The production value of Japan's semiconductor industry reached JPY3.25 trillion (US$27.5 billion) in 2014, increasing 8.7% from a year earlier. Companies have received a boost from government policies that help strengthen the division of labor in order to improve their profitability, according to Digitimes Research.

The Japan government believes that the high-production cost structure of Japan's semiconductor industry is the main reason contributing to its gradual decline in the global semiconductor market.

Makers in the line have thus tended to reduce capital spending for equipment and R&D projects under shrinking profits and therefore, Japan-based semiconductor firms have been set in a position unfavorable for them to maintain their technology advantages but also prevent them from committing new investments for achieving sustainable growth.

For stressing the division of labor, the Japan government is encouraging makers to outsource more production to outside companies to reduce investment on manufacturing processes.

It is also encouraging the development of IC design and IC manufacturing industries, separately. For example, Fujitsu Semiconductor and Panasonic have jointly set up an IC design company, named Socionext, integrating the LSI business units of the two companies. Additionally, the wafer foundry of Fujitsu Semiconductor has also been spun off into an independent subsidiary.

In line with its policy calling for the development of smart community, the Japan government has also been pushing semiconductor firms to develop related applications for the smart community such as smart grid systems, smart households and smart sensors for driving controls, Digitimes Research noted.

By: DocMemory
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