Japan Needs to Transfer Some Semiconductor Industries to Brazil after the Earthquake

The impact of this massive earthquake exceeded expectations. The production of engines in Japan’s domestic auto industry has been reduced by 450,000 units as of March 25, 2010. Judging from the global auto production of 75 million vehicles, this figure is not large, but it is only two weeks of production. However, its impact on the domestic semiconductor industry in Japan may reduce the total production in 2011 by about 20%. With regard to the extent to which the influence will be extended in the future, there are still many uncertainties. In this case, the industry will develop various strategies to restore the semiconductor industry in the future. As one of them, I would like to propose to transfer some of Japan's semiconductor industry to Brazil.

Brazil will become South America's electronics production base among many candidates in the world. Why did you choose Brazil? This is because Brazil has the potential to become a South American electronics production base. If it can establish a complementary relationship with Japan, which has strong technical strength, it may also allow Japanese semiconductor companies to step into the growth track again.

As we all know, Brazil has a population of 190 million people and it is rich in natural resources. The gross domestic product (GDP) currently exceeds that of India, which is also the BRICs. It is expected that in the future, inflation will be stabilized while achieving stable economic growth (in 2009, the world financial crisis was lifted). By increasing domestic purchasing power, its economic structure is also shifting from an export-dependent type to an internal demand-led one. The reason is that the poverty eradication plan implemented by the government has increased the number of the middle class while reducing the number of people living in poverty. The consumption of young people in the mass consumer market has become increasingly active. At present, Brazil is undergoing tremendous changes. In recent years, the number of newly-born middle class (called “Class C”) has reached nearly 100 million, and it has become a major consumption layer that exceeds half of the total population.

Looking back at Brazil’s economic development process, the hyperinflation that lasted for many years ended with the “REAL PLAN,” the currency stability policy implemented in 1994. It is an important turning point in Brazilian economic development. Afterwards, the Cardoso administration (1995-2002) stabilized the economy, followed by the Lula regime (2003-2010), which put Brazil’s economy on a growth track. During this period, the two regimes implemented measures such as subsistence allowances for low-income families, which greatly increased the purchasing power of the people. This ignited the fire of domestic consumption in Brazil. Nowadays, Brazil ranks fourth globally in car sales, with cosmetics sales third in the world and personal computer (PC) sales ranking fourth in the world. The average personal income of the people reached 10,000 U.S. dollars in 2010. It can be said that Brazil does not belong to the emerging market countries but has become a semi-developed country.

In Brazil, various natural mineral resources such as iron ore, uranium (U), and even oil and water resources are abundant. The self-sufficiency rate of oil reached 100% in 2006. In addition, Brazil has also acquired a "pre-salt" oil field with a huge reserve of ultra-deep oil fields. Some people believe that starting from around 2015, Brazil will become an oil exporter equal to OPEC countries. In addition, Brazil is still using the domestically produced sugar cane to produce clean energy, bioethanol, which is a concern, and the output can meet 90% of domestic automotive fuel. In addition, it is generally believed that about 20% of the fresh water on Earth is in Brazil, and Brazil is very likely to become the world's largest food supply country.

At present, Brazil is continuously advancing large-scale infrastructure projects such as the development of the Yanshi Oilfield, the construction of the world's third-largest Belomonte hydropower station, and the laying of high-speed railways connecting Rio de Janeiro and Sao Paulo. The world-famous sports event, which is scheduled to be held in 2014, such as the FIFA World Cup and the 31st Summer Olympic Games in 2016, is also approaching. Brazil will continue to invest in infrastructure. Undoubtedly, it will promote economic growth in the medium term.

The Japanese who moved to Japan from Japan 100 years ago and their descendants are known for their important role in the current economic development in Brazil. It is now time to consider the Japanese semiconductor industry for the next 100 years. The author wants to propose a global strategy that will allow Japan, which has strong technical strength, and Brazil, which is rich in natural resources, to establish a complementary relationship between the two poles of the earth and thus sweep the global semiconductor market.