Having destroyed 67 billion US dollars, Japan wants to revive the chip industry

wallstreetcn ·  Feb 21 14:01

Japan has spent $67 billion to attract the world's advanced semiconductor companies. By 2030, the Japanese government plans to increase domestic chip sales to over 15 trillion yen by 2030. Meanwhile, Japan launched the Rapidus project, which plans to mass-produce the most advanced 2nm chips in 2027.

In order to take back its former leading position of 50.3% market share of semiconductors and not be “stuck in the neck” by overseas competitors, Japan “painfully decided” to smash 67 billion US dollars to attract advanced global semiconductor companies to build factories in Japan and try to lead the world again by mass-producing high-end 2-nm chips.

On February 21, according to media reports, Prime Minister Fumio Kishida plans to raise financial support for the semiconductor industry to 10 trillion yen (about 67 billion US dollars) with the support of the private sector. Another goal of the Japanese government is to triple domestic chip sales to more than 15 trillion yen (about $108 billion) by 2030. Meanwhile, Japan launched the Rapidus project, which plans to mass-produce the most advanced 2nm chips in 2027.

Up to now, in less than three years, Japan has allocated about 4 trillion yen (26.7 billion US dollars) to support the semiconductor industry. Semiconductor manufacturers such as TSMC are building factories in Japan, and the Japanese fab is being built the fastest in the world.

Chip production is of great strategic importance to countries around the world. As the foundation for more than a dozen key technologies, including artificial intelligence, weapon systems, and electric vehicles, advanced semiconductor chips are essential to the field of modern technology.

Governments, including Japan, are aware of this. Kazumi Nishikawa, Director of Economic Security Policy at Japan's Ministry of Economy, Trade and Industry, said, “Why do we pay so much attention to chips? Because the stability of the semiconductor supply chain is critical to the global economy, once chip supply is interrupted, the economy will collapse”.

Japan intends to “fight back” to regain the glory of the semiconductor industry

The market share of the Japanese semiconductor industry fell sharply from 50.3% in 1988 to less than 10% in 2019, ending in 40 years of rapid technological development. In 2022, Japan's Minister of Economy, Trade and Industry, Koichi Hagiuda, publicly stated that the decline of Japanese semiconductors was suppressed and counterattacked by the US and other rivals, but more likely, Japan made mistakes in its own strategies and tactics, which led to the decline of the industry and the defeat of ambitions.

After Japan's leading position in semiconductors was surpassed since the 1980s, it was “painfully pained” and decided to divide the revival of the semiconductor industry into three stages until 2030: (1) Accelerate infrastructure construction for semiconductor production. (2) Cooperate to develop next-generation semiconductor technology. (3) Develop disruptive semiconductor technology based on existing technology.

At the same time, Japan's new chip strategy has two main lines, namely traditional chip manufacturing and “two hands” for high-end chips.

1) High-end chips: 3nm is currently the most advanced semiconductor manufacturing process, and Japan promotes mass production of 2nm chips by 2027. According to media reports, Japan “ambitiously” launched the Rapidus project in Hokkaido and plans to mass-produce the most advanced 2nm chips in 2027, with the intention of “leading” the world in the high-end chip market.

The project raised questions in the market because in a country that lags far behind overseas competitors in semiconductor production, Rapidus is a local Japanese company that has only been established for 18 months. For a company starting from scratch, producing 2nm chips is a difficult task.

But Japan is “in full swing” and, according to media reports, IBM is training about 100 experienced Japanese engineers in Albany, New York as part of the Rapidus project to help them quickly master the US's high-end chip expertise.

2) Traditional chip manufacturing: Japan plans to become a leader in traditional chip manufacturing again. In order to attract foreign semiconductor companies to set up production bases in Japan, the Japanese government is willing to provide financial subsidies of up to 50% of the cost of setting up new plants. Although traditional chips may not be as technically complex as the latest generation chips, they are still very important in many applications, such as automobiles and industrial equipment.

Furthermore, Japan provides substantial tax relief to support foreign companies to build factories. Japan's long-standing regulations, which have been in place for more than 50 years, have also been relaxed: high-tech factories, including semiconductor and battery factories, are allowed to be built in agriculture and woodland.

Up to now, Japan has achieved phased success in this strategy. Benefiting from Japan's strong financial subsidies, TSMC believes that Japan-funded chip projects can be launched faster than in the US or other countries. In Japan, TSMC's $7 billion Kumamoto plant, which aims to “rebuild the semiconductor industry,” is expected to be completed on Saturday, according to media reports.

It has only been 2 years and 4 months since the construction plan was announced in October 2021. For typical Japan where action is slow and regulations are strict, the rapid construction of the plant in just 20 months is a very fast feat of Japan, which shows the full support of the Japanese government. At the same time, TSMC's second factory in Japan is also about to be built, and a third factory is under discussion.

The Japanese government is leading the world in the speed of subsidies

The speed of Japanese subsidies is in stark contrast to the US and South Korea. In 2022, US President Joe Biden officially signed the “Chip and Science Act”, which plans to allocate up to 39 billion US dollars in direct funding subsidies. However, over a year has passed, and the Biden administration has not issued any subsidies to major chipmakers such as TSMC or Intel, which has also caused TSMC to delay production several times to negotiate with the US government. The first $1.5 billion subsidy was not announced until this week.

In South Korea, South Korea's SK Hynix semiconductor project in Yongin City has not yet begun construction since the site was selected in February 2019. The original plan was to start in 2022, but it was delayed several times due to local opposition, land compensation, and water supply licensing issues. Even if construction starts next year, it will take almost 8 years.

The speed at which Japanese fabs are being built is astonishing, far surpassing that of other countries. According to a report from the Center for Safety and Emerging Technologies (CSET), Japanese fabs are being built the fastest in the world, while the US is counting down. According to the CSET study, a total of 635 fabs were built around the world between 1990 and 2020, and the average time from construction to commissioning was 682 days. Among them, Japan had the fastest speed of 584 days, followed by South Korea with 620 days. The number of days in Europe and the Middle East was roughly the same, at 690 days. The countdown for the US was 736 days, far slower than the global average, and second only to Southeast Asia's 781 days.


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