What Japanese semiconductor enterprises can learn from the asset-light business model for sustainable competitive advantage

Over the two decades 1990–2010, Japanese companies’ overall share of the semiconductor market dropped sharply from 46 to just 20 per cent. During this period, the business models of many semiconductor companies around the world evolved to help them achieve their goals of improving operating performance and gaining market share. It is important for semiconductor companies, especially Japanese ones, to understand how the business models they adopted affected their companies’ sustainable competitive advantages. In this article, the operating efficiencies of 50 leading semiconductor companies were explored using a non-parametric frontier method – data envelopment analysis (DEA). The analysis showed that as capital investment rose in the competitive semiconductor industry, more and more semiconductor integrated device manufacturers (IDMs) have benefited from partnering with contract foundry companies and are moving towards a business model based on asset-light or pure manufacturing outsourcing (PMO), resulting in better operating performance and efficiency. The superior business models adopted by more successful IDMs could be benchmarks for other firms and applicable for Japanese semiconductor enterprises in particular. The Japanese semiconductor industry could learn from a well-crafted asset-light business model to refocus on their core competences, and hence rise again.