DISCO: A Lesser Mentioned Semiconductor Equipment Giant
DISCO is a Japanese company whose core competency is to grind fabricated semiconductor wafers into thinner wafers, which are then cut into dies and then assembled into electronics. Their company motto is Kiru, Kezuru, Migaku, which means cut, grind and polish. DISCO holds a leading market share in the production of wafer grinders, grinding wheels, wafer dicing saws, laser saws and surface planarization.
These operations give DISCO nearly $2 billion in revenue in 2021. We'll take a deep dive into the main semiconductor process tools that DISCO manufactures.
Before diving into these topics, let's briefly describe the company's history and their unique culture. Before focusing on semiconductors, DISCO was known as Dai-Ichi Seitosho CO. They were only renamed for easier pronunciation after they started exporting to the US. They are the go-to wheels for a variety of products, but they really hit the mark when they produced thin (1.2mm) high-precision inserts for grinding C-shaped magnets. As they progressed, they invented resin blades, encapsulating hard materials within ultra-thin (0.13mm) resin. These are used for cutting pen nibs.
DISCO continues to manufacture thinner and thinner grinding wheels, using the 40 micron thick grinding wheel MICRON-CUT. Many equipment manufacturers and industrial companies started blaming DISCO for the damage because the tools couldn't accommodate these ultra-thin grinding wheels. Because of this, DISCO started designing its own equipment. DISCO tools were even used to cut moon rocks brought back by Apollo 11!
In the 70's, DISCO entered the semiconductor industry by producing automatic scribing machines and dicing saws. At the Semicon conference in 1977, DISCO developed and demonstrated their DAD-2H dicing saw. They had problems with the cut-off wheel breaking when stopping and restarting the saw, so the DISCO team decided to keep their saw and cut-off wheel on for the entire multi-day show. Apparently, at the 1977 show, DISCO was all the rage among semiconductor users.
Despite being an established Japanese company, the company culture is not. They are very efficient and focused on quality and throughput. They may have the most unique corporate culture in the world. Let's talk about how it came about.
DISCO: Everything has a price
DISCO faces issues that many large and established companies face. A lot of time is wasted in meeting after meeting. Every decision must involve dozens of employees. Without room to innovate, employees waste a lot of time on unnecessary actions. Bureaucracy kills the lifeblood of companies. At the same time, there is poor communication across the organization as employees become so focused on their niche that they miss out on the overarching strategy. There are too many layers between those working on the specifics of product and management.
The solution is pretty weird and frankly cool. There is an internal virtual currency created called "Will". This currency is used as a compensation system to track each and team's contribution to revenue. Workers receive a base salary and bonuses that depend on how much they earn for completing tasks. Groups pay each other to complete tasks. Sales teams pay factory workers to produce goods, who in turn pay engineers to design products. Once a sale is made, it generates a certain amount of will and is passed on to everyone in the supply chain, including HR and IT support.
Ordinary employees receive virtual currency when group bosses allocate a portion of the group's budget to each task they have to complete. Team members then use the app to bid on those jobs. Tasks that do not attract any bids often prove to be unnecessary work. Managers who have abused or abused the system have been dumped by their employees, who are free to move on to other teams.
At DISCO, everything has a price, from meeting rooms, desks and PCs to places to put umbrellas. An individual is almost a one-person startup!
This freedom enables employees to shape their day and focus on the value of their time and efforts. In an environment where people work side by side, the ruthlessness of a hardcore free-market approach is diluted.
In addition, they have a penalty system for inefficient behavior, including piling up unnecessary inventory and even working overtime. Overtime hours have been reduced by 9 percent since the penalties were imposed in 2015, in line with the Japanese government's goal of improving work-life balance.
The success of the program cannot be underestimated. DISCO's operating margin rose from 16% before implementation to 36% in the most recent year. In addition, they also gained some share.
