Japan is no island when it comes to semiconductors. Rightly so.

The “rice of industry.”

This is how the economy ministry referred to semiconductors in the first iteration of Japan’s landmark chip strategy in 2021.

The metaphor captures how indispensable this technology has become to the long-term viability, and even survival, of Japanese industries and manufacturing.

But unlike rice, domestic makers of legacy and advanced chips cannot produce sufficient quantities on their own. Japan has thus become dependent on global supply chains and, going a step further, international collaboration has become essential to meet the government’s objectives of “strategic autonomy” and “strategic indispensability” in semiconductors.

This policy marks a departure from the government’s longtime preference for supporting only domestic manufacturers. It also aligns with the approach of key partners, including the United States, the European Union and Taiwan.

Although achieving strategic autonomy and indispensability requires government incentives and industrial policies, both goals rely on cooperation between Japanese and foreign firms, lending themselves to two types of international collaboration: One that leverages Japan’s comparative advantages and the other that fosters mutually beneficial partnerships.

As a result, there is excitement both overseas and at home about the prospects of Japan’s semiconductor renaissance.

JASM’s Kumamoto fab

Strategic autonomy means ensuring that Japan’s access to legacy chips is not impeded by supply chain disruptions. To this end, in 2021, the government urged Taiwan Semiconductor Manufacturing Co. (TSMC) to participate with Sony and Denso in a joint venture, known as Japan Advanced Semiconductor Manufacturing (JASM), to build a semiconductor fabrication plant (fab) in Kumamoto.

The ¥1.2 trillion facility, which will focus on producing mature nodes, especially 22-nanometer and 28-nanometer processes, was made possible by a ¥500 billion government subsidy. While the JASM fab’s products are no longer at the cutting edge of chip technology, they are essential for Japan’s automotive and consumer electronics sectors.

At first, it may not be clear why TSMC is helping to establish what appears on the surface to be a competitor. However, the Taiwanese government sees Japan as a key partner rather than a strategic competitor, especially when it comes to mature nodes. In fact, the partnership secures TSMC’s presence in Japan and strengthens a shared supply chain.

When paired with Taiwan’s expertise in semiconductor manufacturing, Japan’s technological advantages in materials and equipment offer mutual benefits: The domestic workforce can gain hands-on experience with TSMC’s processes, while TSMC can access crucial specialized resources to maintain its global leadership, creating long-term innovation synergies.

TSMC can make use of Japan’s comparative advantages to overcome some of its own constraints, such as the need to concentrate more of its domestic capacity on advanced (rather than mature) nodes, alleviating the demand pressures on its Taiwanese facilities.

A strategic location, complimentary expertise and government subsidies have made the Kumamoto plant an attractive investment. So much so that in February 2023, TSMC announced a second fab in the area that will utilize 5-nanometer and 10-nanometer processes, freeing up further resources in Taiwan to move toward next-generation chips.

Rapidus’ cutting-edge research

Beyond supply chain resilience, with its vision of strategic indispensability, Japan aims to become a major semiconductor innovation center.

The most high-profile project is Rapidus. In 2022, the government launched an R & D project commissioned by the New Energy and Industrial Technology Development Organization to produce 2-nanometer chips. NEDO and other government agencies have so far allocated ¥920 billion to Rapidus and a further ¥100 billion have been earmarked in the fiscal 2025 budget.

The technical know-how accrued from international partnerships will also be key to Rapidus’ success. To this end, Rapidus closely collaborates with U.S. firm IBM — which pioneered the 2-nanometer node — to leapfrog years of R & D and accelerate its entry into advanced semiconductor manufacturing.

Rapidus is also working with the Belgian Interuniversity Microelectronics Centre (Imec) consortium to leverage the latter’s cutting-edge research into semiconductor materials and nanotechnology. The partnership focuses on breakthroughs in materials science crucial for advanced node production, including working on materials that could replace or at least complement silicon, such as graphene or carbon nanotubes.

These strategic partnerships give Rapidus access to a broader international network, facilitating knowledge exchange and potentially enabling Japan to develop a skilled workforce and top-level research environment.

And the benefits are mutual. The development of advanced semiconductors is key to IBM’s ambitions in artificial intelligence and quantum computing, and the company aims to accelerate innovation in these fields by tapping into Japan’s technical capabilities and talent pool — with the U.S. government also recognizing the importance of joint R & D to establish interoperable semiconductor standards.

For its part, Imec sees Rapidus as an opportunity to bolster its research agenda and enhance its influence in the global semiconductor supply chain, particularly in Asia. And since many of the key European players already work with Imec, Japan is an attractive partner for EU countries looking to build up their own chip capabilities.

Overall, both partnerships further align Japan’s semiconductor strategy with complementary approaches in the U.S. and the EU, such as their respective Chips Acts.

Strategic cooperation

These two types of collaboration focus on private-sector partnerships, but government policies to advance strategic objectives also impact the chip industry.

American export controls to limit China’s access to advanced semiconductor manufacturing equipment have been adopted with the cooperation of two U.S. allies, Japan and the Netherlands, as together, American, Japanese and Dutch companies form the essential links in the supply chain. But for firms like Tokyo Electron and the Dutch ASML, which are restricted in the expanding Chinese market, this effort could be seen as an attempt to artificially suppress competition at their expense.

Government policies can also have a more positive impact. For example, the Japanese government is participating in several multilateral forums to temper competition between partner countries and improve the complementarity of their semiconductor strategies.

Most notable is the “Fab 4” alliance between Japan, the U.S., Taiwan and South Korea, which coordinates and strengthens these allies’ semiconductor supply chains, harmonizing their respective competitive advantages. Japan is also exploring a trilateral partnership with the U.S. and the EU focused on regulatory issues under the auspices of the U.S.-EU Trade and Technology Council to promote agreements on technology standards, supporting open and stable supply chains.

As geoeconomic competition with China intensifies, so will the rationale for further strategic and private-sector collaboration. In this way, the alignment of semiconductor strategies that aim to reduce dependence on a few “rice of industry” sources can put Japan at the heart of a more diversified and secure global chip ecosystem.

(Photo Credit: Reuters/ Aflo)

[Note] This article was posted to the Japan Times on March 3, 2024:
https://www.japantimes.co.jp/commentary/2025/03/03/japan/japan-international-semiconductor-strategy/

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