>Japan once dominated the semiconductor industry. In the 1980s, Japanese firms accounted for more than half of the global market, and an even bigger share of the cutting-edge chips of the time. But trade friction with America led to limits on Japanese chip exports, creating an opportunity for rivals in Taiwan and South Korea. Japanese companies also struggled to shift to an era of increasing specialisation in semiconductor production. Whereas some Japanese firms retained strong positions in the materials and equipment necessary for making semiconductors, from coating chemicals to silicon wafers themselves, they fell behind in cutting-edge manufacturing. By 2019, Japan accounted for less than 10% of the world’s semiconductors.
>Japan’s semiconductor strategy consists of two main pillars. First is indispensability, which means, in effect, “being influential over others”, says Mireya Solís of the Brookings Institution, an American think-tank. The idea is that if Japan can control parts of a long supply chain it can leverage that interdependence to keep others (ie, China) from weaponising their control over certain inputs. The second pillar is autonomy, or having domestic production capacity. “The world will be divided into two groups: countries that can supply semiconductors and countries that buy them,” says Amari Akira, a former lawmaker with the ruling Liberal Democratic Party (LDP) who led semiconductor policy. “The countries that supply will be the winners, and the countries that buy will be the losers.” The government has refreshed its industrial-policy toolkit to meet the challenge. The LDP passed a series of new laws in recent years enabling broader and longer-lasting government support for chip firms like Rapidus. While such measures involve taking sizable bets with taxpayer money, they have broad political support. “Of course there are risks involved—but there are also risks of doing nothing,” says one LDP bigwig involved in the policies.
>The measures have begun to bear fruit. Big subsidies helped entice TSMC to set up shop in Kyushu. Its first fab there produces chips of 12-28nm—the most advanced type of semiconductor to be produced in Japan so far, but still well behind its state-of-the-art models. The firm has already announced plans to build a second facility for even higher-end logic chips there; talks about a potential third fab are reportedly under way. TSMC’s arrival has enticed suppliers and partners to expand on Kyushu, which has positioned itself as “Silicon Island”. Micron, an American memory chipmaker, has also received more than $1bn in subsidies to expand its chipmaking facilities in Hiroshima. Meanwhile Samsung, a South Korean electronics giant, is building a cutting-edge research facility in Yokohama, south of Tokyo.
>Another challenge is developing a sustainable business model. Samsung and TSMC are advancing towards 2nm chips of their own, and have established relationships with the buyers of high-end semiconductors. Rapidus is positioning itself as a boutique option, able to make smaller lots of specialised chips, rather than large batches of one-size-fits-all offerings. “**We have no intention of directly competing with TSMC—the markets are different**,” Mr Koike says. He is counting on generative AI becoming a tailwind, boosting overall demand for chips and increasing interest in offerings that can improve efficiency and reduce power consumption.
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>Japan once dominated the semiconductor industry. In the 1980s, Japanese firms accounted for more than half of the global market, and an even bigger share of the cutting-edge chips of the time. But trade friction with America led to limits on Japanese chip exports, creating an opportunity for rivals in Taiwan and South Korea. Japanese companies also struggled to shift to an era of increasing specialisation in semiconductor production. Whereas some Japanese firms retained strong positions in the materials and equipment necessary for making semiconductors, from coating chemicals to silicon wafers themselves, they fell behind in cutting-edge manufacturing. By 2019, Japan accounted for less than 10% of the world’s semiconductors.
>Japan’s semiconductor strategy consists of two main pillars. First is indispensability, which means, in effect, “being influential over others”, says Mireya Solís of the Brookings Institution, an American think-tank. The idea is that if Japan can control parts of a long supply chain it can leverage that interdependence to keep others (ie, China) from weaponising their control over certain inputs. The second pillar is autonomy, or having domestic production capacity. “The world will be divided into two groups: countries that can supply semiconductors and countries that buy them,” says Amari Akira, a former lawmaker with the ruling Liberal Democratic Party (LDP) who led semiconductor policy. “The countries that supply will be the winners, and the countries that buy will be the losers.” The government has refreshed its industrial-policy toolkit to meet the challenge. The LDP passed a series of new laws in recent years enabling broader and longer-lasting government support for chip firms like Rapidus. While such measures involve taking sizable bets with taxpayer money, they have broad political support. “Of course there are risks involved—but there are also risks of doing nothing,” says one LDP bigwig involved in the policies.
>The measures have begun to bear fruit. Big subsidies helped entice TSMC to set up shop in Kyushu. Its first fab there produces chips of 12-28nm—the most advanced type of semiconductor to be produced in Japan so far, but still well behind its state-of-the-art models. The firm has already announced plans to build a second facility for even higher-end logic chips there; talks about a potential third fab are reportedly under way. TSMC’s arrival has enticed suppliers and partners to expand on Kyushu, which has positioned itself as “Silicon Island”. Micron, an American memory chipmaker, has also received more than $1bn in subsidies to expand its chipmaking facilities in Hiroshima. Meanwhile Samsung, a South Korean electronics giant, is building a cutting-edge research facility in Yokohama, south of Tokyo.
>Another challenge is developing a sustainable business model. Samsung and TSMC are advancing towards 2nm chips of their own, and have established relationships with the buyers of high-end semiconductors. Rapidus is positioning itself as a boutique option, able to make smaller lots of specialised chips, rather than large batches of one-size-fits-all offerings. “**We have no intention of directly competing with TSMC—the markets are different**,” Mr Koike says. He is counting on generative AI becoming a tailwind, boosting overall demand for chips and increasing interest in offerings that can improve efficiency and reduce power consumption.
Quite nice to see.
Good
It’s nice to see some competition
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