Japan Takes the Lead in US Supply Chain Reshuffle... South Korea Faces Growing Concerns

Japan Secures Budget for Next-Generation Semiconductor Production with the US
Multiple Private Companies Unite to Establish Semiconductor Firms
Japan Profits from US-Led Supply Chain Restructuring
Korea Looks Ahead to Chip4... Chinese Retaliation Still a Possibility

Nishimura Yasutoshi, Japan's Minister of Economy, Trade and Industry, is announcing a semiconductor investment plan on the 11th of this month (local time) at the Ministry of Economy, Trade and Industry building in Tokyo.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Pyeonghwa] As the United States forms a semiconductor supply chain centered on Chip4 (Chip4: Korea, the United States, Japan, Taiwan) excluding China, Japan is actively taking steps to secure its national interests. Following the Japanese government's preparation of a budget to showcase advanced semiconductors in cooperation with the U.S., private sector local companies have united to lay the groundwork for entering the foundry (semiconductor contract manufacturing) business. While voices calling for Korea to participate in Chip4 to secure practical benefits are gradually increasing, concerns persist that China may use advanced materials as leverage to trigger trade frictions.

According to Japanese foreign media such as Nikkei Asia on the 13th, the Japanese government recently allocated a total of 1.3 trillion yen (approximately 12.3533 trillion KRW) solely for semiconductor-related budgets in the second supplementary budget of fiscal year 2022. This budget notably includes projects aimed at strengthening the competitiveness of Japan’s semiconductor industry in line with the semiconductor supply chain being reorganized by the U.S. A representative example is the 350 billion yen (approximately 3.3259 trillion KRW) set aside for semiconductor research and development (R&D) projects jointly conducted by the two countries.

This budget was prepared as an extension of the semiconductor joint development project agreed upon by the two countries. In July, the two countries held the Economic Policy Consultative Committee (EPCC), an economic 2+2 (diplomatic and economic) ministerial meeting, in Washington D.C., U.S., where they agreed to establish a U.S.-Japan joint research center and jointly develop and mass-produce next-generation semiconductors with process nodes below 2 nanometers (nm; 1 nm = one billionth of a meter). Japan plans to establish the research center within this year and actively promote the project.

It is also noteworthy that Japan included a subsidy of 450 billion yen (approximately 4.2761 trillion KRW) for advanced semiconductor production facilities and a budget of 370 billion yen (approximately 3.5159 trillion KRW) for semiconductor material self-sufficiency in this supplementary budget. At the EPCC, Japan and the U.S. discussed reducing dependence on materials led by China, such as rare earth elements. Japan has chosen a course aligned with the U.S. while safeguarding its own economic security.

In the private sector, in line with the Japanese government’s moves, a joint venture to enhance Japan’s semiconductor competitiveness was launched. Eight major local companies including Toyota Motor, NTT, SoftBank, Kioxia, and Sony each invested 1 billion yen (approximately 95.025 million KRW) to launch 'Rapidus' last August. Rapidus is establishing a production system capable of mass-producing system semiconductors using advanced processes below 2 nm, with plans to fully enter the foundry business by 2030.

Japanese Minister of Economy, Trade and Industry Yasutoshi Nishimura emphasized the importance of semiconductors from an economic security perspective on the 11th (local time) while announcing related news. The Japanese government plans to support the Rapidus project with 70 billion yen (approximately 665.2 billion KRW).

Given this situation, demands within Korea for participation in Chip4 to enhance semiconductor competitiveness continue. Since China’s semiconductor industry is struggling due to U.S. sanctions, it is argued that Korea should participate in the U.S.-led supply chain to secure practical benefits. Considering Korea’s semiconductor industry has global competitiveness and China heavily depends on Korea, there is also a forecast that China will not take measures such as import bans against Korea. The Korea International Trade Association recently pointed out in a report that proactive participation in Chip4 is necessary to ensure stable supply of semiconductor equipment.

On the other hand, there are also claims that the possibility of Chinese sanctions remains valid. KB Management Research Institute diagnosed that China could realize trade frictions targeting Korea’s vulnerable industrial links. Researcher Shim Kyungseok of KB Management Research Institute predicted, "If trade frictions with China occur, there is a possibility in the materials and raw materials sectors that could affect the value chain of Korea’s high and mid-level industries."

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