Page 137 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

was redirected in the 1930s toward the development of nylon.
Cutting its R&D budget in only one year during the Great
Depression, DuPont increased its annual spending by a total of
93 percent between 1930 and 1939. Investment in R&D led
directly to DuPont’s introduction of neoprene in 1931 and nylon
in 1939, giving it a first-mover advantage with two products that
proved to be hugely successful for decades to come.
R&D budgets were similarly squeezed during Japan’s Lost
Decade. Shin-Etsu, the specialty chemicals company, used its
strong financial position to gain an early lead in a new technol-
ogy during the 2001 downturn.
In late 2000, Chihiro Kanagawa, Shin-Etsu’s CEO, saw
signs that the semiconductor industry was moving toward the
use of large wafers in its manufacturing process. The standard
wafer size at the time was 200 millimeters, but recent research
had shown that shifting to the larger 300-millimeter wafers
could cut the cost of production substantially—the only caveat
being that it required significant investment up-front in tech-
nology and manufacturing facilities.
Because the technology sector was hit hard in the 2000
downturn, Japanese wafer manufacturers were even more hesi-
tant about investing in expensive new production capabilities.
Kanagawa, however, was convinced about the long-term cost-
saving potential of the larger wafers, and the company enjoyed
the strong cash position necessary to make the upgrades. He
foresaw the benefit of being the first mover in a technology
that, he believed, would become the norm for the industry.
So he took a calculated risk by accelerating the company’s
investment in the development of the 300-milimeter silicon
wafer—the first company to do so—and spent $700 million on
production facilities for the new product. This gave Shin-Etsu

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