Japan’s Semiconductor Industry Revitalization

The recent US and EU semiconductor policy changes have directly impacted the semiconductor industry in Asia Pacific economies. The new legislations aim to enhance domestic and regional semiconductor manufacturing in the US and EU, which could shift the balance of global semiconductor production away from Asia Pacific economies.  

The Asia Pacific region, including Taiwan, South Korea, Japan, and mainland China, accounted for 72% of the world's semiconductor production in 2020, with previous production locations such as the US and Japan focusing primarily on the more lucrative design sector. But the rise in demand for semiconductors, chip shortages, and geopolitical events in the past couple of years has shifted the US and Japan’s strategies and policies around chip production.  

Japan was the first country to establish a semiconductor industry in the early 1950s, with companies such as Sony, Toshiba, and Hitachi being some of the earliest players in the industry. In the 1980s, Japan's semiconductor industry dominated the global market, accounting for over half of the world's semiconductor production. However, in the 1990s, Japan's semiconductor industry faced strong competition from South Korea and Taiwan, leading to a decline in Japan's market share.

This year, Japan has launched an ambitious semiconductor manufacturing program as part of a broader strategy to create greater “economic security” under Prime Minister Fumio Kishida’s administration. Japan’s semiconductor manufacturing investment efforts are a part of their quest to gain market share in this growing sector and build national security amidst the ever-increasing tensions between China and the world.  

Japan has seen its global chip share drop from 50% in the late 1980s to around 10%. As such, they recently announced that they plan to increase sales of semiconductors made in Japan to 15 trillion yen ($112.55 billion) by 2030, triple what it is today.  

As part of these initiatives, the Japanese Ministry of Economy, Trade, and Industry (METI) have partnered with major Japanese tech companies, including Sony, Toyota, and SoftBank, to create the consortium Rapidus. In addition, the consortium is teaming up with IBM to develop and eventually manufacture the next-generation 2-nanometer chip. They plan investments totaling $36 billion over the next decade toward this venture with a $500 million government subsidy.

Additionally, METI is funding 40 percent of the $8.6 billion Taiwan Semiconductor Manufacturing Company (TSMC) manufacturing plant project in Japan. Sony will be part of JASM’s fab, which is expected to begin production by the end of 2024, create about 1,500 high-tech professional jobs, and have a monthly production capacity of 45,000 12-inch wafers. In addition to this fab, there have been reports of a second new fab in the southwestern region of Kumamoto to manufacture 5nm and 10nm chips.  

Major economies are shifting from the “just in time” semiconductor supply chain philosophy that led to global supply chain breakdowns to more resilient and holistic supply chain models.  

See how Z2Data can help.