Japanese Government's Plan to Support TSMC's First Factory with 4 Trillion Won Faces Skepticism Domestically

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] As the Japanese government is providing full support including subsidies for Taiwan's TSMC, the world's largest foundry (contract manufacturing) company, to establish a production base in Japan, voices of doubt are also emerging within Japan.

There are criticisms that such support by the Japanese government goes against the free trade order, along with skepticism about its industrial effectiveness.

On the 12th, the influential Japanese weekly Asahi Shimbun pointed out in an editorial that TSMC plans to invest about 800 billion yen (approximately 8.2598 trillion KRW) to build a semiconductor factory in Kumamoto Prefecture, and the Japanese government intends to support about half of that amount, around 400 billion yen (approximately 4.1299 trillion KRW), stating, "Many citizens will feel doubtful."

Asahi raised questions such as, "Is there a possibility of being asked to cover future deficits as well as the initial investment? Can we expect an increase in corporate tax or fixed asset tax corresponding to the subsidy?" and urged the government to explain the purpose, effect, profitability, and contract details of the subsidy to gain public consensus.

If it is difficult to meet these preconditions, it suggested suspending the policy and reconsidering whether it is the best choice.

It also put a question mark on the goal of the revival of Japan's semiconductor industry.

Asahi pointed out, "The semiconductors produced by the factory TSMC is building this time correspond to products from about 10 years ago globally," and added, "It is not expected to have the effect of enhancing the technology of manufacturing equipment or material industries that would maintain Japan's international competitiveness."

There is also mention of the possibility that Japan's support for TSMC may violate World Trade Organization (WTO) rules.

Asahi expressed concern, saying, "WTO rules prohibit subsidies that distort trade. Japan has also criticized Chinese government subsidies along with the United States. If Japan provides huge subsidies to the semiconductor industry, the 'flagship of free trade' that Japan claims could become meaningless."

Kyodo News reported that if support for TSMC is formally decided, the subsidy is expected to be in the scale of several hundred billion yen, and "it will be required to politely explain to the public the significance of generously supporting individual companies."

According to Japanese media reports, the Japanese government is promoting a plan to establish a fund to support the stable supply of semiconductors.

There is speculation that TSMC will be the first beneficiary and receive about half of the investment amount as a subsidy.

Nihon Keizai Shimbun recently pointed out that if semiconductors become oversupplied and international prices suddenly fall, support for TSMC could become a "bad subsidy."

Nihon Keizai introduced that the Japanese government criticized China's subsidies in 2019, saying, "Government support acts as a catalyst to concentrate investment procurement from the private sector, and a large amount of funds flow into specific industries, resulting in overproduction."

This content was produced with the assistance of AI translation services.