【By Liu Bai, Observer News】Japan has long held a certain advantage in power semiconductor fields, but is now facing severe challenges to its industry competitiveness due to the rapid catching up and price competition from Chinese enterprises.
In an article published on August 20 by Nikkei Asia, it was mentioned that Chinese enterprises have gradually established complete production capabilities in silicon and silicon carbide (SiC) wafer manufacturing, rapidly growing with low energy costs and a large market, and their vertical integration model also poses a challenge to Japanese enterprises. Despite the difficult situation, Japanese manufacturers such as Toshiba, ROHM, and Mitsubishi Electric have not yet formed a united front.
Industry experts point out that the technical gap between Japanese and Chinese enterprises on silicon chips may be only one to two years, and no more than three years on SiC. Japanese enterprises overestimated the development of the domestic electric vehicle market and their own global competitiveness, and must accelerate integration to improve cost competitiveness.
Power devices are essential components for power supply and management in various electronic equipment, and for achieving carbon-neutral and carbon-zero societies, and their demand is expected to continue to grow.
At the end of 2023, ROHM and Toshiba reached an agreement on joint manufacturing of power devices, making additional investments to enhance the production capacity of SiC and silicon (Si) power devices, effectively improving their supply capabilities, and using each other's capacity in a complementary way. A few months later, ROHM announced a broader cooperation proposal aimed at "strengthening all business activities related to power chips," including R&D, sales, and procurement.
ROHM excels in electric vehicle chips, while Toshiba has advantages in industrial products. However, according to Nikkei Asia, apart from a joint manufacturing project, the cooperation between the two sides has not yet yielded substantial results. A source said that the in-depth cooperation discussions initially announced in early 2024 have already "stalled."
One of the sources said that ROHM "has given up" seeking deeper cooperation beyond joint manufacturing.
However, ROHM told Nikkei Asia that the joint manufacturing arrangement is progressing steadily, and negotiations on broader cooperation are still ongoing. Toshiba also stated that the joint manufacturing project is proceeding smoothly, but like previous responses to this issue, it declined to comment on broader cooperation.
At the shareholders' meeting in June, ROHM CEO Toshiki Higuchi said that the talks on deepening cooperation are continuing, but the company will "proceed cautiously to ensure the best outcome for ROHM."
The lack of clear progress highlights the difficulties of large-scale restructuring in Japan's power chip industry. The industry has five major manufacturers: Mitsubishi Electric, Fujitsu Electric, Toshiba, ROHM, and Denso, but each of them has a global market share of less than 5%.
April 16, 2025, Shanghai, FMIC Fangzheng Microelectronics booth at the 2025 Munich Shanghai Electronic Exhibition. Silicon carbide power chips for new energy vehicles. Visual China
Power chips, unlike logic chips and memory chips that have been highly popular due to the AI boom, are crucial components for applications such as the grid and electric vehicles. Their function is similar to a "water tap for electricity," used to control the flow of current. More advanced power chips can significantly improve energy efficiency, which is vital for a country like Japan, which relies on energy imports for 90% of its needs.
Since ROHM proposed a broad collaboration with Toshiba, the market has changed greatly.
ROHM recorded a net loss of 5 billion yen in the fiscal year ending March 2025, marking its first full-year loss in 12 years. The company encountered difficulties in profit from silicon carbide (SiC) power chips, as the electric vehicle market, its largest demand side, slowed down, and fierce competition from emerging Chinese companies eroded profits.
ROHM recorded a net profit of 2.9 billion yen in the quarter ending June, a 14% decrease from the previous year. In May, the company announced the reduction of underperforming manufacturing facilities and initiated voluntary layoffs.
Renesas Electronics is another Japanese chip manufacturer facing similar difficulties.
In June this year, Renesas announced its withdrawal from the SiC market, citing weak growth in the electric vehicle market and pressure from Chinese competition. Renesas was also affected by the bankruptcy of Wolfspeed, a U.S. company that was its SiC chip substrate supplier, resulting in a net loss of 17.53 billion yen for Renesas in the first half of 2025, the largest loss for the period.
"If Japanese companies do not unite, they cannot compete with Chinese opponents."
David Dai, an analyst at Bernstein Research, pointed out that the biggest problem for Japanese power chip manufacturers is the price competition with Chinese enterprises.
"Either they are overly optimistic about the Japanese electric vehicle market or they overestimated their global competitiveness, and both have failed," he said.
Analysts point out that ROHM and Renesas have tried to expand their power chip production capacity in recent years, hoping to drive the SiC chip market through the growth of the electric vehicle demand. However, Japan lags far behind China and Europe in electric vehicle adoption, which is a heavy blow to power chip manufacturers closely linked to Japanese automakers.
The production of power chips generally involves two steps: first, cultivating crystals to make wafers, and then patterning and shaping circuits on the wafers.
Chinese enterprises have gradually accumulated the capability to produce complex products, and now they can manufacture complete power chip devices using conventional monocrystalline silicon. Some companies, such as TanKeBlue (Tiankehe Da) and SICC (Tianyue Advanced), have even entered the silicon carbide wafer market, a high-end material mainly used in electric vehicles.
China's low-cost energy helps these companies produce wafers at competitive prices. According to David, energy costs account for 30% to 40% of the total cost of wafer manufacturing.
However, manufacturing wafers is only half the success. Printing circuits on the wafers is more technically challenging, especially in the case of silicon carbide.
KPMG FAS partner Shun Okamoto said that although Chinese enterprises still lack in manufacturing automotive-grade power chips, as the world's largest electric vehicle market, Chinese emerging chip manufacturers have sufficient demand to reduce costs through mass production and improve product quality using customer data.
In David's view, Chinese enterprises are also challenging the existing vertical integration model. Chinese manufacturers organize production according to processes, while Japanese enterprises typically complete the entire process internally. This means Chinese enterprises can focus their resources on specific production processes to improve efficiency.
He said, "The silicon carbide wafer market has basically been dominated by Chinese enterprises, which also means that no one can make money on the wafers... the vertical integration model is facing significant problems."
A similar situation also occurs in the advanced semiconductor market. By the late 1990s, the dominant business model in chip manufacturing had shifted from vertically integrated companies to specialized companies focusing on manufacturing or design, giving rise to the world's largest contract chip manufacturer, TSMC. This change is considered one of the reasons for the decline of major Japanese chip manufacturers such as Fujitsu, NEC, and Hitachi, which failed to adapt to the new business trends in time and withdrew from the investment race for more advanced chips.
Omdia, a global technology market consulting firm, stated that despite the fact that Japanese power chip companies are currently profitable, their operating profit margins are usually around 10%, but their respective global market shares were all less than 5% last year.
"For Japan, if the companies cannot join forces to improve cost competitiveness, it will be difficult to counter Chinese opponents," said Okamoto.
Large-scale integration, many obstacles
However, industry insiders remain skeptical about whether large-scale reorganization will occur soon.
"There is a lot of external pressure for mergers," said a senior employee of a major Japanese chip manufacturer. "The survival of the company depends on its ability to develop products that meet customer needs. Since each company has a wide range of product lines, it is not easy to coordinate. He also said that power chip manufacturers are even reluctant to reveal complete product specifications to customers to prevent technology leaks. 'Trust is important, and it can only be built through long-term cooperation,' he said.
Okamoto said another major obstacle is the lack of a clear industry leader. "Because the market shares of each manufacturer are close and their advantages vary, no company is willing to compromise, so large-scale integration is difficult," he said.
The Japanese government has attempted to promote industry collaboration. In 2024, a subcommittee of the Japanese Ministry of Economy, Trade and Industry proposed that further expansion of cooperation and integration in the design and manufacturing processes is needed to cultivate a competitive power chip industry.
The Japanese government has committed to providing 70.5 billion yen in funding to the Fujitsu Electric and Denso alliance to expand capacity, and 129.4 billion yen to the ROHM and Toshiba memory subsidiary partnership. However, these amounts are far lower than the Japanese government's commitments to TSMC's advanced logic chip projects in Japan or the start-up company Rapidus.
Nikkei News reported in mid-July that Denso has acquired approximately 5% of ROHM's shares to seek deeper cooperation. The two companies announced in May that they would advance "broader cooperation discussions" in the semiconductor field, stating that their strengths are highly complementary. Denso has also cooperated with Fujitsu Electric to produce silicon carbide chips.
Denso declined to comment on the report of its holding of ROHM shares, nor did it explain whether the relationship between ROHM and Toshiba would affect its cooperation with ROHM.
Although some analysts believe that Denso's actions may trigger a new round of restructuring, another industry insider remains skeptical, citing intense competition among manufacturers and differing corporate cultures.
ROHM was founded in 1954 and initially produced radio resistors in Kyoto, later successfully transforming into a professional component manufacturer. This is different from most of its competitors, who are affiliated with large electronics or automotive groups.
Meanwhile, Mitsubishi Electric has also shown interest in cooperation. At the July earnings call, CFO Kenichiro Fujimoto said the company is "studying various possibilities, excluding no options," but did not disclose details. As to why the industry has not seen restructuring, he explained, "Each party has its own considerations, so progress cannot be made overnight."
Okamoto from KPMG said that the technical gap between Japanese and Chinese enterprises on silicon chips may be only one to two years, and no more than three years on SiC. This means Japan has very little time to form a united front.
"Looking at the challenges from China, Japanese enterprises must build a new sense of pride and take integration as the direction forward," he said.
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