Escape (2)
He looked at me as if he expected me to have some trick up my sleeve.
In truth, I did have one idea.
Instead of answering immediately, I asked a different question.
"Who is the current chairman of Kionos?"
"Masaki Saito."
The name stirred a vague memory.
"Have you met him before?"
"Several times."
Since we were in the same industry, we must have crossed paths at events and the like.
"How would you assess him?"
"He's an outstanding executive. In the Japanese semiconductor industry, you'd be hard-pressed to find anyone better."
"I see."
In fact, Chairman Saito was steering Kionos along quite steadily.
"How does he compare to the former chairman?"
"Chairman Samara? Without question, he was the best manager they ever had. Without him, Kionos would have gone under long ago and ended up sold off somewhere."
In truth, opinions on Chairman Samara were sharply divided.
Some called him the "devil from Europe", while others praised him as a "god of management."
"You've met him as well, then?"
"Of course. Ever since my days at SPME, I used to see him from time to time."
"You wouldn't have seen him recently, though."
Chairman Yoo Jae-ho gave a wry smile.
"That's right."
"Could you give me a more detailed explanation of Kionos?"
I had a rough idea already, but hearing it from Chairman Yoo Jae-ho would be different.
"For a time, it was the largest semiconductor company in the world. Yuseong Electronics benefited greatly in its early days as well."
Yuseong Electronics had started out as a consumer electronics company, buying machines and parts from Japan and assembling them into finished goods. The company it had partnered with back then was Kionos.
When Yuseong Electronics announced that it was entering the semiconductor business, the whole world laughed. A company that couldn't even make a proper television, they said, had no business trying to make semiconductors.
That was when Kionos helped again.
Kionos wanted to make its semiconductor technology the world standard, and for that it needed allies.
So it licensed its technology to Yuseong Electronics, allowing Yuseong Electronics to bring forward its semiconductor production timeline by years.
And yet today, Yuseong Electronics was ahead in both output and technology, while Kionos was scrambling to catch up.
Who could have imagined a situation like that back then?
"To understand Kionos, you have to understand SP Microelectronics. People usually call it SPME."
"The French semiconductor company?"
Chairman Yoo Jae-ho nodded.
"As you know, the two companies have a strategic alliance."
The Kionos plant.
Founded in 1879, it was a diversified electronics company with more than a century of history. It had been a symbol of Japan's electronics industry and, at one time, the world's largest semiconductor company.
But from the early 2000s on, it began losing ground to emerging countries.
The biggest reason was that it missed the market's direction and clung too tightly to its existing technology.
The decisive blow came with the 2007 semiconductor chicken game.
The cutthroat price war dragged on for five years and drove one semiconductor company after another into collapse. Even Eldafi of Japan and Camondama of Germany, both then ranked among the world's top ten, went bankrupt and were sold off.
Kionos also couldn't survive the bloodletting and was effectively reduced to a state of negative equity.
If Kionos, following Eldafi, went bankrupt too, the Japanese semiconductor industry would be finished. That was when SPME stepped in as the rescue squad.
SPME was France's largest semiconductor company, with the French government holding a 20 percent stake.
The two companies exchanged shares and formed a strategic alliance.
Kionos transferred a 46 percent stake to SPME, and SPME, together with its own 16 percent stake, provided 1.2 billion euros to resolve Kionos's bonds as they came due.
But emergency funding could only put out the fire in front of them; it was not a fundamental solution.
So SPME demanded a change in Kionos's management.
Moriguchi Yusuke, who had succeeded his grandfather and father in running the company, stepped down, and Thierry Samara, who had been heading SPME's U.S. office, took over as CEO.
That was how Kionos came to have its first foreign CEO in its entire history.
The first thing he did after taking office was a sweeping restructuring. He shut down unproductive, aging factories and fired workers.
Kionos had once prided itself on never laying off employees.
Its founder, Moriguchi Yui, ran the company by one iron rule: a company was a home, and its employees were family. No matter how hard things got, family could not be thrown out. Every CEO after him had honored that principle.
And then, the moment a foreign CEO arrived, he began cutting jobs as if a century-old tradition meant nothing at all.
In his first year alone, he laid off twelve thousand employees.
That was more than 10 percent of the entire workforce. The following year, he cut another ten thousand.
The employees, suddenly cast out onto the street, reacted fiercely, and the union went on strike.
But Chairman Samara did not even blink; instead, he threatened to shut down the factories where the strikes had broken out first.
His next move was to trim the failing divisions.
He ruthlessly cut any business that wasn't profitable, and in the process he split off the entire home-appliance division and sold it to the Chinese electronics company Tianhuan.
Tianhuan had once been one of Kionos's subcontractors. The sale price, on the condition that Tianhuan assume the bad assets as well, was a token one yen.
The news sent shockwaves across all of Japan.
Once, Kionos had been a symbol of Japanese manufacturing. Appliances made by Kionos were sold all over the world, advertising the excellence of Made in Japan.
And now they had sold it for a single yen, to a Chinese company that had once been their subcontractor of all things!
It was an immense blow to Japanese pride.
Even politicians unleashed a storm of criticism, but once again Chairman Samara paid them no mind.
"Only by cutting out the rotten flesh can you save the company. If we fail to post a profit within two years, I will take responsibility, step down as chairman, and return to France."
With the proceeds from selling off the failing divisions and restructuring the rest, he raised cash and cut costs, then poured everything into semiconductors.
He streamlined the aging production lines and drew up an entirely new management strategy.
"The reason Kionos ran into trouble was its obsession with overquality. What matters is producing cheaply and in volume, even if the quality drops a little."
What happened as a result?
In just two years, Kionos went from a 500 billion yen loss to an 800 billion yen profit. The following year, that profit doubled.
NAND flash rose to second place in the world, pressing hard on Yuseong Electronics' heels, and DRAM climbed back to fifth.
It was the glorious revival of a Japanese semiconductor giant that had once seemed doomed to fall.
That was when the trouble began.
While Kionos was riding the semiconductor supercycle and raking in enormous profits, SPME itself was struggling.
Because it had spread itself across too many businesses, it missed the timing on semiconductor investment, and that led to a loss of competitiveness. Its dividend income from Kionos made up the largest share of its total earnings.
By now, in terms of market cap, brand power, and technology alike, Kionos was overwhelming SPME.
And yet the structure still had SPME on top, with SPME sending executives and board members down to Kionos and meddling in its management, while Kionos had almost no influence within SPME itself.
With things like that, resentment inside Kionos only kept growing.
The spark that finally set it off was the integration of the research divisions and the creation of a new legal entity.
SPME had pushed to merge the development departments of the two companies and establish a new firm. The rationale was that this would make development more efficient and cut costs.
Kionos reacted strongly.
They said that, fine, it was called joint development, but wasn't it really just a scheme to siphon off Kionos's technology?
In the end, the plan to create the development entity fell through, but that was not the end of it.
SPME began pushing for an outright merger with Kionos. The pressure of France's government, its largest shareholder, also played a role.
SPME held a full 46 percent of Kionos.
If it wanted to, it could force a merger.
Given that Japan's own semiconductor company might otherwise end up in French hands, the Japanese government opposed it fiercely.
The problem was that there was no obvious way to stop it.
And then...
In the middle of the merger push, something nobody had expected happened.
The Japanese prosecutors urgently arrested Chairman Samara on charges of embezzlement, breach of trust, insider trading, and false disclosures!
Later, it was revealed that Masaki Saito, then an executive director, had played a decisive role in gathering the evidence of wrongdoing.
While Chairman Samara was in custody, Executive Director Saito staged a coup.
He convened the board, dismissed Chairman Samara, purged everyone in Samara's faction, and installed himself as chairman.
As a result, the merger was halted, and Chairman Samara remained trapped in Japan to this day.
Chairman Yoo Jae-ho spoke.
"The Japanese government's willingness to invest money is also about wanting to exercise control over Kionos. There are Japanese interests tangled up in this, so they're basically telling us not to even think about forcing a merger."
I nodded.
"There's no such thing as a free lunch."
Long term, they probably meant to dismantle the alliance.
In fact, the Japanese government was investing 1 trillion yen this year alone to expand factories.
I thought back to my first timeline.
The incident had happened after Christmas the following year.
Even then, it had been such a massive event that it shook both the semiconductor industry and Japanese politics.
If that incident happened sooner, what then?
Even if it didn't destroy Kionos outright, wouldn't it send the stock into a free fall and make further investment unthinkable for a while?
Since Kionos was a competitor in both DRAM and NAND flash, if something happened to Kionos, Yuseong Electronics would stand to gain the most.
I sorted through the thoughts that had come to mind.
I would need to flesh out the details a little more, but the idea was certainly workable.
"I'll take care of Kionos somehow."
Chairman Yoo Jae-ho looked genuinely startled at my words.
"You really mean that?"
"Yes. I'm still working out the method, so I'll tell you later."
"Hm. Very well."
He seemed curious, but he didn't press further.
At any rate, as long as there were no obstacles, the move into the data center industry would proceed without much trouble.
I would have to think a bit harder about how to turn this situation into a money-making opportunity.
I changed the subject.
"But did you really come all the way to the United States just to meet me? We could have handled this over the phone."
"Partly. I also had to deal with the matter of building a semiconductor plant in the United States."
Again, every country was staking everything on semiconductors. The United States was no exception.
America had been pressuring Yuseong Electronics and PSMC to build semiconductor plants on U.S. soil. Like it or not, they were in a position where they had to invest.
Once you factored in all the costs, we were talking tens of billions of won without breaking a sweat.
"Which locations are in the running?"
The United States was a federation of fifty states.
Because each state had different interests, the competition to attract factories was fierce.
"Texas, Alabama, Arizona, and Georgia."
"Which one is best?"
"Based on the incentives and location being offered so far, Texas is the strongest. They're offering the land plus a billion dollars in tax breaks over ten years."
When a semiconductor plant came in, it meant high-quality jobs and a fat tax base. Naturally, each state fought hard to attract one, dangling land and tax incentives in front of prospective investors.
I thought for a moment, then said, "May I offer some advice?"
Chairman Yoo Jae-ho nodded.
"What is it?"
"If I were you, I'd choose Georgia."
At my words, Chairman Yoo Jae-ho looked puzzled.
"Why?"
Normally, the plant would go to Texas.
At this point, their offer was still the best.
I shrugged.
"You'll understand why later."