Will this "invisible company" be Japan's "slaughter knife" for South Korea?

Will this "invisible company" be Japan's "slaughter knife" for South Korea?

4:15 AM

Will this "invisible company" be Japan's "slaughter knife" for South Korea?

On October 26, 1909, Harbin Railway Station, Korean An Engen opened 7 shots against former Japanese Prime Minister Ito Bowen, and Ito fell. Anagen, who succeeded in stabbing, was very emotional. He shouted "Корея! Ура!" in Russian (Long live Korea!)



This is a dramatic but far-reaching event. A Korean killed the Japanese prime minister on the land of China and shouted his wishes to his mother country in Russian. Ito Bowen died, but things did not develop in the direction that An Zhonggen hoped. The pace of Japanese aggression against the Korean Peninsula not only did not slow down but accelerated. After only 300 days, the "Japan-Korea Merger Treaty" was officially signed, and the Korean Empire was in name only. In the era of "being lagging," South Korea could not defend itself from the country. After Japan’s 35 years of colonial rule on the Korean peninsula, there was always an inextricable relationship between the two countries.

After the "Assassination of Ito" 110 years later, the two countries toss-up again, as if to add some high-tech atmosphere to this knot.

On July 1 this year, the Ministry of Economy, Trade, and Industry announced that it had decided to tighten its export policy on some semiconductor materials in South Korea. If Japanese companies want to export fluorinated polyimide and hydrogen fluoride to Korean companies. And photoresist must first apply to the Japanese government, the review time is usually 90 days.

A stone stirs up a thousand waves. If the Japanese the government introduced a restriction policy, few people noticed that after the US-Japan chip war 30 years ago, South Korea appeared to be a fisherman, step by step to becoming the world's largest chip producer, but behind the brilliance of Korean companies, Japan has become the most important source of raw materials for the Korean chip industry. Among them, companies such as Shin-Etsu and SUMCO seem to be anonymous, but they monopolize the vital raw material market within the industry.

Although the root cause of the trade dispute between Japan and South Korea is not trading, but political. However, many people are still curious as to why the Japanese semiconductor industry can still pose a threat to South Korea for many years. And companies like Shin-Etsu Chemical can hold the throat of the Korean economy for political purposes, as the Japanese government wants?

01 Invisible Champion of the Moat


In 1990, German management scientist Hermann Simon proposed a concept: invisible champion. He believes that Germany can maintain its position as the world's number one exporter for 23 years. It is not a big company like the Fortune 500, but an outstanding small and medium-sized an enterprise that is unknown.



Herman set three standards for the "invisible champion":

 1. The top three in global market sales, or the champion in their mainland;

 2. Income is less than $5 billion;

 3. Rarely known to the public outside the market segment.

Throughout the history of Shin-Etsu Chemical, it can successfully escape the decline of the Japanese semiconductor industry. The most important point is that it is an "invisible champion" enterprise that values market demand.

On September 16, 1926, Shin-Etsu Chemical's predecessor, Shin-Etsu Nitrogen Fertilizer Co., Ltd. was established in Nagano, Japan. Japan has many mountainous terrains, small plains, and less arable land. There is a great demand for chemical fertilizers such as nitrogen fertilizer. Nagano has a developed tradition of fruit trees and vegetables. The birth of Shin-Etsu Chemicals can be said to directly hit the pain points of the local market and quickly accumulate the first. Bucket of gold.

The impact of the nitrogen fertilizer on the Shin-Etsu The chemical is consistent. The chemist Schultz once commented: "Nitrogen is the most beneficial promoter of growth, development, and creation. It is our task to grasp it and master it. It is the key to the economy and the source of inexhaustible energy. Obeying us is the secret of happiness."

Since the first synthetic ammonia plant was built in 1913, nitrogen fertilizer has been continuously updated and iterated. Countless factories are looking for more efficient and cheaper products, which means that once they enter the nitrogen fertilizer market, companies can only continue to study and explore the secrets of nature, or you will be left behind by competitors.

In the chemical industry, day-to-day technology is the moat of the company, and Shin-Etsu Chemical is no exception.

After the end of World War II, Shin-Etsu Chemical learned about the silicone industry in the United States and had a great interest in this unique compound of inorganic and organic materials. With the support of the Japanese government, Shin-Etsu Chemical began to invest a lot of manpower and resources in the development of the silicone industry.

Unlike fertilizer products that are limited to agricultural needs such as nitrogen fertilizers, silicones are like an inexhaustible treasure that can be found in aerospace, electrical and electronics, construction, transportation, textiles, food, medical... The use of silicone. With the growth of the Japanese industry, Shin-Etsu Chemical has taken the lead in developing the company as the cornerstone of the supply chain. From 1970 to 1986, Japan's organic silicon production surged 10 times to 60,000 tons, surpassing the United States and completing the conversion from a silicon importing country to an exporting country. Shin-Etsu Chemical has benefited a lot from it.

In 1989, the Ministry of International Trade and Industry of Japan formulated the “Basic Plan for Research and Development of Silicon Polymer Materials” to encourage enterprises to develop the organic silicon the industry with an investment of 16 billion yen. At that time, the US-Japan Semiconductor Agreement was signed for only three years and the Japanese the semiconductor industry is still prosperous, especially the vertically integrated chip companies represented by Toshiba, from raw materials to end products.

Shin-Etsu Chemical is different from Toshiba in that it started with nitrogen fertilizer and made it into the silicone. It is better at researching and manufacturing basic materials. In other words, it is better at meeting the needs of the market. Therefore, when Toshiba relied on the vertical integration strategy for fame and fortune, Shin-Etsu Chemical started from the silicone and continued to expand its product category, silently eliminating the necessary photoresist for semiconductor manufacturing, high-purity hydrogen fluoride, and high-purity single crystal silicon. The puzzles, like fertile land, provide nutrients to Japanese companies on the ground in obscurity.

It is worth mentioning that while Japanese brands such as Toshiba and NEC are occupying the market with great momentum, Shin-Etsu Chemical also opened semiconductor branches in the United States, the United Kingdom, South Korea, and Taiwan. When the world realizes the importance of chips, Japanese companies represented by chemistry have already quietly swallowed up the upstream market share of the global semiconductor industry chain.

Therefore, even if the Japanese chip market has dropped since 1996, as long as the global semiconductor industry is still booming, Shin-Etsu Chemical can always provide nutrients for the entire industry. Today, Shin-Etsu Chemical is already the world's largest supplier of silicon wafers and a manufacturer of silicone products. The basic technology high ground that it occupied early is its moat.

02 Internal and external problems of “invisible champion”


As an "invisible champion" enterprise, Shin-Etsu Chemical's advantage lies in the "champion", and the disadvantage lies in "invisibility." As mentioned before, Shin-Etsu Chemical is good at researching and producing basic materials according to the needs of the market. As long as the industry as a whole is stable, the development of the company is not easily affected by changes in the domestic and international markets.



However, in the upstream of the industrial chain, Shin-Etsu Chemical is faced with midstream and downstream manufacturers, not end consumers, which means that Shin-Etsu Chemical cannot create a “brand effect”. Shin-Etsu Chemical's overseas market revenue accounts for more than 70% of total revenue. Once it is technically slackened and surpassed by other companies, or because economic barriers between countries are blocked, Shin-Etsu Chemical's moat will dry up and monopolize it. Market share will also be divided in an instant.

Therefore, to ensure the advantages of Shin-Etsu Chemical, it is necessary to continuously cultivate talents, ensure technologically advantages, broaden and deepen the moat, and externally, we must always grasp the existing market and develop new markets as much as possible to form stronger ones.

Career Theory, a Japanese career counseling website, has conducted a survey. The average annual salary of Shin-Etsu Chemical is 8.43 million yen (about RMB 577,000), which is in the middle of the industry and the salary level of young people is very low. The average age of employees is 42.4 years old, and the average weekly overtime is 40 to 50 hours. The bonus is rarely affected by the company's performance but is tied to the position level.

In the business management of Shin-Etsu Chemical, “a few elites” are deeply rooted principles. Chairman Chihiro Kanagawa believes that "the ability to beat a competitor depends on whether the total cost can be the lowest in the world." To this end, Shin-Etsu Chemical does not carry out “job rotation” like Western companies. Instead, it firmly anchors employees in a position where they can actively or passively conduct “on-the-job education” until they become “experts”.

The management method of Shin-Etsu Chemical can reduce the cost of employing people, but many job seekers vomit their “screw culture”. Nowadays, the phenomenon of aging in Japan is becoming more and more prominent. How do Shin-Etsu Chemical, which lacks salary competitiveness, high-pressure and high-intensity, and performance rewards and punishments, not attract young and potential employees to guarantee the continuation of technological advantages?

On the other hand, Japanese chemical industry companies represented Shin-Etsu Chemical is facing strong competition from foreign companies.

Similar to the export trade development model of Germany and Japan, after entering the 21st century, China, South Korea, and even India have also begun to appear in large numbers as “invisible champions”. Although it has not threatened Shin-Etsu Chemical's three pillars of silicon wafers, PVC (polyvinyl chloride) and silicone, China has undoubtedly become one of the largest markets for consuming these materials. The near-water tower will have a month, which will inevitably stimulate more Local companies are chasing me.

What's more, China has a large research group, the the demographic dividend is still there, and it is more sensitive to performance. Even if Shin-Etsu Chemical is self-sufficient in the principle of “minority elites”, it is inevitable to increase scientific research and labor costs to maintain its advantages. In the basic materials industry that is sensitive to unit costs, if the cost advantage is lost, the competitiveness of the company will be greatly reduced.

"Invisible" can make a chemical company "muffled and make a fortune", but again, once the championship the advantage is lost, it will fall silently. Under the internal and external troubles, although Shin-Etsu Chemical has become a leading company in the Japanese chemical industry, it has to constantly exercise its spirit and respond to external challenges.

Back to the "Semiconductor Material Restriction Order" of the Ministry of Economy, Trade, and Industry of Japan, the most anxious of the moment is, of course, the major manufacturers of chips such as Samsung and Hynix. Once the photoresist and high-purity hydrofluoric acid are used up, they have to cut production and stop production, and they are under pressure from chip companies in the US, Japan, and Taiwan.

Although for Japan, the total export value of the three materials included in the restriction order is only 0.01% of Japan's total exports, for chemical companies such as Shin-Etsu Chemical, the market share is far more important than sales. Now South Korea has announced that it will invest 6 trillion won (about 35.29 billion yuan) in the research and development of semiconductor parts and equipment. Once South Korea "weaning" success and even retaliatory set up trade barriers, Japanese companies want to get back to this market. It is hard to go to heaven.

Shin-Etsu Chemical represents the situation of Japanese chemical industry enterprises in this era. They often have a long history and rely on technological advantages to operate in a bleak manner to gain a foothold in the global upstream market. What is frustrating is that while they are struggling to maintain their advantages, they also face an "era of order collapse" and pay for the political and economic sanctions imposed by the Japanese government.

Whether the South Korean government is willing to put historical knots and political disputes on the side to compromise the economy is not yet known, but it is certain that for the two countries where Japan and South Korea are contradictory from time to time, this trade dispute will be noisy. a period of time. Thirty years ago, Michael Porter once said, "The relationship between the state and industrial competitiveness is also how the state stimulates industrial improvement and innovation."

an unknown enterprise. However, it is obvious that for the only semiconductor materials and equipment industry in Japan, this big dispute will only bring about a "disaster" for their industrial improvement and innovation.


Source: (Katja News)

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