Japan, which historical has been a strong semiconductor and equipment manufacturing hub has seemingly been on the slow burn, ceding ground to the United States, Taiwan, Netherlands, and more recently, China. However, the Japanese government is intent on turning this around and is sparing no expense, while going on a charm offensive to attract foreign companies and investment. Unsurprisingly, this has already begun to yield good results. 

On February 24, Taiwan Semiconductor Manufacturing Company (TSMC), held an opening ceremony for its first Japanese fab in Kikuyo Town, in the Kumamoto Prefecture. The fab will begin production of 12 and 18nm chips by the end of this year, which means they will fall in the range of automotive chips sizes. The fab will create 1,700 new jobs and have a production capacity of up to 55,000 300mm wafers per month. It is estimated that the construction of the fab will require a capital investment of JPY1 trillion (USD6.64 billion), nearly half (JPY476 billion (USD3.16 billion)) of which will be supplied by the Japanese government through subsidies.  

On the same day, Ken Saito, the Minister of the Ministry of Economy, Trade, and Investment (METI), announced that the Japanese government has decided to provide a subsidy of JPY732 billion (USD4.94 billion) for TSMC’s second plant in the Kumamoto Prefecture. The plant will manufacture 6nm logic semiconductor chips and 40nm semiconductor chips, both in anticipation of a rising demand for automotive and AI chip demand.

However, Japan does not intend to solely rely on attracting foreign companies. In December 2022, the Japanese government established the “Leading-edge Semiconductor Technology Center (LSTC)” to revive its semiconductor manufacturing base. This February, the METI offered to fund the LSTC to a tune of up to JPY45 billion (USD304 million) for the research and development of 2nm class semiconductor chips, thereby positioning itself as a supplier of the highest-end chips. The LSTC aims to begin volume production of new products designated for use in autonomous vehicles and human-machine interfaces beginning in 2027.

Rho’s Evaluation

It is quite evident that many countries and economic blocs are beginning to position themselves as semiconductor suppliers in a bid to decrease their exposure to external disruptions. Japan’s decision to open itself to foreign companies and investment is a double-edged sword as it exposes the country to speculation, but with the possible benefit of high technology transfer and development. We may see Japan close its borders to foreign companies and investments again, once it has achieved a self-sustaining technological know-how of chips production.
But for now, the move is a shrewd one from Japan, as it capitalises on the increasing pressure on semiconductor manufacturers to decouple their operations from China.

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Sources: REUTERS, REUTERS

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