Ibiden
Corporate History & Strategy

In 1917, Ibiden (then Ibigawa Electric) established the Ogaki factory and began manufacturing carbide. Carbide is a chemical product manufactured by reacting limestone and coke at high temperatures, and was in demand as a raw material for fertilizers and other products. Since the manufacturing process consumes large amounts of electricity, Ibiden, which owned its own hydroelectric power plants, held a structural cost advantage by being able to internalize power generation costs.

Leveraging this advantage, Ibiden scaled up carbide manufacturing. By directing cheap hydroelectric power to in-house consumption, the company secured price competitiveness against competitors who procured electricity externally. It was a vertically integrated business model that used electricity for its own chemical manufacturing rather than selling it to external customers.

However, wartime consolidation and reorganization of hydroelectric power companies made it politically difficult to continue the hydroelectric power business as an independent company.

In 1942, Ibiden withdrew from the power sales business through hydroelectric generation, which had been its core business since founding. While it continued to own power generation equipment, it ceased external power sales and directed all generated electricity to carbide manufacturing. It was a transformation from a power company to a manufacturer.

Thereafter, carbide manufacturing functioned as Ibiden's core business through the high economic growth period. However, following the 1973 oil crisis, carbide demand began to decline, and combined with industry overcapacity, Ibiden's earnings base was shaken. In 1991, the last electric furnace was shut down, and the company withdrew from the carbide business entirely.

In 1970, Ibiden decided to enter the printed wiring board market, which was gaining adoption at the time, and commenced R&D. Printed wiring boards are layered substrates for mounting semiconductor components, precision parts coated with copper foil and resin. With the spread of integrated circuits (ICs), demand for printed wiring boards was expected to expand as semiconductor miniaturization progressed.

The technical foundation that enabled Ibiden's entry into this field was the etching technology cultivated through its already commercialized building materials business (melamine laminate). Both printed wiring boards and melamine laminate share the common base technology of chemical corrosion processing (etching), making this a domain where Ibiden's existing technology could be applied.

Ibiden transferred the etching technology accumulated in its building materials business to printed wiring board manufacturing, achieving commercialization in 1972. Amid concerns about the future of the carbide business, this positioned the company for a new growth area in semiconductor-related products.

This entry ultimately defined Ibiden's future business structure. The substrate manufacturing technology cultivated through printed wiring boards evolved into plastic package substrate development in the late 1980s, ultimately becoming the prototype for the core business of package substrates for Intel. It was the starting point of the transformation from a carbide and building materials company into an electronics components manufacturer.

Throughout the 1980s, the adoption of microprocessors (MPUs) and ICs accelerated, and the market for package substrates that encase these semiconductor components grew rapidly. At the time, ceramic was the dominant material for package substrates, with first-movers such as Kyocera and Nihon Tokushu Togyo dominating the field. Ibiden lacked accumulated expertise in ceramics, but in 1987 decided to enter the package substrate market, choosing to focus exclusively on plastic as the material.

There was virtually no track record of plastic package substrate adoption, and for Ibiden this was a venture into the unknown. However, plastic offered the electrical advantage of superior insulation properties, and the company judged that as semiconductors advanced in performance, plastic could eventually replace ceramic.

Ibiden intended to sell its plastic package substrates not only domestically but in the US market centered on Silicon Valley, and established a local sales subsidiary in the United States. The aim was to secure opportunities for contact with US semiconductor manufacturers, beginning with Intel, by placing a sales base at the center of the semiconductor industry.

However, in the early 1990s, the technical difficulty of press-laminating five layers of boards made it hard to reduce prices for plastic packages, and adoption was limited to some expensive general-purpose computers. Ceramic remained dominant in the mainstream PC battlefield, and adoption for Intel CPUs had not yet been achieved. This situation would change only when Intel decided to switch to plastic in the mid-1990s.

In 1991, Ibiden ceased production of carbide, its core business since founding, and the last electric furnace went dark. Having lost its revenue pillar, Ibiden was on the edge of financial crisis. Masaru Endo, who had become president, sought a way forward in semiconductor-related business. Intel was a company that switched component suppliers every 2-3 years in line with CPU generational transitions, offering opportunities for new entrants.

In 1994, Ibiden set the goal of supplying plastic package substrates for Intel's next-generation CPUs. This was the period when Intel had begun considering a switch from ceramic to plastic, and riding this wave of technology transition was Ibiden's very survival strategy.

President Endo launched the Intel Conquest as his own directly supervised project, delegating personnel decisions to Office Director Fujikawa and Deputy Director Ito, assembling a 50-member team. The team was staffed with ace employees in their 40s, and all concurrent duties with other departments were strictly prohibited. Furthermore, R&D budgets were stripped from the R&D headquarters and virtually the entire amount was concentrated on package substrate development.

President Endo set the supreme objective for the project team of 'achieving mass production within 2 years in principle,' and notified them that the project would be dissolved if delayed by even a single day. The target was to compress development that normally takes 5-6 years into 2 years. However, lifetime employment was guaranteed even in the event of dissolution, removing personal risk in case of failure and enabling full commitment to development.

In 1995, Intel officially announced its policy to switch CPU package substrates from ceramic to plastic. Ibiden's plastic package substrates aligned with this policy shift, and in 1996 the company secured a large-volume order from Intel in the millions of units. In 1998, a new package substrate manufacturing building was constructed at the Ogaki factory, establishing mass production capacity.

With the start of business with Intel, Ibiden achieved record-high earnings for two consecutive years in FY1996 and FY1997. The exit from the management crisis following carbide withdrawal was realized, and package substrates were established as Ibiden's new earnings pillar. The all-in bet that President Endo undertook with the resolve to 'go down with the project' bore fruit by aligning with the external environmental change of Intel's material transition.

In 2008, Ibiden judged that demand for package substrates, printed wiring boards, and automotive DPFs would all expand, and executed large-scale capital investment. Capital expenditure in FY2008 totaled a cumulative 61.8 billion yen, with the main breakdown being 28.2 billion yen for package substrates, 12.9 billion yen for printed wiring boards, and 3.5 billion yen for automotive DPFs.

The largest investment item was the establishment of an overseas production base in Malaysia. In 2008, Ibiden established a local subsidiary in Malaysia and began constructing a manufacturing facility for package substrates and printed wiring boards, targeting operations start in 2011. This was a forward-looking investment to expand supply capacity for Intel.

For the massive 61.8-billion-yen investment, Ibiden funded the entire amount from its own capital. Bank borrowing and capital market financing were foregone. Since the package substrate business had performed well throughout the 2000s, accumulated profits were recycled into reinvestment.

While self-funded investment demonstrates financial discipline, not utilizing external capital can constrain the scale and speed of investment. However, for Ibiden, maintaining a financial structure not dependent on borrowed money was an important decision for securing resilience against fluctuations in semiconductor demand. The following year in 2009, the company recorded a net loss of 8.7 billion yen due to the global financial crisis, but the low dependence on borrowing prevented it from reaching a financial crisis.