Change management in an Economy of Speed APO Study meeting June 23, 2004 Hyderabad India Risaburo NEZU Fujitsu Research Institute Growth of high- and medium-high-technology exports, annual average growth rate, 1992-2001 or closest available years Japan Italy Switzerland Norway High- Manufacturing Sweden technology France Denmark industries Germany Australia OECD Spain New Zealand United States Korea EU Slovak Republic Austria Portugal United Kingdom Canada Netherlands Belgium Finland Ireland Greece Turkey Mexico Poland Czech Republic Hungary Iceland 40 30 20 10 0 0 10203040 *OECD total excludes Czech Republic, Luxembourg, Korea and Slovak Republic. Czech 93-, Slovak 97-, Korea 94- 1 Source; OECD, STAN database, May 2003. <#> Share of semiconductor in the ％ world market 60 50 40 30 US Japan 20 Europe Asia (Except Japan) 10 0 1 85 87 89 91 93 95 97 99 200 Gartner/Data Quest 2 Japanese position in international trade （％） 14 12 US 10 Canada 8 Mexico 6 Japan Germany 4 China 2 0 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 Source; US Department of Commerce 3 <#> Value-chain of IT equipments -Integrated approach VS Modular approach - US Fabless (silicon valley) and Foundry (Taiwan) - Japan does everything at home. profitability 【Structure of value chain】 After-sales, R&D, D&D Service, Support Procurement Logistics Manufacturing TIME 4 Source: Nikkei Business July 8, 2002 ComparisonComparison ofof IndustryIndustry StructureStructure (( METI)METI) ・ US and Asia realized high profitability by focusing on the areas of strength ・ Japan marked low profit as it spread its resources to all fields - As a result, Japan was driven into a vicious circle of low investment and poor competitiveness IndustryIndustry structure structure Design Houses Japan USA Asia Semiconductor Intel Samsung TSMC ( foundry ) Hitachi Fujitsu NEC IBM Software Microsoft Computer Sun Microsystems Network cisco Lucent Matsushita Sony Digital Motorola Samsung Appliances 5 <#> Semiconductor product mix (2000) JPN US Europe Korea 100% Mos memory 80% Mi com. Logic 60% Linear 40% Digital CCD 20% OPT 0% Discrete HIC IBM INTEL Fujitsu Micron Hitachi Philips Toshiba Infenion Hyundai ST micro Samsung 6 Source: Semiconductor Industry Research Institute Japan Procurement of components from Taiwan Total of top 10 Total of top 5 $100M Companies Companies 350 300 US 250 US JPN EU 200 150 100 JPN 50 0 EU 95 96 97 98 99 '00 '01 Source:adapted from Ministry of Economic Affairs ( Taiwan ) 7 <#> US Trade in IT products (millions of Dollars) 2001 2002 2003 Exports of goods, balance of payments basis, excluding 718,712 681,874 713,761 military Computers, peripherals, and parts 47,555 38,553 39,928 Semiconductors 45,066 42,235 46,158 Telecommunications equipment 27,874 22,208 20,748 Other office and business machines 2,894 2,023 1,924 Imports of goods, balance of payments basis, excluding 1,145,927 1,164,746 1,263,170 military Computers, peripherals, and parts 74,001 75,150 76,522 Semiconductors 30,422 26,015 24,608 Telecommunications equipment 24,632 23,135 24,766 Other office and business machines 4,864 4,468 7,136 Source; US Department of Commerce 8 Shares in the global server market (2002) HP Dell IBM Sun Microsystems NEC Fujitsu Hitachi Gateway Siemens Solectron Flextronics Acer Quanta Others 2.92.4 the volume of 3.44.4 8 3.4 14.1 87.5 4.6 41.3 shipments 2.2 Brand 31.1 18 15 6.13.4 16.7 2.42.2 2.9 0% 20% 40% 60% 80% 100% 9 Source; The Semiconductor Industry News, 26 November, 2003 <#> Shares in the global mobile phone market (2002) Nokia Motorola Samsung Siemens Sony Ericsson LG Electronics Alcatel Panasonic Mobile Communications Kyocera Phillips Others Flextronics Hon-Hai Solectron NEC the volume of 29 5.3 16.7 4.3 6.9 5.3 4.7 11.4 6.4 5.5 4.4 shipments 2.9 2.7 Brand 35.8 15.3 9.9 8.1 5.5 9.8 3.1 2.8 4.1 0% 20% 40% 60% 80% 100% 10 Source; The Semiconductor Industry News, 5 November, 2003 MarketMarket reorganizationreorganization inin SemiconductorSemiconductor fieldsfields Memory (DRAM) ＤＲＡＭ Two top companies were integrated into globally competitive System ＬＳＩ one. Others withdrew from the market. (1999) Joint 2002 investment in kind ・Appointing former president ＤＲＡＭ of Japan TI to CEO. (April 2003) transfer of business ・ System ＬＳＩ Investment from Intel System LSI ＤＲＡＭ Withdrawal System ＬＳＩ (November 2002) Partition ＤＲＡＭ Withdrawal Group System ＬＳＩ (April 2003) Jointly Flash memory newly-established firm FUJITSU Semiconductor Division ＡＭＤ Comprehensive Group alliance Toshiba Semiconductor ＤＲＡＭ Withdrawal Company System ＬＳＩ Competitive Projects of Public and Private ( HALCA, MIRAI, ASPLA ） Adapted from METI report 11 <#> Fortune 500 Computer and Office equipment 1982 ( Mainframe ) 1992 ( Mini-Computer ) 2002 ( PC ) 1 IBM IBM IBM 2 Sperry Hewlett-Packard Hewlett-Packard 3 Honeywell Digital Equipment Compaq Computer 4 NCR Unisys Dell Computer 5 Burroughs Apple Computer Sun Microsystems 6 Digital Equipment Pitney Bowes Xerox 7 Control Data Compaq Computer Gateway 8 Pitney Bowes Sun Microsystems NCR 9 Wang Laboratories Seagate Technology Apple Computer 10 Wang Laboratories Pitney Bowes 12 Top 10 Japanese IT companies 1981 2001 Matsushita Hitachi Hitachi Sony Toshiba Matsushita Mitsubishi Electric Toshiba Nihon Electric NEC （Nihon Electric） Sony Fujitsu SANYO Mitsubishi Fujitsu Source; Fortune Global 500, 13 <#> Evolution of IT industry -1995 1995-2000 2000-2003 2004-? Mainframe/ PC/Internet Mobile phone Digital home Minicon (US) (Europe) electronics, PSTN Ubiquitous computing (Japan ?) IBM, ATT, DELL,SUN, NOKIA, Sharp, Sony, Alcatel, CISCO, HP ERICSSON, Matsushita Siemens, NTT, INTEL MOTOROLA, (convergence of Fujitsu, NEC SAMSON AV, computer ST Micro, TI and Telecom) Proprietary OS UNIX, Windows Simbian, TRON ,Linux ? 14 Two opposing views TOYOTA SONY Continuous Improvement 15 <#> Americanization of Toyota Japan North 28% America 34% Latin Total America 6.04million 2% US$ Africa 2003 3% Oceania 4% Asia Europe Middle East excluding 14% 5% Japan 10% 16 Source; Asahi shimbun Smile curves applied to automobile and computer industries Automobile Computer and peripherals 14% 14% 12% 12% 10% 10% 8% 8% 6% 6% 85 4% 85 90 95 4% 90 95 97 99 2002 2% 2% 97 99 0% 0% Materials Fabrication Service Materials Fabrication Service And Parts And Parts produced from input and output table by Fujitsu Research institute 17 <#> 18 Another evidence of “doing 16 (%) 14 as others do” strategy (2001) 12 10 8 6 4 US 2 US 0 Lucent Intel Source Motorola ： Japan Research Industries Association EU IBM EU GE Dell Computer Philips Siemens Japan Abb Asea Brown Boveri Where Japanese strength lies in Sony Fujitsu Matsushita 【 NEC number of parts terms of number of parts Toshiba 1 10 100 1,000 10,000 100,000 1,000,000 Hitachi 【 strength Mitsubishi 【 】 weakness 】 chemical catalyst biotec 18 】 Camera, machine tools, TV, auto Air craft, space OS 19 <#> New product areas Japanese share％ （2000） 80 70 VTR Japanese 60 strength 50 Color TV 40 Japanese 30 weakness 20 PDA Mobile 10 Desktop PC Note PC phone 0 0 10203040506070 2000/1995 growth rates % 20 Number of patents granted in the US (2003) Rank Company No Rank Company No 1 IBM (US) 3,439 11 Samsung (Korea) 1,316 2 Canon(JPN) 1,997 12 Mitsubishi (JPN) 1,265 3 Hitachi (JPN) 1,906 13 Toshiba (JPN) 1,217 4 Matsushita (JPN) 1,821 14 NEC (JPN) 1,198 5 Hewlett-Packard (US) 1,763 15 General Electric (US) 1,139 6 Micron Technology (US) 1,708 16 AMD(US) 908 7 Intel (US) 1,595 17 Fuji Photo Film (JPN) 809 8 Phillips (Holland) 1,355 18 Seiko Epson (JPN) 779 9 Sony (JPN) 1,354 19 TI (US) 771 10 Fujitsu (JPN) 1,338 20 Bosch (Germany) 758 21 Source; Denpa Shimbun January 14, 2004 <#> Share of semiconductor in the world Top 20 2003 Company Name 2003 Revenue (Millions of US$) Percent Change Percent Total Intel 27,036 14.1% 14.9% Samsung Electronics 9,675 10.6% 5.3% Renesas Technology 7,971 NM 4.4% Texas Instruments 7,850 20.2% 4.3% Toshiba 7,571 17.9% 4.2% STMicroelectronics 7,238 13.9% 4.0% Infineon Technologies 7,109 32.3% 3.9% NEC Electronics 5,705 8.7% 3.1% Freecale Semiconductor (Motorola) 4,629 -3.7% 2.5% Philips Semiconductors 4,512 3.5% 2.5% Matsushita Electric 4,016 22.4% 2.2% Advanced Micro Devices ( AMD ) / Spansion 3,939 48.0% 2.2% Sony 3,558 27.5% 2.0% Micron Technology 3,418 18.1% 1.9% Sharp Electronics 3,075 35.6% 1.7% Hynix 3,071 28.4% 1.7% Fujitsu 2,605 -16.0% 1.4% IBM Microelectronics 2,515 -10.4% 1.4% Qualcomm 2,466 27.0% 1.4% Rohm 2,398 1.5% 1.3% Others 61,368 0.5% 33.8% Total Revenue 181,725 14.2% 100.0% Source ：iSuppli Corporation, March 2004 22 World semiconductor market ($billion ) (2002-2007) 250 (CAGR % ) 200 opt (9.7) discrete (6.0) 150 analog (5.9) logic (10.8) 100 MPU (8.4) memory (11.7) 50 0 2002 2003 2004 2005 2006 2007 Source JEITA 23 <#> The distribution of major electric device- semiconductor market (Forecast) 100,000 consumer electronics ） M$ computer CELLULAR （ DESK TOP PC communication NOTE BOOK PC automobile 10,000 CAR (BODY) CAR(DRIVE) PC SERVER TV GAME DSC CAR(INFO.) LCD MONITOR DVD RECORDER HDD ANALOG TV DIJITAL STB DVD BURNER DIGITAL TV INK-JET MFP DVC AV 1,000 RECEIVER DVD PLAYER LASER MFP INK JET PRINTER DVD-ROM（Comb.） CAR(ELECTRIC) HYBRID CAR LASER BEAM PRINTER Market of semiconductor IP TELEPHONE DVD-ROM CAGR(03-07)=9% PDA (Stand-alone) Themarket sizeof semiconductor of2007 100 -20% 0% 20% 40% 60% 80% CAGR ( Compound Annual Growth Rate ) 2003-2007 Source:JEITA, MAY2004 24 Production of key IT products and components Jan-March 2004 change from weight(2000) 2000average Jan-March 2003 Lithium ion battery 41.9 217 123 telecom relay station 5.5 143 51