When Eric Johnson took over as head of leading semiconductor supplier JSR three years ago, he planned to split his time between his native United States and the company’s headquarters in Tokyo. The aim was to build on its experience in managing its operations in the United States to develop the group’s global footprint.
But the next three years would drastically change those plans.
Just weeks after he began work, amid a row with Seoul, Japan banned exports to South Korea of photoresists, the thin layers of material used to transfer circuit patterns onto wafers of semi -drivers. Johnson’s JSR is the world’s largest supplier of the material, with up to 40% of the market, which is expected to be worth $14.2 billion by 2029. Its customers range from Samsung to Taiwan’s largest manufacturer, TSMC of contract chips in the world.
Johnson says he used JSR’s “global infrastructure” to navigate the dispute between South Korea, where the company has large customers, and Tokyo, “without running into any of the Japanese government’s concerns.”
Then, in 2020, the onset of the pandemic disrupted global supply chains, causing delays in the production of electronic goods. Johnson was grounded in Tokyo.
But perhaps the most difficult task he faced was tending to the company’s original elastomer business, which focused on manufacturing synthetic rubber for tires. It had ceased to be competitive, but continued to drain the resources needed for capital-intensive operations in semiconductors.
“We couldn’t properly feed all of these companies,” Johnson says at JSR’s headquarters in central Tokyo. He holds a large round silicon wafer in front of him and his face lights up as he explains the engineering behind the latest semiconductor technology. “But also in terms of organizational mentality, you could see two divergent cultures. And when it comes to management, there were two different types of business,” he adds, comparing the slow-growing, mostly domestic rubber business with faster-growing global segments involving semi-materials. -conductors and biomedical devices.
Getting rid of a business that any business was built on would not be easy in any country. But doing it in Japan — by an outsider amid pandemic-induced semiconductor chaos — was bound to pose enormous challenges, from potential resistance from staff to opposition from customers and shareholders.
Even without these pressures, foreign executives have not always had it easy in Japan. Examples range from Nissan’s Carlos Ghosn and his infamous escape from the country in a box, to more recently certain US and UK senior executives at brokerage firm SMBC Nikko who have been accused of market manipulation. But from the start, Johnson played down any idea that being an outsider was a factor in his leadership.
“It is often assumed that a non-Japanese CEO is brought in to disrupt an organization. That was not the case at all in this scenario. I’ve been with JSR for 20 years, and when JSR started working on the transition to find the next CEO, I was part of that process,” he says. Johnson studied chemical engineering at Stanford and spent the first stage of his career at Nikon, before joining JSR to develop a new “life science company” and run its operations in the United States.
Faced with the dilemma surrounding the rubber segment, Johnson says the key for him was to take an organic approach and work from problem to solution with an open mind. His team first focused on restructuring the company, then went looking for a buyer “who will allow them to obtain the investment”.
Johnson has centered his approach on two essential elements for doing anything in a Japanese organization: nemawashi and honest. The first refers to a process – often slow and arduous – of seeking consensus and airing grievances. Hon means someone who speaks his mind: a quality often rare in Japanese companies, especially larger ones, which can become highly political and siloed, torn apart by internal rivalries.
“I’m teased. Many people say that my favorite Japanese expression is honest. . . I encourage people to tell me exactly how they think, and they trust me enough to be able to do that,” Johnson says.
To gain their trust, he moved to Japan to focus on reorganization. “I had to make sure that I was in very close contact with the people who were going to be most affected by this . . . to be able to stand there directly, give them very open and honest answers about how we came to these decisions.
He adds that the Ministry of Economy, Trade and Industry (Meti), which closely monitors industry leaders, especially in sensitive areas, has been “part of the discussion”, although that “they never said: do this or do that”. .
Relationships with customers and other “stakeholders” were also a key part of the process, he says. “We approached the discussion very transparently with all interested parties, including some important customers – these relationships go back a long way and obviously the value of the company depends on it, and our reputation also depends on what they think about it.”
Johnson’s team went through more than a year of talks with dozens of different companies, finally settling on Japanese refiner Eneos. JSR completed the sale of its elastomer business in April with an enterprise value of 115 billion yen ($845 million).
Despite many factors at play, Eneos was not a difficult choice, says Johnson. “They ticked a lot of boxes, primarily because they would provide the best opportunity for this business to thrive. They made our client much more comfortable, and Meti was much more comfortable with that scenario. He adds that when the decision finally fell, “there was already a consensus”.
“Obviously I’m not Japanese, but I appreciate the process that allows people to engage, with transparency, to voice their concerns and it’s up to me to make a decision. But I’ve never had the feel like you have to shove this stuff down anyone’s throat,” he says.
Three questions for Eric Johnson
Who is your leadership hero?
As a hero, the first person I think of is Nelson Mandela. He embodied the ideal that leadership is not about yourself, but rather about the people you serve, and was literally willing to lay down his life for those people. It’s really heroic.
What would you be if you weren’t CEO?
The practical answer is that I would be an engineer. I love learning how things work and trying to improve them, but if I let my imagination run wild I’d say a national park ranger. I really love hiking and the idea of being able to work and protect natural environments is pretty cool.
What was the first leadership lesson you learned?
The decision is important. But it has to come at the end of the process, after allowing a real and open flow of information. Good news is always fun to hear, but it’s much more important to allow bad news and criticism to flow freely and quickly.
The ability to have such an open conversation on a very sensitive topic was made possible by a high degree of trust between leaders and an effective governance structure. “It is important that the governance of JSR has been very progressive from the start and this is something we take very seriously. We make sure we have a very well-functioning board,” says Johnson.
Analysts covering the stock, such as SMBC Nikko’s Miyamoto Go, agree, pointing to four powerful and capable outside board members and a share price that more than doubled from around 1 500 yen to around 3,500 yen since Johnson took over the company. .
Johnson points out that JSR’s DNA contains the ability to “reinvent itself every two years” with the innovation cycle in the semiconductor industry, where there is intense pressure to continually come up with smaller chips. He insists on the need to adapt while being “comfortable being uncomfortable”.
When he begins to talk about new investments made in quantum computing by JSR, the engineer in him reveals itself. “There is no business model for quantum right now. If someone asked me to justify these investments, I couldn’t do it. Like any exponential, you can be on a flat spot, but it’s going to tilt very quickly,” he says. “You can literally take problems that are unsolvable today in the materials science space and optimize and find new opportunities. This is an example of our way of thinking.