Japanese technology companies are not helpless, warns the top official

Japan is helpless against foreign activist investors who take over sensitive technology companies like Toshiba so that domestic shareholders do not intensify the crisis, according to the country’s former economy minister.

Akira Amari, a powerful figure in the ruling Liberal Democrat party that leads its political group on semiconductors, said the Japanese private sector had “zero awareness” of its importance to national security.

Amari made the comments as Japan considered a tightening of export controls and rules on foreign investment amid growing tensions between the US and China over semiconductor technology.

Last month, activists fired the chairman of the board of Toshiba, demonstrating its ability to control one of Japan’s most sensitive technology companies with capabilities in nuclear, military, quantum computing and chips. The company continues to press consider private equity offers after the $ 20 billion CVC acquisition attempt this year.

“The business community said Toshiba is so important, but only activists advanced with money; that’s the core of the problem,” he said in an interview with the Financial Times.

Amari’s comments revealed how contentious law on foreign investment approved last year has not solved Japan’s problem with technology companies struggling or affected by the crisis most often targets of activists.

In addition to the shortage of domestic capital, Amari said, that Japan runs the risk of falling behind in semiconductor technology unless it works more closely with the U.S. to defend China’s threat.

In the late 1980s, the Japanese chip industry surpassed that of the United States to become the largest in the world. But it has suffered a relentless decline. Apart from Kioxia, which has a large market share in flash memory chips, and Sony, which dominates in image sensors, the country’s chip makers can’t compete at the forefront.

However, the country still plays a key role in semiconductor equipment and materials, and the United States wants to keep Japanese technology from the hands of China. Meanwhile, Tokyo wants to maintain its sovereign capacity in chip making.

Part of Japan new growth strategy focuses on strengthening its semiconductor supply chain from an economic and national security perspective, echo initiatives by the Biden administration. Japan has also agreed to provide financing to Taiwan Semiconductor Manufacturing Company, the world’s largest chip contractor, configure a research center in the country.

“We’re moving from a company that uses chips to a society where everything depends on chips,” Amari said. “If we lose this opportunity, we will never be able to close it [competitive] crack. “

It was difficult for any nation to build a standalone chip industry, he said. Therefore, it was crucial that liberal and democratic countries work together to keep the supply chain in friendly hands.

“We will have to build one [semiconductor] supply chain with allied nations, “he said.” America is number one and Japan is number three in terms of economic power, so number one and number three must have a strategic partnership to compete against the nation. number two “.

Amari said the United States routinely blocked security-sensitive agreements through the U.S. Foreign Investment Committee, but Japan was unfairly criticized as a protectionist when it did the same.

Chinese investors have made several attempts to acquire Japanese chip technology, tender in 2019 for Kokusai Electric, a semiconductor equipment manufacturer owned by KKR. Amari said some of the companies with the most vital technologies were medium-sized and did not perceive themselves as especially valuable.

“Unfortunately, Japanese companies have almost no awareness of national security. They care how much money they can make. “