Micron’s huge Hiroshima investment amid job cuts leaves unanswered questions

Ten years have passed since U.S. semiconductor giant Micron Technology bought Japan’s bankrupt Elpida Memory.

While Micron has announced investment of up to ¥500 billion in Japan, it has also proceeded with large-scale job cuts at its Hiroshima plant in the city of Higashihiroshima. The local community, which has embarked on human resource development through an industry-academia-government collaboration, is closely watching whether the chip industry will become a new pillar of support for the local economy.

'No room to say no'

“How could they say they would invest ¥500 billion after cutting so many jobs?” asked a man who was formerly a veteran worker at the Hiroshima plant, having worked there since it was operated by Elpida Memory. After being advised to resign several times this year, he reluctantly complied in May.

Although he received a severance allowance, he still has to repay his mortgage and pay for his children's education.

“Many veteran workers have left the company. The plant is introducing new equipment to mass produce next-generation chips, but I’m worried they won’t be able to train new workers,” the man said.

Micron plans to reduce its global workforce by 10% this year. In May, several hundred people are believed to have left the Hiroshima plant, which had about 3,700 workers as of last November.

The reasons and the extent for the reductions have not been disclosed, but Takamasa Kishimoto, chief consultant at Nomura Research Institute and who watches the semiconductor industry closely, points to a business cycle in the industry. “Memory chips are greatly swayed by economic fluctuations, and Micron has reduced its workforce in the past when the industry faced downturns.”

With the latest investment, the Hiroshima plant will develop next-generation memory chips known as "one-gamma," which are faster and consume less power. The Japanese government is also considering providing several hundred billion yen in financial support for the project, as the government sees it would not only bring economic benefits but also have a positive effect on economic security.

As to why Micron is cutting jobs at the plant while making a huge investment at the same time, several workers who left the plant said they felt the company’s earnings were weak amid a severe economic situation.

“There was no clear explanation from the company,” said one former worker who attended a consultation session held by a local job placement center at the end of May. “I was made to feel like there was no room to say ‘no’” to the company’s call for workers to quit, another person said. Some others expressed regret as wages had been good.

G7 summit timing

Micron announced its massive investment on May 18, the day before the opening of the Group of Seven summit in Hiroshima.

On May 22, the day after the summit ended, the company held a news conference at its Hiroshima plant. CEO Sanjay Mehrotra referred to the job cuts, saying "a difficult situation” was continuing, but he declined to elaborate on the details.

Semiconductor products undergo rapid generational changes, and even in an economic downturn there are times when large investments for production facilities are needed. Kazuyoshi Kihara, head of the Higashihiroshima Chamber of Commerce and Industry, said, "This time it probably couldn’t have been helped, but we wanted some explanations from Micron.”

A worker at the Hiroshima plant said, "We want Micron to be a chip plant that supports the local economy, and that should be the reason for their huge investment. Some workers have lost their motivation as they are anxious that there may be another round of layoffs.”

Human resource shortage

Haruki Matsuura, 23, a second-year student at Hiroshima University's Graduate School in Higashihiroshima, took a job offer from a major materials manufacturer rather than from a chipmaker.

Matsuura, who studies metallic materials, had considered working for a semiconductor-related company because of the industry’s high profitability, but he says he was worried about its future even if things might be good now.

Matsuura attended job seminars at several semiconductor-related firms, but he felt that they didn’t match with his field of interest. Many of his senior peers in school have chosen jobs at carmakers and machinery manufacturers. Although Micron’s Hiroshima plant is only about 3 kilometers away from his school, not many students have gone into the semiconductor industry, he said.

The chip industry is subject to severe fluctuations in supply and demand, and there is an industry-specific business cycle of several years, known as the "silicon cycle.” The industry needs to balance making massive investments and securing human resources while overcoming economic fluctuations. Micron’s global job cuts, including one at its Hiroshima plant, are believed to have been caused by a slump in demand for semiconductors.

According to a survey of 39 firms and organizations in the semiconductor industry in the Chugoku region, 24 companies, or 60%, said there was a shortage of personnel in research and development departments, while 26 firms said that hiring was difficult. The survey was carried out between December and January by the Chugoku Bureau of Economy, Trade and Industry.

Akinobu Teramoto, director of the Research Institute for Nanodevices at Hiroshima University, said the semiconductor industry had long been unpopular with students. Even though some of his students have entered the industry in recent years, he sees the trend now reversing again.

“Many of their parents are in their 50s or so — a generation that has experienced a chip industry downturn,” he said, adding that the parents’ view seems to be affecting students’ career choices.

In April, Teramoto’s institute opened a new facility that has world-class research equipment. It is the new base of the Setouchi Semiconductor Co-Creation Consortium, a joint industry-academia-government group to develop semiconductors and foster human resources.

A total of 21 companies and organizations have joined the group, including Hiroshima University, the Chugoku Bureau of Economy, Trade and Industry, Hiroshima Prefecture, Higashihiroshima City and Micron Memory Japan, along with major manufacturers.

Although Micron’s Hiroshima plant has reduced its workforce, it is still essential to secure human resources in order to refine technologies and products. Competition for skilled workers, however, is fierce.

In Kyushu, capital investments in the chip industry are set to total more than ¥1.5 trillion between 2022 to 2024, including one by chip giant Taiwan Semiconductor Manufacturing Co. in Kumamoto Prefecture.

Last spring, Kyushu also established a consortium bringing together industry, government and academia for semiconductor human resource development. Last year, the Tokyo-based National Institute of Technology designated two schools in Kyushu, including its Sasebo College in Nagasaki Prefecture, as hub schools for human resource development. They are ahead of other schools in teaching a specialized curriculum for the chip industry.

But in the Chugoku region, not only chipmakers but also related manufacturers face a shortage of human resources.

To attract applicants, Tazmo moved its headquarters from Ibara, Okayama Prefecture, to the more populous Okayama city in 2019. Rorze, based in the city of Fukuyama, Hiroshima Prefecture, has been holding online job fairs since 2019 to increase contact with students in distant areas.

Adtec Plasma Technology, also based in Fukuyama, is increasing the number of joint job seminars it holds in the Kanto and Kansai regions.

"Students tend to go to large companies in the metropolitan area,” said President Hidenori Morishita. “Even at the expense of personnel costs, we want to nurture the next generation of employees who can lead the company.”

With its population falling at an accelerating pace, the Chugoku region needs to develop a strategy to foster human resources in a stable manner to keep pace with technological advances.

This section features topics and issues covered by the Chugoku Shimbun, the largest newspaper in the Chugoku region. The original articles were published June 22 and June 23.