Japan’s government is seeking various strategies to revive its domestic semiconductor industry – which used to be at the top of the global market. Japanese chipmakers held over 50% of the global market share in 1988, but it has been on a downhill slide since then. By 2010, Japan only held a 10% share of the world market. In an initiative to re-energize the semiconductor sector, Japan is planning to set up a research project with the help of the global market leader Taiwan Semiconductor Manufacturing Company (TSMC).
The country aims to boost its competitiveness in the sector amidst a global semiconductor shortage. Semiconductors are crucial in producing many modern devices and equipment, including smartphones, game consoles, and even automobiles. The increased demand for home electronics during this pandemic has contributed to the supply problems.
Automotive and industrial consulting firm AlixPartners estimates that the current shortage will cost the global automotive industry $110 billion in revenue losses annually. The firm forecasts a reduction in automobile production at around 3.9 million in 2021 due to this shortage.
Japan-TSMC Semiconductor research collaboration
The Japanese government has approved the $338m semiconductor research project to develop the latest semiconductor technology in the country. According to the Ministry of Economy, Trade, and Industry (METI), the government will be shouldering more than 50% of the project’s cost.
About 20 Japanese firms will be working with TSMC on the research project. It will focus on the technology used for 3D chip assembly. This technology enables manufacturers to produce higher-density components that are still small in size.
The participating Japanese companies will include electronic components manufacturer Ibiden Co. and chemicals firms Asahi Kasei, Mitsui Chemicals, and Sumitomo Chemical.
As part of the agreement, Japan will construct research facilities at the National Institute of Advanced Industrial Science and Technology in Tsukuba. The group is scheduled to begin conducting research by 2022.
TSMC explained in a statement to Reuters that the planned facilities “aim to leverage more expertise in the field of materials to bring value to the industry.” The company also said, “We appreciate the support from Japan’s government for us to drive semiconductor technology advancement together with TSMC’s partners in Japan.”
TSMC to build a plant in Japan?
The Taiwanese tech firm holds over half of the global semiconductor foundry market in 2020. The increased demand from the shortage has forced TSMC to hit record levels of capital expenditure and operate its factories beyond capacity to meet this demand. The company is the supplier of almost all major global chip developers, such as Nvidia, Qualcomm, and Apple.
Following the announcement of the research partnership, reports were made regarding TSMC’s plan to open a manufacturing facility in Japan’s Kumamoto Prefecture. If this holds, the plant would be located near an existing factory of Sony, a key supplier of TSMC.
The facility is expected to be a 12-inch wafer factory that is capable of switching between different process technologies, including 28-nanometer and 16-nanometer lithography processes. However, TSMC did not comment on the said plan yet.
Aside from Japan, the US has also asked TSMC to increase its presence in the country. As a result, the Taiwanese firm said earlier this year that it would build five additional chip plants in Arizona aside from the $12bn factory it announced last year.
Revitalizing the semiconductor industry in Japan
The economy and industry ministry has also unveiled its blueprint to revitalize Japan’s semiconductor industry. Through this initiative, the ministry plans to promote domestic production, boost spending, and match subsidy levels for the chip sector, provided by foreign governments. The ruling Liberal Democratic Party and some government officials are said to be building new funding worth tens of billions of dollars for this purpose.
The ongoing tension between the US and China is associated with supply chain risks, especially with most of the chip production concentrated in Taiwan. The Japanese government wants to seek cooperation with foreign companies instead of relying mainly on the initiatives of Japanese firms.
METI will be in charge of searching for overseas companies that could be potential partners in this strategy. Japan will also try to convince other nations and regions with similar values to relocate their supply chains to the country as a national security measure.
Japan winning amidst the chip shortage
While the semiconductor shortage has been a threat to most firms worldwide, some Japanese chip suppliers are still thriving. Kyoto-based Towa, a manufacturer of semiconductor molding machines, reported that 87% of its revenues came from semiconductor manufacturing for the fiscal year 2020. In addition, the company has raised its profit forecast for the year and its shares went up by 78% in 2020.
Lasertec Corp., which develops tools for inspecting and measuring semiconductor photomasks, posted record profits and orders in the first half of 2021. The company’s shares rose by 118% during the period. Lasertec also raised its full-year operating profit forecast.
Lastly, Advantest Corp. that manufactures semiconductor testing devices and electronic measuring instruments, reported that 70% of its revenue in 2020 came from its semiconductor segment. Additionally, its shares also increased by 25% during the period.