Concern is already being expressed over the decision by Japan Investment Corp. to acquire Tokyo-based chip materials maker JSR Corp. for around 1 trillion yen ($7 billion) in a strategic shift to shore up the domestic semiconductor industry.

JSR holds a 26 percent share in the global market of photoresists, a chemical agent essential for manufacturing semiconductors.

With JIC backing, the move announced June 26 is intended to realign the domestic semiconductor industry, which the government has pitched as a strategic commodity for the nation’s economic security.

But the use of government funds in the past to realign industries has not always had a happy ending. And this is what business analysts are harping on about.

Experts even suggested that JSR might lose its competitiveness because of the buyout.

On the same day that JIC announced its plan to acquire JSR, the latter’s board of directors agreed it would approve the acquisition plan.

JIC plans to complete the takeover bid in late December.

The final buyout price will come to around 900 billion yen based on the price of 4,350 yen per JSR share.

JSR will be delisted from the Tokyo Stock Exchange in 2024.

It has pledged to facilitate the realignment of Japan’s semiconductor industry after the buyout.

Semiconductor circuits are manufactured by projecting circuit patterns with exposure devices on silicon wafers, upon which photoresists, a liquid agent, are applied.

Photoresists are an essential material in the process of microfabrication.

Japanese makers hold around 90 percent of the global market for photoresists, according to British research company Omdia.

JSR, along with Tokyo Ohka Kogyo Co., holds a conspicuously large share of the market.

Referring to the benefits of delisting, Eric Johnson, the CEO of JSR, said June 26 during an online news conference that it is difficult for listed companies to execute long-term strategies.

By having JIC as its sole shareholder, he said the company will be able to move ahead with clear strategies and enhance its international competitiveness.

Johnson noted that JSR still has not decided on which companies or industry areas it will target in the push to realign the semiconductor industry.

Given the acceleration of digitalization in society, semiconductors have become a “strategic commodity,” without which people’s lives would suffer greatly. As it is, the United States and China are locked in a battle for chip supremacy.

For these reasons, the government feels it is easier to justify its involvement in the semiconductor industry’s realignment.

NOTABLE FAILURES

But that is not to say that everything will be an unqualified success.

The government sank an absolute fortune in public money into Elpida Memory, Inc., a company established in 1999 by merging semiconductor memory businesses of NEC Corp., Hitachi, Ltd. and Mitsubishi Electric Corp., only to see it go bankrupt in 2012 before being acquired by a U.S. company.

Japan Display Inc., founded in 2012 by merging the small-sized liquid crystal display (LCD) panel businesses of Toshiba Corp., Sony Corp. and Hitachi Ltd. in a government-led initiative for the realignment of the LCD industry, is still struggling.

Its results for the fiscal year ending this past March showed the company had suffered from a net loss for the ninth consecutive fiscal year.

Certainly, JSR is financially on a much more stable footing, so the acquisition by JIC doesn’t come across as a salvage effort under difficult conditions.

Johnson said during the news conference that his company is currently in a strong position and that many of its partners are saying now is a good time to make more efficient investments in research and development.

He added that JIC will become a good lever to execute that strategy.

But Yukihiko Nakata, a professor emeritus of technology management at Ritsumeikan Asia Pacific University in Oita Prefecture cast doubts on whether JIC will be able to manage JSR in a way that will enable it to recoup the buyout price.

He expressed concern that JSR will have less freedom in managing the company because how it conducts its business will have to reflect government policies.

Minoru Nogimori, chief researcher at the Japan Research Institute, Ltd., also expressed doubts.

“The protection by the government may stabilize management of JSR,” he said. “But the buyout might detract from the company’s competitiveness and harm its growth.”

(This article was written by Kanako Tanaka and Takeshi Narabe.)