Sony Group's headquarters.
In the 1980s and 1990s, Japanese electronics brands like Panasonic and Sony were synonymous with Japan and dominated the global market. Similarly, in the semiconductor market, six Japanese companies — NEC, Toshiba, Hitachi, Fujitsu, and others — were ranked among the world's top ten.
However, Japanese electronics were overtaken by Korean and Chinese products. And in the semiconductor market, Japan was surpassed by Taiwan and Korea. Today, the presence of Japanese companies in these sectors has largely vanished.
While it is the fate of early entrants to eventually be overtaken by latecomers, applying the business cycle theory — which states that growth is impossible without anticipating the future and developing new products — it appears that Japanese companies, once dominant in global markets for electronics and semiconductors, lacked a forward-looking strategic vision.
Successful Transformations = Survival
Sony and Fujifilm are examples of Japanese companies that transformed themselves in response to market changes and achieved success. Sony, which once astonished the world with the Walkman and brought high-quality TVs to market under the Trinitron and Bravia brands, recently announced it would spin off its television division and establish a joint venture with China's major player TCL. That venture is set to handle everything from TV design to sales. Details for the joint venture's launch, targeted for April 2027, are reportedly being finalized.
With its TV division now separated from the main company, Sony is no longer an electronics manufacturer. The core businesses of the main Sony entity are now:
- Gaming,
- Entertainment (music, movies, etc.), and
- Semiconductor devices, which boast the world's top-ranked image sensors.
The former Sony is no longer recognizable.
In the camera film industry, the shift to digital cameras drastically reduced demand for camera film. Fujifilm once challenged the giant United States company, Kodak, in the global camera film market. Kodak, however, clung too stubbornly to its film business and has now lost its former glory.
In contrast, Fujifilm has undergone a major transformation.
The company has evolved into an enterprise centered more on its healthcare and materials divisions. It handles medical equipment like CT and MRI scanners. On the other side, it produces semiconductor materials, rather than being primarily a film company. It is now achieving strong business performance.
Problems of Outside Pressure
Japan's semiconductor industry decline stemmed from political causes, and there was no subsequent revival. The Japan-US Semiconductor Agreement (1988) is widely regarded as the catalyst that triggered Japanese companies' fall from the semiconductor market. This agreement forced Japan to increase the share of foreign semiconductors in its domestic market from 10% to 20%.
Japanese companies and the Japanese government failed to unite and effectively address this externally driven retreat from the semiconductor business. Aside from external factors like pressure from the US, internal factors, such as the resulting brain drain of engineers overseas, also played a role.
Currently, Japan faces uncertainty about which sectors will see increased pressure from the US government. Japanese companies and the government must thoroughly review past failures to avoid repeating the same mistakes across all fields.
Revival with Advanced Technologies
The Japanese government is now focusing its efforts on reviving Japan's semiconductor industry. It has provided approximately ¥476 billion JPY (about $3 billion USD) in subsidies for the construction of the Kumamoto Plant 1 of Japan Advanced Semiconductor Manufacturing (JASM). This is a joint venture in which Taiwan's TSMC holds the majority share, and Sony Semiconductor Solutions, Denso, and Toyota hold minority shares. The factory was completed in late 2025 and began mass production of 12- to 28-nanometer semiconductors.
Furthermore, the Japanese government announced subsidies of up to 732 billion yen in 2025 for a second factory currently under construction. This one was originally planned for the mass production of 6- to 12-nanometer semiconductors. However, early in 2026, TSMC announced plans for mass production of 3-nanometer semiconductors at the second factory, expanding the original planned scale. Additional subsidies from the Japanese government are anticipated.
Public-Private Investment
RAPIDUS, launched in 2022 with a total investment of ￥7.3 billion ($47 million ) from eight companies — Sony Group, Toyota Motor Corporation, Denso, Kioxia, NTT, SoftBank Group, NEC, and Mitsubishi UFJ Bank — in addition to ￥920 billion ($5.9 billion ) in government funding, aims to begin mass production of 2nm semiconductors in April 2027.
This initiative has further attracted 22 private companies, bringing total private investment to over ¥160 billion (over $1 billion ). By the end of FY2026-27, the project is projected to reach a massive scale, with government support, including investments, totaling ¥2.9 trillion (over $12 billion ).
The Japanese government has announced plans to provide subsidies totaling up to ¥242.9 billion ($1.56 billion ) for memory semiconductor production by Kioxia and Western Digital, and up to ¥536 billion ($3.44 billion ) for advanced semiconductor mass production at the Hiroshima plant (Higashi-Hiroshima City, Hiroshima Prefecture) operated by Micron Technology. Micron acquired the semiconductor divisions of Hitachi, Mitsubishi Electric, and NEC through its purchase of the former Elpida Memory company.
In this way, the Japanese government is demonstrating its commitment to strengthening domestic semiconductor production capacity.
Making a Comeback
Having fallen from its former glory, the semiconductor industry now aims for a comeback with Japanese government support. Meanwhile, in the semiconductor manufacturing equipment market that underpins the semiconductor manufacturing business, Japanese companies hold an unshakable position. Tokyo Electron ranked fourth globally in sales for FY2024. It also maintains its solid position as the world leader in patent holdings.
Furthermore, ADVANTEST ranked sixth globally in sales for the same fiscal year, SCREEN ranked seventh, and DISCO ranked 10th. In other words, Japanese companies occupy four spots in the top ten rankings.
While few general consumers may recognize these names, these companies produce indispensable semiconductor equipment for the global market. Their importance continues to grow due to the rising demand for such equipment, driven by the expansion of semiconductor production. Each company possesses advanced technological capabilities, reaffirming that Japanese firms still shine brightly. They bring to mind the era when Japanese semiconductor manufacturers dominated the top ten rankings.
Conclusion
Some companies, like Sony and Fujifilm, have achieved significant transformations and restored their performance. Others, like Tokyo Electron, have steadily grown their business by manufacturing equipment for the semiconductor industry — a massive, high-profile sector — while operating behind the scenes.
Sony and Fujifilm are prime examples of successfully breaking free from fixation on existing markets and pivoting to growth markets. They achieved disruptive innovation, overcoming the dilemma described by Clayton M. Christensen in The Innovator's Dilemma – the struggle large corporations often face in escaping established businesses and entering emerging markets.
Meanwhile, Tokyo Electron is a prime example of companies that have continued to create "products only they can make" through specialized technical expertise and Japanese craftsmanship, achieving further evolution.
Certainly, Japan's growth has stagnated compared to the 1980s, when Japan was hailed as number one. Pessimism about Japan's future is often voiced. However, Japan also has these companies that have transformed with an eye on the future and embarked on a growth trajectory. The true potential of the Japanese people is yet to be fully realized.
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Author: Yoshifumi Fukuzawa
