The hidden corner of Japan’s semiconductor rise and fall

Latest update time：2023-02-27

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In 1949, a Japanese college student named Hiroshi Yamauchi was about to graduate from the Law Department of Waseda University. Suddenly he received the news that his father had died of illness. His family asked him to drop out of school and return home to inherit a family business .

This company has quite a history. It was first established as a small workshop in 1889 by Yamauchi's great-grandfather, Yamauchi Bojiro. It has been passed down to Yamauchi Hiroshi for the fourth generation and has more than 100 employees. It mainly produces flower cards, poker and other gambling equipment. .

Although Hiroshi Yamauchi is young, he is very good at running a business. After returning home, he carried forward his ancestral business in just a few years. By making playing cards, he actually made the company public. However, Yamauchi Hiroshi is a man with great ambitions, and he is not satisfied with just making flower cards.

The question is, where to go next?

The restless young man traveled around the United States and found a new direction: video games. This thing was definitely considered a trendy entertainment industry at the time, and Yamauchi Hiroshi could see the huge potential in it at a glance.

After World War II, Japan's economy recovered rapidly. By the 1960s, it was already the number one developed country in Asia, but it was still a little brother following the United States in all aspects. American culture is very popular in Japan. Almost all the programs broadcast on Japanese TV come from the United States. Emperor Showa's favorite is Superman.

It was an era when the United States led the world in all fields, and video games were no exception. There is no other reason: any commercial product will ultimately be governed by the laws of the underlying technology. For video games, this underlying technology is semiconductors, and the United States is the birthplace of semiconductor technology.

In 1947, at Bell Labs, the most powerful corporate laboratory in the world at the time, William Shockley and two other physicists jointly invented "the most important invention of the 20th century", the transistor, which triggered a revolution in semiconductor technology. But for a long time afterwards, due to its high price, semiconductor technology could not enter the civilian market and could only be used in laboratories and military products.

Semiconductors can later enter public life. On the one hand, it is inseparable from the evolution of its own technology. On the other hand, it must have a broad enough market application to drive it.

Today, when we talk about chips, the first thing we think of is often computers and mobile phones. However, in history, the earliest large-scale application of chips was actually game consoles.

Yamauchi Pu saw this and decided to transform the company. Eventually the family business became a name known around the world: Nintendo .

However, at that time, Nintendo was just a "little kid" in the gaming industry. In the 1970s, it was an American company that dominated the gaming world.

In 1971, Intel launched the world's first microprocessor 4004. An American engineer named Bushnell was inspired to design the world's first two-player game console called "Pong" in his bedroom. It was carried to a bar and found to be a hit.

Seeing a business opportunity, Bushnell resigned decisively and founded a company called Atari .

This is a slightly unfamiliar name today, but at that time, Atari was a presence in Silicon Valley comparable to Apple today.

This company's market value increased more than 60 times in just 6 years, becoming the first company to become one of the world's top 500 companies by selling game consoles. Jobs's first job was to develop the stand-alone version of "Arkanoid" at Atari.

Bushnell (second from left) and Pong arcade machine

It was precisely after seeing Atari's success that Japanese companies keenly sensed opportunities. As a result, companies such as Sega, Namco, and Nintendo all entered the arcade market in the mid-1970s and achieved some success.

However, at this time, the forefront of the video game industry is in the United States, and Japan is a major copycat following the United States.

For example, just 8 months after Atari launched PONG, Sega took the prototype manual, figured out the circuit logic of Pong, and copied it to create a Japanese version of the copycat machine; another game company, Namco, was originally a copycat machine of Atari. Li was the only dealer in Japan, but after buying 15 Atari Arkanoids, he copied thousands of them himself.

At that time, the semiconductor industry in Japan was in its infancy. It needed technology but not technology, and it needed talent but not talent. Therefore, it pursued a borrowing mentality from Big Brother and was not polite.

It can be said that for the Japanese semiconductor industry, copycat game consoles played an "enlightenment" role and helped Japan cultivate the first batch of semiconductor technology talents.

But then again, if you rely solely on copycats, you will never be able to surpass your opponents and lead the trend. This is an unchanging truth in the business field. For ambitious Japanese entrepreneurs like Hiroshi Yamauchi, they don’t want to stop living off copycats.

The problem is that they need an opportunity, a breakthrough, to redefine this industry.

In the history of gaming, an important year is 1977. Because that year, Atari launched the epoch-making Atari 2600. What was unique about this game console?

In the early days of the semiconductor industry, general-purpose CPUs had not yet been born. Software and hardware were not separated. Game consoles used customized circuit boards, and players could only play a few games embedded in the console. The Atari 2600 host used a universal CPU chip for the first time , and could play different games by replacing game cartridges.

At that time, there was an arcade game called Space Invader, which was ported to the Atari 2600 by Atari. It sold more than 6 million copies and was extremely popular. That Christmas, children all over the United States were clamoring for Atari game consoles as gifts.

Advertisement for Atari 2600

In Japan, there is no home console like the Atari 2600 on the market. Space Invader can only be played in arcades. It costs 100 yen to play a game. Many parents still feel sad about this.

The pain points of the market are often opportunities for businesses. Hiroshi Yamauchi, who had been eyeing the game market for a long time, felt that the opportunity had come. He decided to make an epoch-making product and surpass his opponents in one fell swoop.

At that time, the consumption power of the Japanese market was far lower than that of Americans. Yamauchi Hatsutsu said to his subordinates: "In order for consumers to fall deeply in love with game console products, they must first be able to afford them."

In order to keep costs as low as possible, Nintendo decided to greatly simplify the console: the keyboard and floppy disk drive were cut off, and the control stick derived from the arcade machine was replaced with a D-pad controller.

As the most important core component of a game console, how to control the cost of the CPU is particularly critical.

Nintendo originally planned to use chips from Intel or Motorola, but supplier Ricoh Semiconductor proposed another plan: use a Rockwell 6502 CPU instead. This chip was launched not long ago. Not only is it ultra-low cost, it can also save three-quarters of the circuit space. Ricoh also has a license to use it.

The advantage of 6502 is that it is cheap and not yet popular in Japan, so it is easy to establish technical barriers. However, the problem is that Nintendo itself is not familiar with its circuit logic. what to do? Hiroshi Yamauchi decided to take a gamble: Just use the 6502 chip. If no one understands it, learn it now.

Fortunately, it’s not like no one understands it at all.

In the spring of 1983, Nintendo recruited a young man named Shuhei Kato because his resume contained this sentence: "I taught myself the machine language of 6502 through magazines during college." On the first day he joined the company, he was told: There is no training for new employees, but there is an urgent task that needs to be assigned to you.

Facts have proved that this self-taught young man is very reliable. He is like a mobile technical manual, helping Nintendo solve many technical problems.

Compared with the previous generation of overlord Atari 2600, the hardware configuration of the red and white machine has been greatly improved: 8-bit CPU, 2K memory, a dedicated graphics processing unit and 2K video memory, and the picture performance capability far exceeds the former. Hiroshi Yamauchi is confident in this machine.

Nintendo classic NES

Just as Nintendo was gearing up, industry leader Atari took the initiative to send a "big gift." Due to its monopoly position, Atari was very arrogant and exploited game producers in various ways. The programmers left in anger.

However, Atari was completely ruined and allowed all kinds of shoddy games to flood into the market, completely ruining its own brand. Its products were unsaleable, its stock price plummeted, and the U.S. video game market also plummeted. This is known as the " Atari Collapse ." Many Americans feel that the gaming market is completely finished.

But Americans did not expect that the gaming industry was not only not dead, but was about to experience a major explosion. However, it was Japanese companies that broke out for them.

In July 1983, almost at the same time that Atari fell from the altar, Nintendo FC was launched on the market and became an instant hit.

Nintendo learned from Atari's lessons and not only developed hit games like "Donkey Kong", "Super Mario Bros." and "The Legend of Zelda", but also "Contra", "Double Dragon" and "Brave". Third-party games such as "Dragon Quest" have been brought into its own camp. These classic games have landed on the FC platform and have accompanied the childhoods of countless people around the world.

In this way, with a strategy of balancing soft and hard, and content being king, Nintendo monopolized industry standards, almost single-handedly revitalized the game market, and became the world's game overlord.

A total of more than 60 million FC units have been sold in the global market, half of which were sold to Americans. Nintendo has achieved a monopoly on the console platform level.

Throughout the 1980s, Nintendo defeated all rivals in the world. Star products like FC sold tens of millions of copies. Another handheld console called Game Boy is even more exaggerated. The entire series has sold more than 200 million units.

Nintendo Game Boy

There is a big background here, which is the rise of Japan's semiconductor industry since the 1970s.

In 1974, the Japanese government formulated the "Very Large Scale Integrated Circuit Plan" and spent 72 billion yen to integrate industry, academia, and research resources across the country to focus on tackling key problems. As a result, it took only 6 years to capture 30% of the U.S. memory market. , even Intel, which started out with memory chips, was forced into a corner by Japanese companies and almost went bankrupt.

By 1986, six of the world's top ten semiconductor companies were from Japan, and the top three were monopolized by NEC, Toshiba, and Hitachi.

The outbreak of Nintendo is inseparable from the rise of Japan's semiconductor industry, but on the other hand, the prosperity of the game market has brought huge market demand, which in turn has driven the iteration of Japan's semiconductor technology.

At that time, in developed countries, game consoles, like televisions, refrigerators and other home appliances, had a very high penetration rate and were mass-produced electronic consumer products. Another fact that may surprise many people is that the technical content of game console hardware is much higher than that of TVs and refrigerators.

Before the 1990s, game console hardware and personal computer hardware were almost technically synchronized. The only difference was that game consoles were used for entertainment, while personal computers focused on office work. However, because computers were too expensive, they were far from popular at that time. In the civilian chip market, game consoles were the major demand, with sales far higher than computers.

At that time, game consoles were an important battlefield in the chip arms race. In order to attract users, manufacturers always tried to stuff the most advanced chips into their own game consoles.

Let’s take Nintendo as an example.

Ricoh was originally a small semiconductor supplier, but Nintendo suddenly placed an order for 3 million chips. Based on the 6502 chip, Ricoh developed a central processing unit called "Ricoh 2A03", which became the hero behind FC's instant success.

According to statistics, in 1991, the total amount of specific semiconductors consumed by Nintendo far exceeded that of other Japanese companies, and the number of semiconductors it used accounted for more than 3% of all Japanese semiconductor production.

However, for the Japanese semiconductor industry, another gaming giant with greater influence is latecomer Sony.

Sony is a home appliance giant. When it first announced that it was developing a next-generation game console, no one believed it was serious. After all, Sony has never made any games and is a complete layman. However, many people have not noticed that Sony has been deeply involved in the semiconductor field for a long time, so making a game console is a natural thing.

As early as 1953, Akio Morita was eyeing the transistor, which was only a few years old. He went to the United States to learn from it and spent $25,000 to purchase the transistor patent. At that time, he was considered to be taken advantage of.

No one could have imagined that taking the first step in the semiconductor field would become the starting point for Sony's future glory.

In 1955, Sony launched Japan's first transistor radio "TR-55". It weighed only one-fifth of the vacuum tube radio with the same performance and cost only one-third. It was light, cheap and practical. It quickly sold well in Japan. Selling well all over the world.

Sony’s first star product, the TR-55 radio

Sony, which had opened up the two lines of Ren and Du, has been cheating since then and has been marching towards the road of empire: it launched the world's first transistor TV in 1960, launched the famous "Trinitron" color TV in 1968, and came out in 1979. The Walkman has directly become a cultural phenomenon and has become synonymous with the Walkman. A total of more than 200 million units have been sold...

Due to Sony's accumulation in the semiconductor field, Nintendo came to the door in 1986 and expressed its hope that the two companies would develop an SFC-compatible machine with CD-ROM.

Sony was overjoyed. After all, as mentioned earlier, the technological content of game consoles was higher than that of televisions and radios at the time. Sony could also take this opportunity to further improve its own technology.

It's just that Sony never expected that the thick-browed Nintendo was very unreasonable and unilaterally tore up the contract. Sony, which already had one foot in the gaming industry, simply went it alone and officially launched the first-generation Play station (PS) in December 1994 .

Sony has established a huge game studio to develop first-party content, and has also brought in major third-party companies such as Namco, Konami, and Square Enix to convince them to take a gamble on Sony. In order to meet the challenge, Nintendo came up with the new N64 console in 1996, but this time, luck was no longer on their side.

The winner is Sony. The global sales of PS game consoles exceed 100 million units, while Nintendo N64 only has 32.63 million units. The empire begins to collapse.

The legendary Sony PS

Compared to Nintendo, Sony is much more ambitious in its pursuit of core technologies.

As a company that started out by playing cards, Nintendo lacked technical genes. Hiroshi Yamauchi did not realize that the beginning of the Japanese game industry was based on semiconductor technology originated in the United States; Nintendo's most popular FC was also based on the 6502 chip. Shangcai was a great success.

Today we often say that second-rate companies make products and first-class companies make standards. But standards also have a food chain. In the electronics industry, the top of this food chain is the chip.

After defeating Nintendo, Sony wants to use its position in the game console market to realize another dream: to enter the chip industry and establish an ecosystem with core technologies.

Professor Michael Levitt, winner of the 2013 Nobel Prize in Chemistry, once said publicly, "Why do we have such powerful computers today? One of the important reasons is that young people play video games. Without video games, we would not have machines. Learning, there will be no artificial intelligence.”

Sony does not want to be just a game platform provider like Nintendo. Its goal is to become Japan's Intel + Microsoft.

On the highly successful PS2 game console, Sony used deeply customized CPUs and GPUs, but the problem is that these are all based on American chip technology, and it has not yet mastered the underlying technology.

Let me say here that "deep customization" sounds very powerful, but in fact it is not a particularly advanced thing. To put it bluntly, it is just a modification of other people's underlying architecture.

In the 1980s, the chip industry was booming. There were multiple architectures and multiple technical routes on the market, and game console manufacturers could choose the one with the highest cost-effectiveness.

But by the 1990s, this kind of gameplay gradually became unplayable, because the computer field was almost unified by x86. Looking at it, the only thing left that could compete with Intel's x86 was IBM's PowerPC architecture, which was used by Apple computers at the time. Sony saw this as an opportunity.

In 2000, Sony and Toshiba jointly knocked on IBM's door. The three companies reached a technical alliance and jointly developed the next generation chip based on PowerPC architecture - Cell .

Sony's wishful thinking is this: With the powerful performance of Cell, PS will completely defeat its opponents on the next generation of game consoles. At the same time, it will use Sony's scale advantage in the game console market to counterattack the PC market, allowing Cell to compete with the x86 architecture.

This is a quite ambitious dream. If realized, Japan's IT industry will hopefully be on an equal footing with its American counterparts.

In 2001, Sony and IBM jointly held a press conference and announced the technical specifications of the Cell chip for the first time: integrating 250 million transistors and 1 trillion floating point operations per second, comparable to a supercomputer! In the mouth of the media who are good at creating hot spots, it later became "Cell processor can simulate the earth."

If this earth-shattering and ambitious goal can be achieved, Sony will not only win the next-generation game console war, but even Intel will have to bow to it, and computers will usher in the Cell chip era.

However, the ideal is full and the reality is very skinny.

Facts have proved that making chips is much more difficult than making games. Cell spent 4 billion US dollars, but its performance has never met expectations. The overly complex structure has caused Cell to become a bottomless pit of money.

Sony is stuck between a rock and a hard place. Keep investing. Costs will soar further and cost performance will be completely lost. Just let it go. Sony's Stars and Seas have just begun and come to an end. Sony reluctantly used the obscure Cell chip in the PS3. As a result, it was losing money because the price/performance ratio was too low.

The ill-fated Cell processor

After a few years of struggling like this, Cell couldn't be saved. In the end, the team was disbanded and Cell was merged into IBM's mainstream chip product line.

But it has to be said that if Cell succeeds, it will be a great victory for the Japanese semiconductor industry.

In contrast, Americans, who have the right to speak about semiconductors, have developed a top-down approach after entering the 21st century.

In 2001, Microsoft launched Xbox, and Bill Gates personally handed an Xbox into the hands of users in Times Square. Compared with Sony and Nintendo, Xbox's hardware is unprecedentedly powerful: Intel Pentium 3 processor, NVIDIA NV2A customized GPU, and the memory is also a universal PC model - it is not so much a game console as a customized gaming PC.

Xbox eventually sold 24 million units. Although it did not beat Sony's PS2 (which sold 159 million units, which was incredible), it pulled Nintendo from its second position and gave it to American game manufacturers. Bad breath.

In the late 1980s, the semiconductor war between the United States and Japan broke out.

The U.S. emperor has landed a series of iron fists on Japan: sanctioning leading companies such as Sony and Toshiba, imposing anti-dumping duties, and signing the "U.S.-Japan Semiconductor Agreement."

Japan's semiconductor industry has slowed down investment and research and development, and has begun to enter a recession. By 2016, only Toshiba was struggling in Japan on the list of the world's top ten semiconductor companies.

But one thing seems a bit abnormal at first glance: Nintendo, which dominates the game market, was not on the U.S. blacklist at the time. Even today, Nintendo and Sony are still the most powerful players in the gaming industry. Microsoft has been burning money on Xbox for more than ten years, and so far it can only barely rank third.

This is why?

If you think about it carefully, you will understand that this is not surprising. The chip architecture of Japanese game consoles is almost all from American companies. The seemingly powerful Japanese game manufacturers actually do not master the underlying technology. In this case, the more Nintendo and Sony's game consoles are sold, the more "blood transfusion" they will have on the U.S. semiconductor industry.

In the history of science and technology, there is a saying that is often quoted: demand is the mother of technology .

Among the laws of technological innovation, there is a "Valley of Death" model: most of human technological innovations and inventions will be lost in the long river of history. Only those that achieve industrialization and commercialization survive and are passed on.

This is especially true for high-tech industries such as chips, which have high technical thresholds and huge investments.

Entertainment is one of the eternal themes of human life. The popularity of video games has spawned huge demand, constantly stimulating semiconductor technology upgrades, and lowering costs by leveling investment, thereby promoting the continuous iteration of chip performance, ultimately leading to the development of personal computers. The coming of age.

In July 2022, the Chinese Academy of Sciences released a seemingly "unorthodox" study "Game Technology - New Technology Clusters in the Process of Integration of Data and Reality". The core point is that games play an important role in the development of hard technology. , which can be regarded as a very powerful counterattack to the reputation of video games as "spiritual opium".

The two figures that impressed me very deeply are: game technology contributes 14.9% to the technological progress of the chip industry, and contributes an astonishing 71.6% to today's hot AR/VR.

In fact, in the past year or so, the positive impact of games on cutting-edge technology has received more and more attention and recognition at home and abroad. Whether in November last year, the European Union passed a long-term development strategy for electronic games with a high vote of 560 votes, or the United States, South Korea, Japan, Australia and other countries have successively announced accelerating the layout and support of the game industry.

At the same time, at this year's game industry annual meeting, the "Research Report on the Technological Capabilities and Technological Value of Games" released by the Game Working Committee of the China Music and Digital Association and the China Game Industry Research Institute also showed that terminal manufacturing, electronic communications, machinery manufacturing, and automobile manufacturing Among other industry professionals, more than half recognized that games have promoted the development of AI, 5G, and

Looking back at history, there has always been a "resonance" between games and technological innovation: in the early days , technology inspired the birth of games; later, games began to feed back technological innovation and became a testing ground for "black technology"; today, game technology is increasingly integrated into the development of the real economy. , social value continues to be highlighted.

When it comes to the problem of stuck chips, the first thing we usually think of is that the development of the semiconductor industry relies on arduous technical research. However, in this highly commercialized industry chain, technology alone is not enough; A huge market to support.

More and more countries are increasing their attention and investment in games, hoping to seize the opportunity under the general trend of virtual and real integration. Game technology clusters are becoming an important bargaining chip in the competition between major powers.

Looking back at history, the rise and decline of the Japanese semiconductor industry is almost at the same pace as the rise and fall of the Japanese video game industry. The evolution of technology and the commercial application of technology have always achieved mutual success.

*Disclaimer: This article is original by the author. The content of the article is the personal opinion of the author. The reprinting by Semiconductor Industry Watch is only to convey a different point of view. It does not mean that Semiconductor Industry Watch agrees or supports the view. If you have any objections, please contact Semiconductor Industry Watch.

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