KAWASAKI – Tokyo Ohka Kogyo Co., JSR Corp. and Shin-Etsu Chemical Co.: Three seemingly inconspicuous companies suddenly came into the spotlight in early July when Japan announced it would slap tightened export controls to South Korea on three key chemicals — photoresists, fluorinated polyimide and hydrogen fluoride — that could be diverted for manufacturing weapons.
Behind the development of cutting-edge, palm-sized smartphones that dwarf the capabilities of 1980s desktop computers lies an advanced type of liquid that responds to beams of light to coat and etch finely detailed patterns on semiconductor circuit boards using a technique called photolithography — a process that uses one of the three chemicals.
TOK, JSR Corp. and Shin-Etsu Chemical control roughly 90 percent of the extreme ultraviolet (EUV) photoresists market, which are used for cutting-edge 7 nanometer chips.
There have been various types of photoresists manufactured over the years, and the state-of-the-art technology makes it possible to create lines approximately 10,000 times thinner than a single strand of hair.
Kawasaki-based TOK was the world’s biggest manufacturer in 2017, accounting for 26.9 percent of the global market for photoresists used in chips, according to research by Fuji Keizai Co.
There are two types of chips — logic and memory. A logic chip is used for processing information in a central processing unit, while memory chips are for storing data, such as in dynamic random access memory or flash memory.
In logic chips, fierce competition for higher speeds is playing out globally, and EUV photoresist, which uses EUV light wavelengths to etch wafer lines on semiconductors at a nano level, is state-of-the-art technology used for making the most sophisticated chips — an area dominated by Japanese manufacturers.
There’s a danger that cutting-edge semiconductors using EUV photoresists could have military applications, which was why Tokyo chose it as one of the chemicals for tightened export procedures due to concerns about national security.
Despite the market dominance it enjoys now, it was pure coincidence that TOK entered the photoresist market.
Japanese chipmakers craved local supplies of high-grade products instead of the unreliable quality of those imported from the United States, pushing TOK to make them. It then became the first Japanese company to manufacture photoresists, in 1972. Ever since Japanese chipmakers grew to seize the world’s No. 1 title from the U.S. in 1986, TOK and other Japanese manufacturers have controlled a large global market share.
“Thanks to Japanese chipmakers who have used our products, we have grown into one of the major global photoresist manufacturers,” said TOK’s public relations general manager, Hideo Ohhashi.
At one point in the 1980s, TOK controlled most of the market.
“Japanese manufacturers have held a market share of around 90 percent for the cutting-edge products since around 2000, and they are likely to maintain that share,” said Shuuichi Nakahara, senior analyst at Tokai Tokyo Research Institute.
Exceptional quality is paramount as an intrusion of one foreign object per 100 billion particles could damage the products, and customers demand that their suppliers prove their products do not contain any impurities. To show that, TOK uses a device that can detect a single drop of an impurity in a 50-meter Olympic pool.
As semiconductor applications widened to an ever-more diverse range of electronic devices, so did the market for photoresists. TOK’s material business sales, including photoresists, have almost doubled over the past 17 years to more than ¥100 billion, while operating profit for that segment has nearly tripled.
Why did a handful of Japanese chemical material firms succeed in dominating the global market, even though a number of Japanese semiconductor firms have fallen from grace after claiming the No. 1 spot?
A dedication to meeting various customer needs, the geographic advantage of having ready supplies of high-purity chemicals, and decades of accumulated expertise were cited as key by experts.
“It’s not only clearing the specifications that our customers want, but it’s sometimes necessary to meet the requirements that are not written on paper,” said TOK’s Ohhashi. “We sometimes face very high hurdles and I think those companies that have been able to respond to those requests are probably the ones that survive today.”
The chip business is facing a relentless battle for miniaturization as manufacturers battle in a frontier world just dozens of atoms thick.
TOK started production of “g-line” photoresists made using wavelengths of 436 nm in the 1980s. Currently, the latest EUV photoresist is used in 7-nm chips, and the market is likely to see 5-nm chips soon. TOK is unique in that it produces all those kinds of photoresists.
The South Korean government has dedicated about 7.8 trillion won (nearly ¥700 billion) to support the development of local materials used in semiconductors to create a domestic supply chain that is not reliant on Japanese materials.
“Japanese manufacturers are roughly two generations ahead (of South Korean manufacturers),” said Nakahara. “One generation is roughly two to three years. It would be difficult for South Korean rivals to catch up in a short time.”
“There are overseas materials firms that provide similar products to what we make, but when you look at the products used in South Korea, you see a large market share for Japanese firms,” Ohhashi said. “That is because Japanese firms have an edge in supplying good and stable quality products and an established support system.”
The trade ministry’s rigorous export controls against South Korea have not resulted in any significant impact on TOK, partly because EUV photoresist sales started less than a year ago and account for less than 1 percent of total annual revenues, Ohhashi said.
TOK supplies EUV photoresists to South Korean end users in two ways, either through TOK’s South Korean plant or through exports from Japan. TOK also needs to get approval for exporting EUV raw materials such as resin, which TOK buys from a Japanese raw materials supplier.
“This is not an embargo, but because approval is now required for every shipment rather than the previous system under which blanket permission was given, it’s taking more time for review,” Ohhashi said. “We have been making shipments of products made in South Korea, so there has so far been little, if any, impact.”