Just like the global heatwave, the artificial intelligence (AI) race is not showing any signs of cooling down. The Biden administration is mulling new restrictions on the export of AI chips to China, while China has countered with export controls on gallium and germanium (elements used in the production of compound semiconductors). This has once again highlighted semiconductors’ importance as a key building block for AI computation. Tensions over this strategic asset have become so intense that leading U.S. chip makers have planned to meet with government officials to urge them to refrain from further restrictions.
Whist the rivalry between the superpowers is driving supply chain reshoring, Japan has rolled out its own Chips Act, hoping to bring cutting-edge manufacturing back home. Known as the “Land of Fire” for its volcano Sakurajima and the Beppu hot springs, Japan’s southernmost island Kyushu is indeed heating up. Kyushu has long been Japan’s “Silicon Island” and new investments are now revitalizing its high-tech industry. Japan Advanced Semiconductor Manufacturing (JASM), jointly owned by TSMC, Sony and Denso, plans to build a new plant there and start bringing in production equipment by September 2023. TSMC also announced that it might build a second plant in Kumamoto, a prefecture in Kyushu. Other leading players such as Rohm, Mitsubishi Electric and SUMCO had also all announced capex plans since 2021, thanks to government support and cost competitiveness. The Japanese government has committed to supporting major domestic and overseas semiconductor makers by dedicating JPY 368.6 billion (US$2.8 billion) to strengthen the semiconductor supply chain, and JPY 450 billion (US$3.4 billion) to build production bases for advanced semiconductors.
As the AI race escalates and demand for computing components continues to skyrocket, Japan's semiconductor equipment vendors, particularly those supplying AI server chips that require higher-density advanced packaging for chiplet technologies, are poised to take advantage of new opportunities and revive the country’s position as a global semiconductor leader. Leading Japanese companies in the supply chain, such as Disco Corp., are well positioned to benefit from this trend given their crucial role in spearheading advanced semiconductor development and the shift toward next-generation materials.
Disco
Global Leader in Semiconductor Equipment
Kiru (cutting), Kezuru (grinding), Migaku (polishing). With a mission like that, it is no surprise Japanese firm Disco has worked its way to become a global leader in grinding and dicing machines for semiconductor production. Disco has a strong heritage in high-precision equipment, where its in-house cutting technology has even been used on cutting the moon rocks brought back by Apollo 11. Today, Disco has an estimated 80% market share in grinders and dicers, supporting semiconductor manufacturing from front-end wafer processes through to back-end assembly & packaging.
As semiconductors become more advanced, high-precision equipment is paramount in the manufacturing process. Think small node size of 2 to 3 nanometers and 3D chiplets. Disco's machines are vital in achieving this. Its grinders are used to thin and prepare wafers from silicon ingots, while its dicers are used to cut chips on the processed wafer. Advanced semiconductor manufacturers require high accuracy and reliability from their equipment. As such, top foundries like TSMC look for partners that have a solid track record. Disco’s reputation for working closely with customers on the ground to deliver solutions, on top of its technological capabilities, has positioned it to be a partner of choice.
Disco is at the forefront of the transition to next-generation semiconductor materials, notably Silicon Carbide (SiC) and Gallium Nitride (GaN) technologies. These materials possess superior electrical properties crucial for the development of power devices used in electric vehicles and renewable energy systems. Disco's Kabra wafer dicer machine has pioneered an innovative ingot slicing method, resulting in increased wafer production and reduced production time. By enabling the adoption and manufacturing of SiC and GaN-based semiconductors, Disco is driving the progression and widespread use of advanced power devices.
Driven by secular trends such as AI and the energy transition, demand for high-performance and next-generation semiconductors is only set to increase. With a strong competitive edge given well-established strategic partnerships and superior technology, Disco has positioned itself well to benefit.
