Japan bets $67 billion to become global chip powerhouse once again

Deep in the snowy northern island of Hokkaido, Japan is pouring billions of dollars into a long-shot bet to revive its chip-making prowess and insulate its economy from growing US-China tensions.

Excavators and trucks criss-cross the frosty ground as construction work continues on a futuristic factory looking over a grassy plain with roaming horses. It’s a development that is changing the landscape of an area known for farming, military bases and Chitose airport. It’s a project that also aims to change the face of Japan’s chip industry, according to Bloomberg.

A freshly created homegrown venture, Rapidus Corp., is looking to mass produce state-of-the art 2 nanometer logic chips in 2027 from an initial starting point of zero. By industry standards it’s an implausible challenge for an 18-month-old venture in a country that has fallen far behind overseas rivals on semiconductor production. But with the US and China sparring over access to the latest chipmaking expertise and equipment, Japan’s government has sensed an opportunity to leverage Washington’s concern over supply chain security to get back into a game it once dominated.

The stakes are huge. Advanced chips will serve as the foundation for a dozen critical technologies, including artificial intelligence, weapons systems and electric vehicles. A large portion of global production centres on Taiwan and South Korea, leaving future supplies vulnerable to regional tensions.

“There are geopolitical, economic security factors involved,” said Atsuo Shimizu, a Rapidus executive in charge of launching the new foundry. “To survive as a nation, Japan needs to be a global player with technology. And we can clearly demonstrate that with semiconductors.”

Tokyo has already shown it means business. In less than three years, Japan has earmarked about 4 trillion yen ($26.7 billion) for revitalising its semiconductor punching power with Prime Minister Fumio Kishida targeting financial support for the industry to eventually reach 10 trillion yen with private sector support. Among the goals is a tripling of domestically produced chip sales to more than 15 trillion yen by 2030.

Japan’s new chip strategy has two main strands. First, the country is seeking to reestablish itself as a prime location for manufacturing legacy chips by luring to Japan the biggest foreign names in the industry with generous subsidies of up to half of the set-up costs. The second and more ambitious part of the strategy is the Rapidus project in Hokkaido aimed at restoring Japan’s place as a player at the forefront of silicon-chip wizardry.