How Japan wants to catch up with semiconductors with a new chip company

Asia Technonomics

In the weekly column we take turns writing about innovation and economic trends in Asia.

(Photo: Klawe Rzeczy)

Several countries are currently promoting state subsidies for chip production in their own country after the supply bottlenecks of the past few years have shown the vulnerability in this field. The USA is doing it, the EU is doing it, China has been doing it for a long time – and Japan, the third largest economy in the world, sees its chance to regain its old size in the semiconductor world.

In the 1980s, the Japanese chip companies still dominated the world market. But then they ceded the position to Taiwan and South Korea. In Japan, many have not forgotten those times. Now a new company called Rapidus Japan is to catapult forward in terms of semiconductor production. The Japanese government supports the project as a measure of “economic security”, one of the keywords in Tokyo’s Kasumigaseki government district.

The Economy Ministry has already pledged half a billion euros (70 billion yen) in subsidies. And everyone expects more to come.

The chip company could be able to mass-produce two-nanometer semiconductors by 2027, and only with that two years after the world market leader TSMC started this new generation of chips a very ambitious plan. Rapidus is planning the equivalent of 36 billion dollars in investments over the next ten years to catch up at breakneck speed. Can this work?

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Toyota, Sony, Softbank: Rapidus has prominent shareholders

After all, eight well-known companies are behind Rapidus, a small who’s who of the Japanese economy: car manufacturer Toyota and car supplier Denso The shareholders include the electronics companies Sony and NEC, the IT and telecom groups Softbank and NTT, the memory chip company Kioxia (formerly Toshiba Memory) and the bank MUFG.

>> Read also: Japan wins the chip world market leader for a new plant and solves a supply chain problem

Despite investing billions, China has always lagged behind the semiconductor catch-up goals it has set itself. Japan, however, is hoping that the geopolitical situation will help in the industrial policy bet. The US wants to decouple China from the latest semiconductor developments and is closely relying on Japan as a partner. According to reports, among other things, Japan is now willing to support the USA’s strict export restrictions on chips and chip production systems to China.

Industry Minister Yasutoshi Nishimura

Japan’s Economy Ministry has already pledged half a billion euros (70 billion yen) in subsidies.

(Photo: AP)

The close alliance between the two states can also be seen in the fact that the two-nanometer chip is to be developed in Rapidus’ yet to be built factory in cooperation with IBM in its Albany Nanotech complex in New York. According to the Japanese Ministry of Economic Affairs, both companies plan to jointly create a new market for next-generation chips, which Rapidus will then produce. Both companies also want to cooperate in training.

Rapidus and IBM have become symbols of stronger industrial policy cooperation between the USA and Japan. When Japanese Industry Minister Yasutoshi Nishimura met with US Secretary of Commerce Gina Raimondo earlier this year, representatives from both companies were present. In addition, the states want to cooperate more closely in artificial intelligence and biotechnology in the future, announced Nishimura.

Like so many companies in the industry, Rapidus wants to work not only with IBM, but also with the Imec Institute in Belgium. Rapidus is the last chance for Japan’s semiconductor industry to compete globally again, says company boss Atsuyoshi Koike.

TSMC factory in the country to help

In addition, the Japanese hope that the settlement of the Taiwanese market leader TSMC in the south of Japan will increase the semiconductor capabilities of the country. TSMC’s $8.6 billion factory is currently under construction – with billions in subsidies.

While the Taiwanese are still struggling with the decision to manufacture in Europe, a second plant is already being discussed in Japan. The settlement of the world market leader encourages the industrial politicians in Tokyo. They also refer to the knowledge that is still dormant in many Japanese companies.

However, it is far from certain that the industrial policy structure of the new chip company Rapidus will work. Japanese companies have already tried to jointly dominate the chip market: In 1999, the memory chip group Elpida was formed, in which NEC Hitachi Memory and the DRAM division of Mitsubishi Electric were merged. After a few good years, bankruptcy followed in 2012, and today the company is owned by Micron Technology, based in the USA.

In the Asia Techonomics column, Nicole Bastian, Dana Heide, Sabine Gusbeth, Martin Kölling and Mathias Peer take turns writing weekly about the most exciting technological and economic trends in the world’s most dynamic region.

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