigates both electronic packaging technologies per se and also related manufacturing technologies. In response to the widespread notion that the United States needs to better understand “the realities of Japanese industry,” this study also investigates goal-setting and infrastructure in the electronics industry of Japan.

CREATING A VISION OF THE FUTURE

Chapter 2 provides a model of Japan’s vision of future product development activities. The introduction of next-generation components and equipment corresponds to the introduction of next-generation products. At Sony, next-generation products are defined as half the size and half the weight at the same cost. Roadmaps signal industry suppliers about future customer requirements. The panel found that in Japan

  • Long-term product planning accompanies a product-pull investment strategy. The Japanese will continue to make major R&D investments that are product driven.
  • The guiding principle for management is product planning, which leads to efficient investments in technology and production; the best technology is the most affordable technology.
  • The focus on cost, size, and weight reduction drives the miniaturization process; however, there may be a limit to ultrasmall assembling.

The changes taking place in consumer electronics have significant implications for the future. Companies in the high-volume electronics business are on a steep learning curve that is providing continuous opportunities to fuse technologies to meet product objectives. This is most evident in the flat panel display technology that is merging traditional electronics with displays.

It appears that component vendors are moving toward supplying functional modules, and system integrators are becoming increasingly aware of the benefits of also manufacturing components. Sony, for example, now manufactures about 65% of the key components of the compact disc player. There is evidence that companies like Murata and Nippondenso are seeking increased independence through technology and component self-sufficiency. As vendors provide more of the subsystem integration and component costs increasingly dictate profits, the relationships between suppliers and end-product producers may change. At the time of the JTEC team’s visit, however, there was no indication of any lessening of the traditional supplier-customer interdependencies. Subcontractors contribute to new product development, and technical information is widely shared among vendors and end-product integrators. This organizational structure lends itself to effective concurrent development, shorter development cycle times, and lower life-cycle costs.

As the fusion of technologies increases and semiconductors, electronic packages, displays, and peripheral devices become increasingly integrated, the electronics industry may undergo major restructuring; it is not evident who will have the major advantage. It is clear that advanced technology and flexible manufacturing will not, by themselves, provide the advantage; nor will excellence in design. Organizations capable of quickly responding to change, led by visionary and capable management, will hold the essential competitive advantage. The lesson from Japan is that teaming is a primary success factor.

SUPPORTING INFRASTRUCTURES

Chapter 3 provides an overview of the infrastructure that supports Japan’s leadership in consumer electronics. The panel found that

  • Japanese firms appoint a greater number of technically trained managers to head their companies than do U.S. firms.
  • Corporate enterprises are structured and managed to operate effectively in the global marketplace.
  • Firms have separated research on production technologies from other research and development activities.
  • Enterprises invest heavily in the development of production automation technology.
  • Japan’s patent system functions to facilitate industry-wide transfer of technology rather than to protect intellectual property rights.
  • Industrial research is given additional support through local municipal industrial research institutes (MIRIs).
  • Japanese firms are constantly in pursuit of new technical knowledge and effective transfer of technology from global sources.
  • Recent recessionary pressures are temporary and may actually strengthen the industry.
  • People are the primary sustainable competitive advantage. Information technology can be employed to support continuous learning; it is not, however, a substitute for the kind of training and personal communication evidenced in Japan.
  • The borderless manufacturing world is a continuing reality that justifies further investments in transportable manufacturing-enabling technologies.

The existing infrastructure supports movement into advanced technologies and products. This is particularly evident in the electronics industries. Separation of production development focuses attention and resources on manufacturing advancements that ensure the rapid introduction of new, high-quality products at low costs. Without advanced equipment capabilities, it would take much longer for new component technologies to become part of next-generation product designs. The strategic importance of manufacturing is emphasized in the education of the workforce and in the priority that management gives to continuously improving the process in order to more rapidly and efficiently manufacture complex products.

The United States has lost the infrastructure necessary to be globally competitive in the production of high-volume, low-cost electronic products, despite the fact that U.S. industry may dominate certain sectors such as microprocessors. While the United States continues to invest heavily in R&D, Asia is making major investments in manufacturing infrastructure. U.S. investments in R&D are now being exploited offshore, with associated negative effects on jobs, the balance of trade, and the general economic health of the country. Domestic suppliers have been abandoned in favor of low-cost offshore producers that frequently receive the latest technologies from their customers.

PACKAGING TECHNOLOGIES

Chapter 4 explores Japan's technology packaging strategy. It is important to understand not only what technology Japan is developing, but also how firms pursue their objectives. The JTEC panel's findings in this regard indicate that Japanese companies

  • Seek to identify customer needs as the basis for developing next-generation products that establish the roadmaps for technological development.
  • Make long-term commitments to component and equipment development that support future product innovations.
  • Effectively utilize existing investments in the established supplier base and existing technological infrastructure; investments in new technologies are introduced only when competitive challenges require them.

Miniaturization is expected to continue to place pressure on packaging technologies and their assembly. In both the United States and Japan, the rate of silicon scale integration will continue to improve semiconductor cost and performance through the 1990s as semiconductor suppliers develop systems on a chip. At the next level in the “food chain,” the focus in the 1990s will be on high-density electronic assembly technologies. Many of the gains in the 1990s will be attained through continuous improvements in Japan’s existing surface mount packaging and assembly technologies, leading to devices with improved functionality, input/outputs in excess of 1,000, lead pitches below 0.2 mm, low-cost MCMs, and improvements in equipment technology to meet the requirements shown in Figure E.1. Specifics of the Japanese roadmaps for achieving these goals are provided in the report.