Global Courant
At the G7 summit in Hiroshima in May 2023 leaders stated in a statement on economic resilience and economic security that they would strengthen supply chains for critical goods, including semiconductors, through global partnerships.
This commitment reaffirms Japan’s efforts – starting in 2021 – to revive its domestic semiconductor industry, reduce dependence on other countries for critical goods and build a resilient supply chain.
Two key elements of Japan semiconductor strategy for 2023 include strengthening domestic manufacturing capacity and promoting research and development (R&D) for next-generation semiconductor technology through international cooperation.
This ambitious approach aims to transform Japan’s semiconductor industry and demonstrates the government’s determination to revitalize its semiconductor ecosystem.
The Japanese government aims to increase domestic semiconductor production capacity by providing subsidies to companies involved in the production of advanced semiconductors.
Given that semiconductors are used in everything from mobile phones to defense systems, expanding Japan’s domestic capabilities will be critical for reducing the risk dependence on unreliable sources of supply and the risk of becoming too dependent on a few countries.
In 2021 and 2022, the government has set aside more than 1 trillion yen (nearly $7 billion) for semiconductor factories. Without this, Japanese and foreign companies would likely choose more attractive locations to produce semiconductors.
In May 2023, top managers of seven foreign semiconductor companies spoke agreed with Prime Minister Fumio Kishida exchanges views on expanding investments in Japan. This step is expected to further secure the foundation for semiconductor production.
Semiconductors were also designated “specified critical materials” to strengthen the Japanese industry’s ability to manufacture legacy semiconductors and produce the required production equipment and materials.
This resulted in a total budget of 368.6 billion yen (2.8 billion dollars). These support measures are intended to maintain Japan’s presence in the global semiconductor ecosystem and stimulate additional private sector investment.
In addition to financial support, the Japan Investment Corporation (JIC) – a government-linked fund overseen by the Ministry of Economy, Trade and Industry – has taken a major step by acquiring chip materials manufacturing firm JSR in a takeover bid of approximately $900 billion . yen ($6.4 billion).
Japan Investment Corporation’s purchase of local photoresist manufacturer JSR took a major chip component company off the open market. Image: Facebook
JSR holds firm about 30% share of the world market for photoresists needed for semiconductor production. The acquisition will enable JSR and JIC to restructure Japan’s semiconductor materials industry through large-scale mergers and acquisitions to enhance the competitiveness of Japan’s semiconductor materials companies.
Although industrial policy alone will not be enough to revive Japan’s domestic semiconductor industry, the government can ensure that its industrial policy contributes to the industry’s success.
This work requires close collaboration with semiconductor companies and other stakeholders, an examination of the successes and failures of industry policy efforts, and the adjustment of policies as necessary.
The Japanese government’s semiconductor strategy also emphasizes strengthening Japan’s next-generation semiconductor technology base through international cooperation. Other technology-driven countries – including European countries, the United States, South Korea and India – are launching policies to build resilient semiconductor supply chains.
This is an opportune time for Japan to do so pursue cooperation with other countries.
In December 2022, Japan founded the Leading-edge Semiconductor Technology Center (LSTC), which is supported by public research institutions in Japan and serves as an R&D hub for scientists around the world.
At the LSTC, researchers will explore new technologies for next-generation semiconductors based on the needs of domestic and foreign industries. It is expected that the National Semiconductor Technology Center and the Interuniversity Microelectronics Center (IMEC) will collaborate with the LSTC on advanced semiconductor technologies.
In addition, Japan’s National Institute of Advanced Industrial Science and Technology is cooperating with domestic and foreign semiconductor companies on a project to launch a pilot line of 2-nanometer chips.
It is also work with the Taiwanese semiconductor manufacturing company (TSMC) to develop an advanced 3D semiconductor packaging technology. These collaborative projects demonstrate the Japanese government’s ambition to catch up with world leaders who are currently ten years ahead of Japan in chip manufacturing technology.
The Japanese government has also established Rapidus, a mass production center for next-generation semiconductors, in partnership with IBM and IMEC. Rapidus received 330 billion yen ($2.3 billion) in financial support from the Japanese government in 2022 and 2023. The company aims to start producing 2-nanometer semiconductors in 2027.
But because Rapidus has not yet built and operated a production facility, it will likely take some time before its potential is realized. It also remains to be seen whether Rapidus’ business model, which is based on R&D supported by sales revenue, will work.
A cautionary tale is that between the 1970s and the 2000s several joint research projects similar to the LSTC were conducted by the Japanese government. These government initiatives initially benefited Japan’s semiconductor industry.
But in the long run, Japanese semiconductor companies became less diverse as a result of the standardization of their technology and the leveling of technology within their companies.
This lack of diversity among Japanese semiconductor manufacturers made it difficult for companies to adapt to changes in a competitive environment.
To apply lessons learned from previous government initiatives, the LSTC will need to be led by a diverse group of Japanese semiconductor companies, operate flexibly, and not be overly tied to specific research goals.
The government is encouraging the revival of Japan’s semiconductor industry. Image: Twitter
The Japanese government’s new semiconductor policy aims to play an important role in revitalizing Japan’s semiconductor ecosystem. To successfully implement the strategy, the government must continue to pursue further investments and long-term policies aimed at building a resilient global supply chain.
At the same time, the government will also have to work closely with stakeholders and remain flexible in adapting its policies. In addition to financial support, the Japanese government is taking a multi-pronged approach to strengthen the competitiveness of its semiconductor industry.
International cooperation, the establishment of R&D centers and the development of human resources are all on the table. These efforts are expected to help Japan’s semiconductor industry build a stronger position and contribute to economic resilience at home and abroad.
Hideki Tomoshige is a Research Associate for the Renewing American Innovation Project at the Center for Strategic and International Studies (CSIS), Washington DC.
This article was originally published by East Asia Forum and has been republished under a Creative Commons license.
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