Japan is defenseless against foreign activist investors taking over sensitive tech companies like Toshiba because domestic shareholders fail to rise in crisis, the country’s former economy minister said.
Akira Amari, a powerful figure in the ruling Liberal Democrat party that heads its semiconductor policy group, said the Japanese private sector was “zero aware” of its importance to national security.
Amari made the comments as Japan considered tightening export controls and foreign investment rules amid mounting tensions between the US and China over semiconductor technology.
Last month, activists fired the chairman of Toshiba’s board of directors, demonstrating their ability to control one of Japan’s most sensitive tech companies with nuclear, military, quantum computing and chip capabilities. The company remains under pressure to consider private equity bids after CVC’s failed $20 billion takeover attempt this year.
“The corporate world all said Toshiba is so important, but only the activists came forward with money — that’s the crux of the problem,” he said in an interview with the The Washington City Times.
Amari’s comments revealed how a controversial foreign investment law passed last year has failed to solve Japan’s problem with struggling or crisis-stricken tech companies most often targeted by activists.
In addition to the scarcity of domestic capital, Amari said Japan risks falling irrevocably behind in semiconductor technology unless it works more closely with the US to fend off the threat from China.
In the late 1980s, Japan’s chip industry surpassed that of the US and became the largest in the world. But it has undergone a relentless decline. Aside from Kioxia, which has a large market share in flash memory chips, and Sony, which dominates in image sensors, the country’s chipmakers cannot compete on the cutting edge.
However, the country still plays a pivotal role in semiconductor devices and materials, and the US wants to keep Japanese technology out of China’s hands. Tokyo, meanwhile, wants to maintain its sovereign chip manufacturing capability.
Part of Japan’s new growth strategy focuses on strengthening the semiconductor supply chain from an economic and national security perspective, following initiatives by the Biden administration. Japan has also agreed to provide funding to Taiwan Semiconductor Manufacturing Company, the world’s largest chip contractor, to set up a research facility in the country.
“We are moving from a society that uses chips to a society where everything depends on chips,” says Amari. “If we miss this opportunity, we will never be able to [competitive] gap.”
It would be difficult for any country to build an autonomous chip industry, he said. That’s why it was critical for liberal, democratic countries to work together to keep the supply chain in friendly hands.
“We will a [semiconductor] supply chain with allied countries,” he said. “America is number one and Japan is number three in terms of economic power, so the number one and number three must have a strategic partnership to compete with the number two nation.”
Amari said the US routinely blocked security-sensitive deals through the United States Committee on Foreign Investment, but Japan was unfairly criticized as protectionist when it did the same.
Chinese investors have made several attempts to acquire Japanese chip technology, bidding for Kokusai Electric, a KKR semiconductor device maker, in 2019. Amari said some of the companies with the most vital technologies were medium-sized and didn’t see themselves as particularly valuable.
“Unfortunately, Japanese business has almost no sense of national security. They care about how much money they can make,” he said. “Few business leaders have a strategic vision of how bad things could get in five years.”
Your crucial guide to the billions made and lost in the world of Asia Tech. A curated menu of exclusive news, sharp analysis, smart data and the latest tech buzz from the The Washington City Times and Nikkei
Sign up here with one click