The Sagamihara
glassworks is the repository of the highly secret, world beating
techniques that have propelled Nikon to a dominant position in the
manufacture of key production equipment.
This plant leads the
world in making glass with uniquely powerful optical qualities that
are vital in the production of semiconductors. Thanks to this
glass, Nikon has come from nowhere in less then two decades to
become the world's dominant manufacturer in so-called
steppers.
Steppers play an
important role in world manufacturing in the late twentieth century
as blast furnaces did in the nineteenth. They are lithographic
machines that perform the crucial function of printing circuit
patterns on silicon wafers.
Lithographic-a
printing process in which the image is rendered on a flat surface
and treated to retain designs while the non-image areas are treated
to repel designs.
The printing is done
by focusing an image of the circuit pattern onto a photosensitive
material coated on each wafer. The image is formed by shining a
light through a "mask"- a stencil- like metal replica of the
circuit pattern- and is progressively reduced through a series of
huge lenses. It is then reproduced on the silicon
wafers.
Because the
resolution power of each new generation of steppers is greater then
the last, the semiconductor industry can print even finer lines on
each new generation of chips. And of course, the finer a chip's
lines, the greater its information- processing
capacity.
Much of the stepper
industry's growth in sales revenues comes from price hikes as each
succeeding generation of machines offers greater
performance.
As of 1998, a
state-of -the-art stepper cost more then five million. This
represented a five-fold increase over Nikon's first steppers in the
early 1980's. Moreover, a next generation stepper, due to go to
volume production in 2000, is expected to cost more then $8
million.
For the Japanese
economy, the most striking benefit has been soaring exports. Nikon
exports more then fifty percent of its steppers. Moreover, even
those Nikon steppers that are installed in Japanese semiconductor
plants contribute strongly, if indirectly, to Japans exports
because they are engaged mainly in making semiconductors for
export.
Nikon pay levels are
well among the best in Japan. As of 1997 its workers earned on
average Y-404, 900 a month. That was about $3, 300 at the 1997
exchange rate. Workers received large biannual bonuses that brought
their total income to around $55, 000 a year. Nikon's pay levels
were comparable to those in Japan's world beating automobile
industry.
The stepper
industry's need for highly precise mechanics stems in part from the
ultra demanding level of accuracy required in positioning silicon
wafers for the lithography process. If a wafer's position is off by
much more then .1 microns- little more then one -thousandth of a
hair's breadth- the resulting chips may prove fatally
flawed.
Microchips are
three-dimensional devices. Like the floors in a tall building,
layers of circuits are imposed one on top of another. If each
succeeding layer is not precisely aligned over the one below, the
circuit connections between the layers will not line up. The
mechanical challenge is greatly compounded by the fact that
steppers print the same tiny pattern repeatedly on each
wafer.
A final benefit of
Nikon's base in Japan was a plentiful supply of long- term capital.
Nikon could count on its Mitsubishi connections to ensure that it
had privileged access to the torrent of patient capital available
from the Mitsubishi groups various banks and insurance
companies.
Nikon's main rival,
Canon, had already established an important beach-head in copiers
and used this advantage to achieve leadership in the emerging laser
printing business (Canon supplies the key enabling components in
laser printers to companies like Hewlett-
Packard).
When American
semiconductor makers were under strong competitive pressure from
fast expanding Japanese rivals in the mid- 1980s, a furious policy
debate raged in Washington. For many in the Reagan administration,
the appropriate response seemed clear: do nothing. Their position
was famously encapsulated.
In a remark
attributed to the top Reagan Administration Economic Advisor
Michael Boskin: " Computer chips, wood chips, potato chips. What
the difference? They're all chips."
Reaganites believed
that the choice of which goods the United States should or should
not produce was best left to the unfettered free market. If
American companies found quicker, easier profits in making potato
chips or wood chips then computer chips, then this is where the
nation's best prospects for prosperity lay.
There were several
flaws in this argument, of which the most obvious was that if the
American economy was to remain one of the world's strongest, the
United States needed not only profitable corporations but good
jobs.
The fact that the
profit downturn the American semiconductor makers had suffered
stemmed from no fundamental slowdown in the industry's phenomenal
growth rate, but rather from short- term oversupply problems
created by the aggressive expansion of notably far sighted Japanese
semiconductor companies.
In just ten years to
1996, worldwide sales of microchips multiplied five fold to total
$132 billion.
Higashi Hiroshima- a
medium sized Japanese town- has one of the world's largest and most
advanced semiconductor fabrication plants. Measuring 400 metres
long and about thirty metres high, this plant is located in a semi
rural setting on the outskirts of town.
The plant is
operated by NEC, which ranks as the world's second largest
semiconductor maker after Santa Clara-based Intel Corporation. For
our purposes, NEC is a more interesting company to look at then
Intel because it has based its success almost entirely on world
leading manufacturing skills, Whereas Intel's growth has come from
a so called market lock- in - its virtual monopoly in making chips
for Wintel-standard companies.
In the summer of
1997, NEC had just finished building a new extension full of
state-of-the-art manufacturing technology. The extension, code
named A2, was expected to lead the world in mass producing chips
with lines as thin as .25 microns- one quarter of one millionth of
a metre.
This was an
important advance on the semiconductor industry's previous mass
production best .28 microns, and it paved the way for NEC to
pioneer the production of massively powerful 256 megabyt
memories.
Perhaps the most
important thing about A2 is its price tag- a cool $630 million. It
is a good example of the pattern for Japanese companies to make
their largest investments at home- a pattern reflected in the fact
that though NEC operates more semiconductor factories abroad then
in Japan, fully two- thirds of all the investment capital it pours
into its worldwide semiconductor business each year goes to
domestic operations.
Clearly the Higashi
Hiroshima plant is a classic example of manufacturing's ability to
create superb First World jobs. Moreover, in common with other
manufacturing operations, the plant has created an excellent range
of jobs: nearly 80% of NEC's workers are mere high school
graduates, a considerably higher proportion then in the Japanese
workforce as a whole.
For a fifty-year-old
worker, wages plus bonuses came to well over $60,000 a
year.
The evidence of the
1990's is that the job prospects are better in semiconductors than
in mushrooms - not to mention wood chips or potato
chips.
