Morris Chang, founding father of Taiwan Semiconductor Manufacturing Firm, gave a daring prediction when he opened the chipmaker’s new facility in Japan’s Kyushu island on Feb. 24. Chang predicted that the brand new foundry, backed by billions of {dollars} in Japanese authorities cash, would spark “a renaissance of semiconductors” for the Asian nation.
Most chip conversations deal with Taiwan or South Korea, which host a few of the world’s main chipmaking corporations. Governments are courting companies like TSMC, Samsung and SK Hynix to arrange new amenities of their international locations, ostensibly to spice up provide chain resiliency.
Nevertheless it was a distinct image 50 years in the past. Within the Nineteen Eighties, six of the highest 10 chip producers had been Japanese. The nation’s producers managed about half the market in 1988. However Japan’s chip dominance pale as a result of a mix of adjusting market developments, the rise of latest competitors, and geopolitical strain.
Now, Tokyo hopes it may possibly revive its chip fortunes with a brand new authorities technique backed by billions of {dollars}—with TSMC’s plant as the primary stage in Chang’s predicted “renaissance.”
TSMC’s new plant on ‘Silicon Island’
Very like how the U.S. has Silicon Valley and Taiwan has Hsinchu Industrial Park, Japan has its personal chipmaking hub: “Silicon Island,” the business’s nickname for the island of Kyushu.
Among the corporations with bases on Japan’s third-largest island embrace Tokyo Electron, Sony and Renesas. And now it’s additionally house to a brand new plant from the world’s main producer of modern chips: TSMC. The world’s largest contract chip producer opened the plant on Feb. 24 in Kyushu’s Kumamoto prefecture.
The plant is a three way partnership together with native heavyweights Sony and Denso. The Japanese authorities chipped in too, allotting 476 billion Japanese yen ($3.2 billion) in grant cash. Tokyo is promising an extra 732 billion yen ($4.9 billion) in additional assist for a second TSMC plant. The Taiwanese chipmaker mentioned in early February it was opening a second plant with Toyota becoming a member of as a brand new investor.
The TSMC plant is step one in what Tokyo hopes shall be a revival of Japan’s chip business. In June 2021, the Japanese authorities launched a technique that put semiconductors on the heart of its financial safety coverage. Tokyo promised subsidies for home chip manufacturing, a analysis heart for superior chips, and a deeper partnership with the U.S.
“If TSMC is there, which means [Japan’s chipmaking] capability shall be a lot larger than earlier than,” says Helen Chiang, who leads Asia semiconductor analysis on the consulting agency IDC. “It might appeal to different corporations to put money into Japan, like Intel or Samsung.”
A chip renaissance
Japan used to dominate the semiconductor business. Giant home demand for chips helped to assist the sector between the Sixties to Nineteen Eighties, increasing Japan’s share of semiconductor design and manufacturing. Japanese companies additionally had simpler entry to financing than their U.S. counterparts. Quickly, corporations like NEC, Hitachi and Toshiba had been taking on the worldwide market.
However finally Japan misplaced floor to different economies like South Korea and Taiwan. Whereas some observers level to the rise of companies like TSMC and Samsung that invested in foundries, or missed alternatives throughout the PC growth, Chiang thinks the rationale for Japan’s decline is partly as a result of geopolitics. The U.S. noticed Japan as an financial rival ranging from the Nineteen Seventies, and will have labored with South Korean companies instead, she suggests.
Within the Nineteen Eighties, U.S. corporations complained that Japanese companies had been dumping chips onto the U.S. market. The Semiconductor Business Affiliation within the U.S. and corporations like Micron and Intel filed anti-dumping lawsuits towards Japanese exporters in 1985.
One 12 months later, Japan agreed to voluntarily restrict its gross sales to the U.S., and pledged to open up a minimum of 20% of its personal market to overseas producers.
As we speak, Japan is nowhere close to the cutting-edge in relation to chip manufacturing, with its most superior foundries producing chips which are a decade behind what TSMC can do, at greatest.
But Chiang emphasizes that Japan nonetheless has a agency grip available on the market in relation to supplying tools to make semiconductors.
And that offers Japan some leverage within the chip business. In early 2023, Japan and the Netherlands agreed to restrict the export of superior chip making tools to Chinese language corporations, aligning themselves with U.S. efforts to constrain China’s chip sector. That had an sudden consequnce: Chinese language corporations scrambled to seize chipmaking instruments that weren’t topic to export restrictions. Robust demand for chip making instruments helped develop Japan’s exports to China by 29% in January.
Japan’s subsequent steps
TSMC’s present plant in Japan will start manufacturing by the top of the 12 months, and can develop chips within the 12 nanometer to twenty-eight nanometer vary, which would be the most superior semiconductors produced in Japan.
That superior manufacturing will elevate the extent of expertise in Japan, Chiang says. Japanese companies can study from being part of TSMC’s manufacturing within the nation. Firms could even be capable to construct a long-term relationship with TSMC, maybe working with the Taiwanese producer with its deliberate facility in Germany, scheduled to begin operation in 2027.
TSMC isn’t the one chipmaker attracted by Tokyo’s supply of cash. Samsung and U.S.-headquartered Micron are additionally planning huge investments in Japan.
“Japan will play a extra vital position” within the chip sector going ahead, Chiang says. “It is not going to solely have the stream of supplies and tools, however [Japan] will enlarge [its] affect in foundries.”
Japanese officers are already hopeful that the TSMC mission will enhance the encircling economic system. Above-average pay on the plant is already having “a ripple impact” on the encircling space, Ken Saito, Japan’s economic system minister, mentioned on the opening ceremony on Feb. 24.
However there’s nonetheless extra work to be executed to reverse the nation’s fortunes. “To revive the Japanese chip business, that is the place the true problem begins,” he mentioned.
