Part7. Casting About for a Restorative Offensive Weapon

May.2013

Part7. The Untold Story Behind the advent of QMEMS - Casting About for a Restorative Offensive Weapon

Mutsuo Hayashi was beyond tense. The date was January 9, 2005, and Hayashi and his boss, Kaname Miyazawa, had just alit from a train and were standing in Samukawa Station, in Kanagawa Prefecture. Fifteen or 20 passengers had stepped off the train with them. Only a few days earlier in the new year and the station would have been thronged with worshippers on their way to nearby Samukawa Shrine, but as it was the crowd was sparse. A north wind was sweeping past the platform, and Hayashi felt very cold. But the wind was not the only reason. He was under strain from a crucial mission. The strain seemed to have exacerbated the cold. He was shivering to the core. He wondered whether he'd caught a cold, but he had no time for a break. He quickly hailed a taxi and, with Miyazawa, headed to their destination.

A merger of a magnitude that shook the industry

A month and a half earlier, at the end of November 2004, the crystal device industry received some unexpected, shocking news. Seiko Epson and Toyo Communications Equipment ("Toyocom") had announced that they would integrate their respective crystal device businesses, in October 2005. Both companies were long-established players in the crystal device industry who had driven advances as rivals and competitors. Those two companies would become one. To industry insiders, the news was hard to believe.

The tech bubble had burst a couple years earlier, in 2001, and sales of computers and communications equipment had plummeted around the world, and sales of crystal devices, essential components in IT products, likewise plunged. An influx of new low-cost rivals from Taiwan only added to the Japanese manufacturers' woes. While the Taiwanese could claim a price edge, Japanese manufacturers still had a fairly sizeable advantage when it came to high-end crystal products. In terms of low-end, commodity products, however, there was not much of a performance difference. For this reason, commodity products were exposed to price competition, and profits had gradually eroded.

Epson and Toyocom saw the writing on the wall. They knew that they would slowly slide into poverty unless they took action of some kind. It was this recognition that led them to pursue a merger. But "action of some kind" did not mean simply a defensive move. With the merger, the companies were looking for a restorative offensive weapon that would roll back the competition. Although both companies handled crystal devices, they served different customers and boasted different technologies, so they complemented one another. Epson held sway in a territory that covered timepieces and consumer electronics. Toyocom, on the other hand, ruled the domain of communications equipment and industrial electronics. In the technology realm, Seiko Epson's strength was in photolithographic processes and micromachining, while Toyocom's expertise was founded in the basic crystal device theory. The companies believed that by crossing their DNA they could come up with the offensive weapon they needed. They would use the 10 months from the end of 2004 to October 2005 to come up with ideas for some original, attention-grabbing products—what they called "eye-catchers"—to coincide with the merger. This was the blueprint drawn up by the management teams of the companies.

A flash of inspiration

What kind of idea could be turned into an offensive weapon? Hayashi spent the entire New Year's vacation racking his brain for an answer. Why? Because at the end of 2004 Miyazawa had put him in charge of coming up with the "eye-catcher."

Finally, January 9th arrived. This was the day that engineers from Seiko Epson and Toyocom's crystal devices businesses would come together to introduce their respective technologies. The place was the Toyocom plant in Samukawa, a 10-minute taxi ride from Samukawa station. Representing Seiko Epson were Kaname Miyazawa, the deputy chief operating officer of the Quartz Operations Division, and Mutsuo Hayashi, the general manager of the R&D and Design Department.

The fact is that Hayashi had not yet hit upon an idea for the eye-catcher. He was feeling the pinch. That made him all the more tense. The day was very cold, but his palms were sweating.

First, Toyocom's Yoshiaki Tanaka presented his company's technology. Toyocom had been developing crystal devices since before WWII and had thus stockpiled a good deal of technology. Hayashi frantically took notes as he listened.

In the midst of this furious note-taking Hayashi's pen suddenly stopped. He felt as jolt as if he had been struck by lightning. It happened during a presentation about AT-cut crystal units fabricated using a photolithographic process. AT-cut crystal units are used primarily in products such as computers, communications equipment, and consumer electronics. Toyocom had been attempting to dramatically reduce the size of crystal units without sacrificing accuracy by using a photolithographic process instead of a mechanical process. Hayashi was convinced that, together, the companies could send waves through the industry if they could produce these crystal devices on a practical level.

The basic technology had already been established. It simply had not yet reached a practicable level because Toyocom flinched at the prohibitive amount of capital investment required. Hayashi recognized this as the chance of a lifetime. Seiko Epson was the first in the industry to mass-produce tuning-fork type crystal units, a product well-suited to the photolithographic process. Epson already had a manufacturing line in its Ina facility. Hayashi thought that if the company could use this line, it might be able to mass-produce these products.

If they could take Toyocom's strong basic technology in AT-cut crystal units and combine it with Epson's photolithographic technology, they could show the world something completely new. Hayashi had found the perfect idea for his eye-catcher. With that, he returned to Ina from Samukawa by way of Hachioji station. An ardent rail fan, Hayashi had no time to enjoy the ride on the Azusa express. The only thing going through his mind was how to ready the eye-catcher in time for the merger.

Full steam ahead

The direction was set. All they had to do was move to the execution phase. On January 21, Seiko Epson and Toyocom set up an office to prepare for the merger. Hayashi was put in charge of technology. Then, on February 1, he boarded a train for Sagami Plant, alone. He had two missions. One was to devise a post-merger product strategy that included the eye-catcher. The other was to establish an intellectual property rights strategy. While the direction had been decided, the difficulty of the mission was still quite daunting. Moreover, Hayashi would have to face Toyocom's engineers all by himself. You would think that Hayashi would be tense, but, in fact, he appeared as calm as ever. That is because Toyocom's Sagami plant was far from enemy territory; in fact, he had a lot of friends there.

Hayashi had joined Meidensha in 1975, where he worked in the Crystal Division. He spent the next 24 years developing crystal devices. Then, in 1999, Hayashi learned that Meidensha would pull the plug on its crystal business, so Hayashi and many of his coworkers quit and joined Seiko Epson. Many of his coworker, but by no means all of them. Some of his coworkers chose to join Toyocom. In other words, he had friends and former associates at the Sagami plant. So, his trip to there was something of a homecoming. Far from feeling tense, he was at ease and actually looking forward to his arrival. On the first day work went forward in a congenial atmosphere. Likewise on the second and third days. The missions were accomplished one by one, and work on the merger proceeded with nary a hitch.

Going on the offensive with a triple threat

The merger was a chance to go on the offensive. The themes—that is, the eye-catchers-that were central to the offensive strategy were identified. There were three of them. First were AT-cut crystal units that could be fabricated using the photolithographic process. This was the so-called "photo AT" theme. Second were crystal oscillators based on Toyocom's HFF (high frequency fundamental) technology. Third and last were gyroscopic sensors, which Seiko Epson had in development.

The question was how these technologies could be made commercially practicable. A mountain of work remained before commercial practicability could be attained, but Hayashi had accomplished his mission: He had identified the seminal products, the eye-catchers. The next thing he needed to do was to make sure that the engineers from both companies fully understood the eye-catchers, the process by which they would be developed, and the post-merger vision.

So, they held frequent meetings between engineers of crystal device-related Toyo Communication Equipment Co., Ltd. and Seiko Epson. They made ​​Ina Plant Epson, office of Shinjuku, Sagami office of Toyo Communication Equipment, alternately meeting. It was to deepen mutual understanding will also be social gathering after the meeting.

Hayashi returned to the Sagami plant after the meetings. He became re-immersed in a life of knocking out a succession of detailed tasks in preparation for the merger. With the full support and cooperation of Yoshiaki Tanaka and a senior Toyocom executive named Yasuhiko Ikeda, Hayashi's work went smoothly. A little too smoothly, as it turned out. Work had gone so smoothly that he ended up with free time on his hands. Since he had come to Sagami Plant on his own, leaving his family behind, he was living in a rented apartment. When he returned to his apartment in the evening after work, the small hand on the clock had still not reached 6 o'clock. The days were gradually growing longer, and dark had not yet fallen. He had too much time to spend by himself in a pub. So, he frequently invited engineers from Toyocom out to dinner and drinks at pubs in places like Ebina and Chigasaki. Still, he couldn't kill all his free time. Fortunately, there was a driving school near his apartment. Rail fan that he was, Hayashi would go anywhere and everywhere by train whenever he could. For that reason he had never felt the need to get a driver's license, but with so much time on his hands, he figured he might as well take driving lessons. A short few months later he became a newly minted driver.

Looking to dazzle

In May, as work toward the merger moved forward, Toyocom engineers received their work orders and headed to Seiko Epson's Ina Plant. The merger had not yet been completed, but the partners were eager to get an early start on joint development. Thinking back on that time, Hayashi says, "We knew what we had to do, and we didn't see any sense in just waiting around for the October 1, 2005, merger announcement, so we just got to work."

One of the goals was to exhibit the fruits of their joint development efforts at CEATEC Japan 2005, which would open on October 4, 2005. CEATEC is the biggest trade show in the electronics industry. It is closely watched by almost all industry insiders. Seiko Epson and Toyocom felt that if they could have an eye-catching product ready for the show, they could, without a doubt, capture the attention of the industry. It would be just another feather in the figurative cap of the new company. But they had slightly less than five months to complete development. The engineers attacked the project with a sense of mission, even begrudging the time spent sleeping.

At last CEATEC Japan 2005 was at hand. Three days before the start of the show, on October 1, Seiko Epson and Toyo Communications announced their merger and the formation of a new company, Epson Toyocom. The announcement spurred interest among visitors, and the Epson Toyocom booth drew heavy traffic.

Epson Toyocom later launched new products to market in rapid succession. And the following year, Epson Toyocom made a splash at CEATEC Japan 2006 by introducing its remaining two eye-catchers: a gyroscopic sensor and an HFF crystal oscillator. This was the first time that we used "QMEMS" as a key word to include these new eye-catchers. (figure3)


Figure 1.Photo AT crystal unit shown at CEATEC Japan 2005.


Figure2.Hayshi lecturing on QMEMS.
Mutsuo Hayashi presenting an in-depth talk on QMEMS at a lecture given at CEATEC Japan 2006. The theme of the speech was "Epson Toyocom's QMEMS Technology and its Applications."


Starting over from scratch

The business merger between Seiko Epson and Toyocom was successfully completed, in no small measure because of Hayashi's efforts. Reflecting back on those days, Hayashi says, "I've never been involved in another merger, so I can't say for sure, but I doubt there has ever been a merger with fewer problems. Everything went incredibly smoothly."

The merger provided an opportunity to go on the offensive, and the quartz device business was restored to form. Unfortunately, that did not last long. At the end of 2008, the business unexpectedly found itself under siege from the global financial crisis and a surging yen. The demand for electronics plunged in response, sending the Japanese crystal device industry into another tailspin. Moreover, a new rival emerged in the form of MEMS devices based on silicon material.

How could the company survive this challenge? Hayashi points out, "We were able to develop new markets because our engineers thoroughly researched and had a firm understanding of crystal materials. It is very doubtful that we can overcome the difficulties we are now facing with only minor innovations. I think we have to start over from scratch and dig even deeper into the nature of crystal materials. If we can do that, the quartz device business should again thrive and flourish."

Creates the concept of ‘oscillation regions’

The business merger between Seiko Epson and Toyocom was successfully completed, in no small measure because of Hayashi's efforts. Reflecting back on those days, Hayashi says, "I've never been involved in another merger, so I can't say for sure, but I doubt there has ever been a merger with fewer problems. Everything went incredibly smoothly."

The merger provided an opportunity to go on the offensive, and the quartz device business was restored to form. Unfortunately, that did not last long. At the end of 2008, the business unexpectedly found itself under siege from the global financial crisis and a strong yen. The demand for electronics plunged in response, sending the Japanese crystal device industry into another tailspin. Moreover, a new rival emerged in the form of MEMS devices based on silicon material.

How could the company survive this challenge? Hayashi points out, "We were able to develop new markets because our engineers thoroughly researched and had a firm understanding of crystal materials. It is very doubtful that we can overcome the difficulties we are now facing with only minor innovations. I think we have to start over from scratch and dig even deeper into the nature of crystal materials. If we can do that, the quartz device business should again thrive and flourish."

By Technical Writer, Katsumi Yamashita

interview

Mutsuo Hayashi
Joined electronics manufacturer in April 1975 and worked in the Crystal Device Department. In December of the same year, he began a two-year stint researching the fundamental theory of crystals under Professor Hitohiro Fukuyo of the Research Laboratory of Precision Machinery and Electronics, Tokyo Institute of Technology. For the next 23 years he worked exclusively in the development of crystal products such as crystal oscillators. However, in November 1999, when at that time decided to pull out of the crystal business, Hayashi left to join Seiko Epson's Quartz Device Operations Division. In January 2005, after successfully developing and commercializing temperature compensated crystal oscillators (TCXOs), he was put in charge of the technical end of the merger between Seiko Epson and Toyo Communications. In June 2008 he was promoted to managing director (in charge of sales and marketing) of Epson Toyocom. In June 2012 he retired from Seiko Epson. He currently works in the Sales and Marketing Division. He handling the back-end process for semiconductor products. His abiding interest outside of work is trains and railways. Says Hayashi, "As long as there is a railway, I will travel anywhere by train." Hayashi also has a profound interest in and knowledge of audio and cameras.

QMEMS is a registered trademark of Seiko Epson Corporation.

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