Determinants of Microlithography Industry Leadership:
The Possibility of Collaboration and Outsourcing

Author Name CHUMA Hiroyuki  (Faculty Fellow) /AOSHIMA Yaichi
Creation Date/NO. January 2003 03-E-003
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The main purpose of this paper is to examine the reasons why Japanese microlithography manufacturers lost their competitiveness in the latter half of the 90's mainly based on the field interviews and publicly available data. Especially, we shall focus on the following four possible determinants of competitiveness in this industry: 1) Characteristics of the major units (including software) that composemicrolithography,and the methods of their production and procurement. 2) Inter-firm R&D collaboration for new product development; 3) Product architecture and the other ways of incorporating product quality; 4) Changes in demand for microlithography and the marketing strategies of each company to adapt to such demand changes. Many people mention that the rapid growth of ASML can be scribed to their extensive strategies of outsourcing and R#D collaboration, and that the modular product architecture enabled them to carry out such strategies. However,we will discuss how such an explanation is not necessarily appropriate. ASML's current position has been established but not because of their extensive use of outsourcing; the modular product architecture was not a major source of their ompetitiveness either.We are not saying that the competitiveness of Nikon and Canon have weakened just as a result of the transitory process of the ordinary business cycle. Rather,we found deeper structural factors that caused problems for the two Japanese companies. While the manufacturing industry is being transformed from an engineering-based to a science-based one, vertically integrated Japanese R&D systems, like Nikon's or Canon's,have begun to exhibit serious drawbacks to innovation.