Japan's strategy to 'revive' the semiconductor industry

The Japanese government has agreed to provide up to 192 billion yen ($1.3 billion) in subsidies to Micron Technology's Hiroshima plant, in an effort to boost domestic chip production.

The subsidies will help the U.S. semiconductor company install ASML’s extreme ultraviolet (EUV) lithography equipment to produce cutting-edge chips, which are needed to power AI, data centers and autonomous driving technology, Economy Minister Yasutoshi Nishimura said on October 3.

Japan is actively attracting semiconductor companies like Micron to build factories here. Photo: Bloomberg

“The market is tough right now, but we feel it is necessary to invest at times like this,” Nishimura said at a press conference, referring to the industry-wide slump that has weighed on Micron’s revenue. “This is to secure the supply of advanced chips that will serve Japan’s economic security in the future.”

Bloomberg commented that Tokyo's move marked "a victory" for Micron as the US chipmaker struggled with unrest in China, also one of the company's largest markets.

Micron is under investigation by Beijing, putting half of its mainland sales at risk.

Meanwhile, Nishimura said Japan will allocate up to 167 billion yen to support Micron’s manufacturing costs and 25 billion yen for development funding. The Boise, Idaho-based semiconductor company said it plans to spend about 500 billion yen on “1-gamma” manufacturing in the East Asian country.

“We are proud to be the first company to use EUV in Japan and to implement the 1-gamma manufacturing process at our Hiroshima fab,” said Sanjay Mehrotra, CEO of Micron, in a statement.

Tokyo’s financial commitment comes as similar efforts in the United States have been hampered by labor shortages and funding delays. The world’s largest chip foundry, TSMC, said in July 2023 that it would delay production at its Arizona plant until early 2025.

On the other hand, TSMC's foundry construction in Japan is proceeding relatively smoothly, with the site operating around the clock and the government pledging to pay nearly half of the costs.

Prime Minister Fumio Kishida's administration has so far spent billions of dollars in subsidies with the goal of tripling domestic chip production by 2030, helping an aging Japan regain its status as a technology powerhouse.

Tokyo is in talks to support TSMC in building a second factory in Japan and to fund domestic Rapidus Group to produce its own advanced chips .

Micron also acquired Elpida Memory Inc, a Japanese DRAM maker, in 2013. The US company said it needed to hire more than 4,000 engineers and technicians in the country.

“Good jobs are an incentive to keep young people closer to home, which creates a positive ripple effect for the regional economy,” Nishimura said.

“The North Star”

Rapidus, a promising Japanese semiconductor startup backed by both the government and other domestic tech giants like Sony and Toyota, aims to produce 2nm chips by 2027, a technological leap from Tokyo’s decades-old foundry capabilities.

Rapidus's factory is expected to go into pilot production in 2025. Photo: Asahi.com

The startup is now at the heart of Japan’s quest to restore its status as a semiconductor superpower. Policymakers see the ability to found advanced chips domestically as crucial to reducing foreign dependence in an era of booming AI and complex geopolitical tensions.

Rapidus CEO Atsuyoshi Koike, who was also CEO of Western Digital, is lobbying manufacturers across the supply chain to invest in Hokkaido, the northernmost prefecture where the 13-month-old startup will operate a pilot plant in 2025.

Instead of competing with global semiconductor companies on general-purpose chips, the Tokyo-based startup will focus on specialized chips, such as low-power AI chips, he said.

Meanwhile, Hokkaido, with its abundant clean water resources and one of Japan's leading renewable energy hubs, is an ideal location to revive its status as a chip powerhouse.

The government has so far allocated $2.4 billion to the chip venture and is ready to provide an equivalent annual budget to “maximum support” to keep Rapidus on track. However, the obstacles are not gone, especially the shortage of semiconductor manpower.

Hokkaido, famous for its ski resorts and agricultural products, has also attracted many manufacturing companies over the years. The prefecture has the advantage of being less prone to earthquakes than the rest of Japan. At the same time, it has favorable natural conditions with easy access to water, suitable for developing renewable energy.

Koike said Hokkaido could become a version of Silicon Valley in the future. It would take time, but could be achieved “around 2030.”

Vietnam will have a mechanism to promote the semiconductor industry.

Deputy Minister of Information and Communications Nguyen Huy Dung said that he will accelerate Vietnam's participation in the regional semiconductor ecosystem, attracting global semiconductor businesses to be present, produce, and conduct research and development in Vietnam.

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