Japan Dreams of Becoming a Chip Powerhouse, Betting 90 Trillion Won in a 'Do-or-Die' Move

Japan is investing about 90 trillion won in the semiconductor industry, staking its future on becoming a chip powerhouse. The government-led initiative has established a new foundry company, 'Rapidus,' funded by major corporations, while also focusing on attracting leading overseas companies including TSMC. However, there are mixed forecasts regarding the future of this semiconductor development project.

[Image source=Reuters Yonhap News]

According to Bloomberg on the 21st, Prime Minister Fumio Kishida has allocated a budget of approximately 4 trillion yen (about 35 trillion won) to revitalize the semiconductor industry. Combining private sector contributions and government subsidies, a total support fund of 10 trillion yen (about 88 trillion won) is planned. The goal is to triple domestic chip production sales by 2030, reaching 15 trillion yen (about 133 trillion won).

A prime example of Japan's ambition to leap into the chip powerhouse league is the newly established foundry venture Rapidus. This company, jointly funded by eight of Japan's leading corporations including Toyota, Kioxia, Sony, NTT, SoftBank, NEC, Denso, and Mitsubishi UFJ Bank, was directly established under the leadership of the Japanese government. Following the groundbreaking ceremony for the foundry in Hokkaido last September, the plan is to mass-produce advanced 2nm (nanometer; 1nm = one billionth of a meter) semiconductor chips starting in 2027. It is reported that about 1 trillion yen in government support funds have been invested in establishing the factory.

The news agency described it as "a project that will change the face of Japan's chip industry" and "an incredible challenge by an 18-month-old venture group in a country that has fallen far behind overseas competitors in semiconductor production." Atsuo Shimizu, Executive Director of Rapidus, emphasized, "Japan must become a global player with secured technology to survive as a nation," adding, "We can prove this through semiconductors."

Currently, Japan is pursuing a 'two-track strategy' to foster the semiconductor industry. The first is actively attracting leading overseas companies by subsidizing about half of the factory construction costs. The world's number one foundry company, TSMC, is building a $7 billion (about 9 trillion won) factory in Kumamoto Prefecture in southern Japan. Earlier this month, plans for a second factory were announced. Additionally, Samsung Electronics, Micron, and ASML are investing in production or research facilities within Japan. The record-weak yen has also eased the cost burden for overseas companies building production bases, which has been a significant factor in their investments, according to the news agency. The second strategy is nurturing domestic companies. Rapidus is a representative example of Japan's semiconductor company development project.

The reason Japan is betting heavily on semiconductor revival with massive support funds is interpreted as a response to the 'changing semiconductor supply chain.' There is a sense of urgency not to be left behind in the rapidly growing artificial intelligence (AI) semiconductor market, which is regarded as a future growth engine.

Kazumi Nishikawa, Director of the IT Industry at Japan's Ministry of Economy, Trade and Industry, stated, "The reason Japan is desperate to recreate its past glory is to survive the US-China hegemony war," pointing out, "If chip supply from Taiwan, where the two countries are sharply at odds, is cut off, it would cause trillions of dollars in global losses and economic collapse." Executive Director Shimizu also mentioned, "Japan's geopolitical and economic security depends on the success of Rapidus."

However, doubts remain about the final outcome of the Rapidus project, which openly showcases Japan's semiconductor ambitions. The news agency noted, "It is uncertain how successful the final results will be compared to the bleeding (investment amount), and whether there will be buyers for the produced products." The foundry business is led by TSMC and Samsung Electronics, and the technological gap is large for Japan as a latecomer to catch up. Currently, Rapidus aims to mass-produce 2nm process semiconductors, but Japan's current technological level is assessed to be around the 40nm class. Takashi Yunogami, a former Hitachi engineer, criticized, "Rapidus's goal is like the wishful dreams of young players trying to become Shohei Ohtani overnight."

Japan's chronic issues of labor shortages and aging population are also cited as obstacles to Rapidus's success. According to a survey by Japanese recruitment company Recruit Holdings, the demand for semiconductor engineers in Hokkaido, where Rapidus's factory is located, increased 5.4 times compared to 2017. However, supply has not kept pace. The Ministry of Economy, Trade and Industry estimates that the semiconductor industry in Japan will face a shortage of 40,000 workers over the next decade. Regarding this, Executive Director Shimizu said, "As of the end of last year, the average age of Rapidus's 300 employees will exceed 60 years old in 10 years."

On a more positive note, unlike the 1980s when Japan was engaged in anti-dumping lawsuits with the United States, Japan is now establishing comprehensive cooperation with global companies. ARM, a semiconductor design company invested in by SoftBank, has formed a strategic partnership with Intel, and IBM and Google announced a $150 million support for a US-Japan joint quantum computer research project. IBM is currently training about 100 veteran Japanese engineers in Albany, New York, in advanced chip expertise.

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