What is Japan doing to revive its semiconductor chip industry?

This funding is part of a national strategy to rebuild Japan's semiconductor industry, once a source of pride for the country. The government is actively supporting the Rapidus joint venture, a key project aimed at building state-of-the-art chip manufacturing plants capable of competing with the world's leading technology powers.

At the same time, Japan is actively attracting international chip manufacturers to invest in the country, aiming to diversify its supply chain and reduce its dependence on external sources.

Mr. Ishiba stated, "We will establish a new support framework to attract more than $325 billion in public and private investment over the next 10 years," emphasizing that this will be part of a larger effort to "rebuild" Japan.

According to local media, this plan will be part of a comprehensive economic package expected to be finalized in November, funded through subsidies, investments from government institutions, and debt guarantees.

This move comes as Japan is actively strengthening and diversifying its semiconductor supply chain, with the government aiming to triple sales of domestically produced chips to over $97.5 billion by 2030.

Supporting the development of domestic semiconductor chip companies.

One of the entities that could benefit from the funding announced on November 11th is Rapidus, a Japanese chip manufacturer. This government-backed joint venture plays a key role in the nation's chip industry revival strategy. Rapidus is central to Japan's efforts to boost domestic chip production and increase its competitiveness in the global semiconductor sector.

Established in 2022 with direct support from the Japanese government, Rapidus is a strategic joint venture aimed at promoting the domestic chip industry. The company receives strong backing from many major Japanese corporations, including Toyota Motor and Sony Group, leading companies in the industrial and technology sectors. In addition, Rapidus collaborates with IBM – a leading American technology corporation – to leverage advanced technology and international expertise.

The company has received over $2 billion in financial support from the Japanese government, with the specific goal of achieving mass production capability for advanced 2-nanometer logic chips by 2027. This funding not only helps Rapidus invest in state-of-the-art technology and infrastructure but also strengthens its research and development capabilities, ensuring Japan can compete with leading global chip manufacturers.

Logic chips are specialized chips used to process information and perform tasks in electronic devices. The most advanced logic chips currently available are widely used in modern technologies such as artificial intelligence, quantum computing, and machine learning, where powerful computing capabilities and high processing speeds are required.

Rapidus chairman Tetsuro Higash called the company "the last chance" for Japan to regain its leading position in the global semiconductor industry. He said it was a crucial effort for Japan to catch up with pioneering nations in the field, such as Taiwan and South Korea, as the semiconductor industry plays an increasingly important role in the global economy and technological security.

In the 1980s, Japan was a leading nation in the chip manufacturing industry, accounting for more than half of the global semiconductor market. During this period, Japanese companies such as NEC, Toshiba, and Hitachi dominated the semiconductor industry, with their chips widely used in electronic devices, computers, and other technology products.

However, the country began to lose its leading position with the emergence of foreign competitors such as Taiwan Semiconductor Manufacturing Co. (TSMC) of Taiwan, currently the world's largest contract chip manufacturer, and Samsung of South Korea.

Both Samsung and TSMC, two giants in the semiconductor industry, have announced detailed plans to begin commercial production of 2-nanometer chips by 2025. With significant investments in research, development, and factory construction, both companies are aiming to create advanced logic chips with higher performance, lower power consumption, and smaller dimensions.

Meanwhile, the United States has asserted its role as one of the most important centers in the global chip design field, led by top technology companies such as Intel and Micron. These companies not only pioneer the development of advanced chip designs but also play a crucial role in providing foundational technology for modern industries.

At the same time, the Netherlands has become a leading country in the production of the world's most advanced chip manufacturing equipment, thanks to the company ASML. ASML is the exclusive supplier of EUV (Extreme Ultraviolet Lithography) lithography machines, a revolutionary technology that enables the production of extremely small and high-performance chips, laying the foundation for the remarkable development of the global semiconductor industry.

Attracting investment from the world's leading semiconductor companies.

Besides the goal of establishing a leading chip manufacturer right here in Japan, the subsidies are also designed to attract the return of world-leading companies that have previously taken over or acquired key Japanese chip businesses. This is part of an overall strategy to restore Japan's position in the global semiconductor industry.

The government hopes that providing financial support and incentives will not only stimulate domestic investment but also encourage multinational companies to bring back advanced technology, management expertise, and production networks, thereby promoting sustainable development for the domestic chip industry.

With support from the Japanese government, chip manufacturers such as TSMC, Samsung Electronics, and Intel Corp. have agreed to invest billions of dollars in Japan. These companies are leaders in the production of memory chips used for data storage, which are essential in data centers used for artificial intelligence and cloud computing.

TSMC, the world's largest contract semiconductor manufacturer, has announced plans to build a second manufacturing plant in Japan before completing its first.

According to Brady Wang, a semiconductor analyst at Counterpoint Research, attracting such companies to Japan could help the country quickly accelerate vertical integration across its entire supply chain and build its semiconductor ecosystem faster.

Japan has also signed cooperation agreements with allies such as the United States, the United Kingdom, Taiwan, and several EU countries aimed at promoting research and development related to next-generation semiconductors.

Is Japan's strategy feasible?

Michael Yang, senior director of semiconductors at analytics and consulting firm Omdia, told CNBC that while Japan may no longer hold the leading position in semiconductor manufacturing and fabrication, it still maintains a significant advantage in several key areas. Specifically, Japan is currently a global leader in essential semiconductor materials and equipment, such as silicon wafers, process chemicals, and high-tech manufacturing tools.

These sectors not only play a core role in the semiconductor supply chain but are also crucial to the performance and quality of advanced chips. This helps Japan maintain a strategic position in the global semiconductor industry, despite increasingly fierce competition.

Mr. Yang added that through subsidies for the chip industry, primarily aimed at increasing production capacity, the country will be able to expand into other aspects of the semiconductor supply chain and enhance its strategic position in the global semiconductor market.

However, Brady Wang of Counterpoint Research believes that Japan regaining market share in the chip industry will be a significant challenge. According to him, Rapidus will have to find "shortcuts" in its chip design and manufacturing processes to achieve the same level of sophistication as the world's leading semiconductor companies.

A representative from Rapidus stated that the architecture of the 2-nanometer chip differs from that of the 3-nanometer chip, making mass production of this type of chip a "completely new challenge for all companies" and opening up tremendous opportunities for market entry.

However, in this endeavor, "subsidies are necessary, but cannot guarantee success," Wang said, adding that TSMC has taken more than a decade to catch up with global chip companies and build relationships with customers.

Ken Kuo, senior vice president of research at technology market research firm TrendForce, said: "Subsidies are just a basic requirement to enter the semiconductor industry, but success requires more than just support, such as talent, technology, and strategic planning."