TowerJazz to acquire three of Panasonic’s semiconductor fabs (Nikkei headline)


TowerJazz acquires three of Panasonic’s large written off wafer fabs for around US$ 100 million

Massive market entry to Japan for TowerJazz

Nikkei (the world’s biggest business daily, see our J-Media report) reported as their top headline yesterday, that TowerJazz is planning to acquire interests in three of Panasonic’s reportedly largely written-off semiconductor fabs valued at about US$ 100 million.

Nikkei reports that Panasonic plans to spin out three fabs into a separate company, to be owned 51% by TowerJazz and 49% by Panasonic:

  • Uozu-shi in Toyama-ken (富山県魚津市)
  • in Tonami-shi in Toyama-ken (富山県砺波市), and in
  • Myoku-shi in Niigata-ken (新潟県妙高市)

TowerJazz entered Japan’s market by acquiring the Nishiwaki semiconductor fab near Nishiwaki-shi in Hiyogo-ken near Kobe.

TowerJazz is a leading Israel-USA foundry company traded on NASDAQ. TowerJazz in 2011 acquired a semiconductor fab in Nishiwaki-shi in Hiyogo-ken (兵庫県西脇市). The Nishiwaki fab was initially built by a joint-venture between Texas-Instruments and Kobe-Steel, and was later acquired by Micron. TowerJazz acquired the Nishiwaki-fab from Micron in 2011.

We believe that the driver for these transactions are both PUSH and PULL:

  • PUSH:
    • Panasonic’s need for capital
    • Panasonic’s need to withdraw from loss-making operations (Panasonic’s semiconductor operations reported YEN 20500 million (US$ 200 million) operating losses for revenues of YEN 184 billion YEN (US$ 1.8 billion) and need to focus on a smaller number of core businesses
    • need for investments in the semiconductor fabs to upgrade equipment and Panasonic’s difficulties to supply such capital
    • the imperative to globalize management
  • PULL:
    • TowerJazz’ business focus on fab operations, and cooperations with partners
    • TowerJazz’ interest in expanding operations in Japan

Panasonic’s need for decisive restructuring is well-known

Panasonic’s need for decisive restructuring is well-known, we commented many times on CNBC and BBC about Panasonic’s situation, see for example:

Driver: the “Panasonic shock”

In the past Matsushita (Panasonic was previously named after its founder) was nick-named “Matsushita Bank” because of its solid financial situation. However on October 31, 2012, President Kazuhiro Tsuga announced that “Panasonic is an unusual company” referring to Panasonic’s financial predicament: Panasonic had reported YEN 754.2 billion (US$ 7.5 billion) net losses for FY2012 (ending March 31, 2013). At the same time, President Tsuga also announced a program to revive Panasonic. This event is known as the “Panasonic shock”.

You can find detailed analysis of Japan’s electronics sector including Panasonic in our report “Japan's electronics industries: mono zukuri”.

Driver: the need to globalize Japan’s management

In a recent brainstorming event with the President of Tokyo University, the legendary Masamoto Yashiro asked: “In truth, why Japanese management is not global? What should we do?” and explained some answers.

Moving semiconductor fabs from Panasonic management to TowerJazz management is a good example of how Japanese management can be globalized.

Japan electronics industries – mono zukuri. Preview this report:

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SIM free iPhone Japan: officially on sale by Apple in the online Apple store

SIM free mobile phones Japan

SIM free iphone japan finally arrive in Japan – directly sold by Apple.

To understand Japan’s telecom sector in detail, read our Japan Telecom sector report
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SIM-lock free iPhone 5s and iPhone 5c are now officially sold via the Japanese section of the official webstore.

It has been official policy recommendation (not regulation) by Japan’s General Affairs Ministry (総務省) for Japan’s mobile operators to sell SIM-free mobile phones, or to remove the SIM-lock of phones when requested by customers. However, Japan’s mobile operators have been very shy to follow the Ministry’s recommendation, and particularly Japan’s operators did not follow this recommendation for the iPhone.

Apple has now taken the step to offer SIM-free iPhones (model 5s and 5c) officially via the webstore in Japan.

This is a further step on the way of disruptive innovation sweeping through Japan’s mobile phone sector, which evolved from NTT monopoly and leased phones, via step-wise liberalization, entry of newcomers, and now domination by three groups NTT-DoCoMo, KDDI/AU and Softbank.

SIM-free iPhone sales in Japan- What will be the implications?

  • For customers, it will be much easier now to switch operators in Japan under the Mobile Number Portability (MNP) program keeping their iPhone. It will be seen, whether operators follow up with their number portability procedures to include the iPhone, which was not the case until recently.
  • For customers, roaming and international travel will be easier, customers will be able to use their Japan-bought SIM-free iPhone on foreign networks inserting local foreign operators’ SIM cards. Japanese operators might lose some limited amount of roaming income (which has never been very high, unlike in Europe).
  • For operators, churn under the Number Portability Program is likely to increase, increasing competitive pressure on operators to differentiate via radio connectivity, customer service, and innovative services.

How to get and use a SIM-free iPhone in Japan?

We have not yet done this ourselves, but what we hear is:

  1. Buy a SIM-free iPhone from the Apple online Apple-store (apparently SIM-free iPhones are not available from operator stores or physical Apple stores). Take care, the models may differ depending on which operator you want to use the iPhone on, i.e. Docomo or KDDI/AU or Softbank. Better check with the operator about prices and conditions before you purchase the SIM-free iPhone, just to be sure.
  2. Take the iPhone to a mobile operator store (i.e. Docomo, KDDI/AU or Softbank, depending on which type of iPhone you have bought), subscribe for service and get a SIM-card for the iPhone.
  3. There are also some mobile virtual operators (MVOs) in Japan, i.e. operators which purchase capacity from Docomo, Softbank or KDDI, and then retail this capacity to end users. Check their conditions, service speed, bandwidth etc before you buy.

Report on Japan’s telecommunications industry

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