Japan wants to return to the forefront of the crucial semiconductor industry, by positioning itself as a new global manufacturing hub thanks to substantial government funding. The Land of the Rising Sun counts among its industries the leading manufacturers of materials and equipment for semiconductor production, but has seen its share of the global chip-making market shrink from around 50 per cent in the 1980s to 9 per cent in 2022 after trade tensions with the USA and competition from South Korean and Taiwanese rivals.
This is the reason why Japan has invested huge sums in recent years to rebuild its manufacturing sector in chip production and free itself from the dependence on China and Taiwan, spending more than the USA and other major Western countries, as the data and figures from the Ministry of Finance show. However, up to 500 billion yen (€3.1 billion) of Japanese spending in the sector is so far covered by actual financing. One source is the GX bonds, which the government has started to issue for green transformation and from which it expects to raise around 20 trillion yen (125 billion euros) over a decade. The latest manoeuvre to support the sector includes up to 53.5 billion yen (334.4 million euros) for research activities alone and the development of back-end processes such as chip packaging.
According to some government estimates, however, the Japanese semiconductor industry still lags about ten years behind the world’s technology leaders, which Japan is trying to overcome through new synergies and by attracting foreign companies and capital, besides financing local ones. Among the main initiatives, the start-up Rapidus, a consortium of Japanese companies in collaboration with IBM Research, is working on the two-nanometer semiconductor technology. The Japanese government has earmarked around 6.25 billion euros for Rapidus to build its first factory in Chitose, Hokkaido, scheduled for 2026-2027. Furthermore, between 2022 and 2023, Rapidus has already received 2 billion euros for the production of these chips, with further 1.8 billion euros earmarked for research and development. A further EUR 3.7 billion subsidy was promised in April this year, bringing the total planned investment in the project to around 32.8 billion euros.
Besides Rapidus, other companies in the semiconductor industry are benefiting from public support. The Leading-edge Semiconductor Technology Centre (LSTC) received 281 million euros to develop advanced technologies, while Taiwanese giant TSMC opened its first plant in Japan with a total investment of more than EUR 18.7 billion, supported by the Goverment.
Overall, at least nine Taiwanese chip companies have opened offices or started joint ventures in Japan over the past two years. Other Taiwanese companies in the industry are looking to increase their presence or enter the market, also favoured by a weak yen. Among them, Powerchip is seeking government subsidies to set up a EUR 5 billion foundry in the country. South Korean Samsung, on the other hand, will receive support of up to €125 million to build a new research and development facility for advanced semiconductors near Tokyo.
At the same time, Japan has also opened up to greater collaboration with the USA: American Micron Technology has planned total funding of EUR 3.1 billion in Japan over the next few years, with support from the local government, and Nvidia has announced the forthcoming opening of its first Japanese chip production plant.
The expansion of the semiconductor industry has also turned Japan into an attractive destination for the establishment or expansion of foreign banks, including some banks in Taiwan itself.
