Global Semiconductor Manufacturers Eyeing Japan to Insulate Global Supply Chain

Amid rising tensions with China and the uncertainty plaguing the global chip supply chain, Japan’s foundries could see a resurgence. A combination of both government assistance and international cooperation is driving what could become an important renaissance for Japanese silicon production.

As recently as the 1980s, Japan accounted for roughly 50 percent of the global semiconductor market. Now, its influence has fallen to just 10 percent as chip design and manufacturing have moved into locations like Taiwan, the U.S., and the Netherlands.  

But thanks to the perceived threat of China’s growing military and technological power as well as souring U.S.-China relations, global leaders are working to decouple the chip supply chain from the country. Investing in Japan is just one avenue but is a promising one moving forward.  

Global Partnerships

The move to Japan isn’t just a fleeting promise from one firm. Seven of the world’s largest chip manufacturers now have plans to deepen their partnerships with Japan. This includes TSMC, Samsung, Intel, and Micron, among others.  

Leaders from each of the involved chipmakers met with Japanese prime minister Fumio Kishida in an unprecedented move to reshape the global supply chain. The unlikely discussion rests at the center of Japan’s aspirations of revitalizing its chip industry.  

The country’s minister of economy, trade, and industry, Yasutoshi Nishimura, said in a statement, “Japan’s role has risen as like-minded nations work to strengthen their supply chains. We reconfirmed the strong potential for Japan’s semiconductor industry.”  

Indeed, thanks to both outside investment and state subsidies, Japan’s chip industry now has a realistic chance of once again rising to prominence. The latter will play an important role, encouraging foreign chipmakers to bring their operations into Japan. Economic uncertainty and tensions between China and Taiwan will make those moves even more attractive.  

Taking advantage of the friendly policy, U.S. chipmaker Micron plans to invest up to $3.7 billion to build a new extreme ultraviolet lithography (EUV) plant in Hiroshima. The move makes Micron the first to bring EUV technology to Japan for production, per Reuters. It is expected to begin operations in 2025.  

Meanwhile, Samsung will invest $215 million in a new Yokohama-based research and development center. The move is noteworthy as relations between Japan and South Korea warm. At this time, the company has declined to comment further on the intended use of the facility.  

Economic Needs

Global interest in Japan’s semiconductor industry is an undertone to larger collaboration as several countries seek to fortify the global supply chain against future disruption. Japan is preparing for a G7 summit focused on economic security. Given the recent scrutiny of the global semiconductor market by the U.S. and its allies, the timing is perfect.  

U.S. ambassador to Japan, Rahm Emanuel, said in a recent interview, “Investing in secure supply chains and a strategic partnership for your economic and national security is a key cornerstone of confronting economic coercion.”

Thanks to a 2022 economic security law, semiconductors are considered an essential product to daily life and the economy in Japan. The country plans to use $9.3 billion from its supplementary budget to support initiatives of foreign chipmakers.  

Moreover, Japan and the U.S. are expected to soon announce a $70 million deal to educate and train 20,000 new semiconductor engineers. The program includes 11 universities, including Hiroshima University and Tohoku University in Japan and Purdue University in the U.S.

The move aims to address Japan’s chronic shortage of engineers. If the country hopes to regain its stake in the semiconductor industry, having enough engineers will be essential. Without them, any vision of growing the chip industry fizzles. Indeed, Japan’s shrinking workforce is perhaps the most threatening factor to this proposition.

However, the combination of international chip manufacturers increasing their presence in Japan and global economies looking for opportunities outside of China could make for a golden combination.

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