Japan’s Semiconductor Revival: Can It Reclaim Its Glory?
In the 1980s, Japan dominated the global semiconductor market, holding over half of the global share. However, massive shifts in the semiconductor supply chain led to a decline in Japan’s dominance. The rise of specialized chip manufacturers like Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest and most advanced semiconductor manufacturer, and the emergence of the fabless model, where companies focus on chip design and outsource manufacturing, shifted the landscape significantly. Now, Japan has launched an ambitious plan to revitalize its semiconductor industry, pouring billions of dollars in subsidies, and hoping to reclaim its former position as a global leader. At the heart of this revival is the Rapidus Corporation, a consortium established in 2022 by the Japanese government and eight domestic companies to develop and manufacture advanced semiconductors. Rapidus aims to manufacture 2 nanometer chips by 2027, a goal that sets them on a direct collision course with TSMC and Samsung, the current industry giants.
Key Takeaways:
- Japan’s semiconductor industry was once a global powerhouse, but its market share plummeted in the 1990s due to political pressures, increased foreign competition, and the shift to a specialized manufacturing model.
- The Japanese government has committed billions of dollars and is actively collaborating with private companies to revitalize its domestic semiconductor industry.
- Rapidus Corporation, established with government support, aims to produce 2 nanometer chips by 2027, but faces a formidable challenge catching up to TSMC and Samsung.
- Japan’s revival efforts are driven by both economic and national security concerns, as the country wants to reduce reliance on foreign powers for critical technologies.
- The geopolitical landscape complicates Japan’s efforts, with the U.S.-China semiconductor rivalry creating a complex environment for Japanese companies to navigate.
A Two-Pronged Approach: Design and Manufacturing
Japan’s semiconductor revitalization plan adopts a two-pronged strategy:
1. Chip Design and R&D
Japan aims to regain prominence in chip design, an area where the U.S. currently holds a strong position. To achieve this, Japan is partnering with IBM in the U.S. to explore advanced semiconductor design technologies. The goal is to build expertise in designing cutting-edge chips, particularly those crucial for powering the burgeoning field of artificial intelligence (AI).
2. Building Manufacturing Capacity
Simultaneously, Japan is seeking to attract foreign investment and establish domestic semiconductor fabrication plants (fabs). Notably, TSMC has already committed to setting up fabs on the Kyushu Island and has announced plans for a second facility in the region. This partnership underscores Japan’s commitment to a diverse manufacturing strategy, leveraging the expertise of existing global leaders.
Catch-Up or Reinvent? Rapidus’ Ambitions
Rapidus Corporation has set its sights on manufacturing 2 nanometer chips by 2027, a bold target that places them in direct competition with TSMC and Samsung. However, achieving this goal will be an uphill battle. TSMC and Samsung are already working on even more advanced chips, with plans to produce 1.5 nanometer chips by 2026.
While Rapidus aims to compete in the race for shrinking chip size, other Japanese companies are pursuing a different approach. Canon, a renowned Japanese company historically known for cameras and printers, is developing a nano imprint lithography system as an alternative to extreme ultraviolet (EUV) lithography, which is currently dominated by ASML, a Dutch company. This strategy highlights Japan’s intent to innovate and potentially disrupt the semiconductor manufacturing process.
The Geopolitical Maze
The global semiconductor landscape is intricately intertwined with geopolitical tensions. The U.S. has imposed restrictions on China’s access to advanced chips and chip-making equipment, leading to increased scrutiny on companies like TSMC, Samsung, and ASML. Japan, caught in the crossfire, faces difficult decisions in navigating this complex web of alliances and restrictions.
While the U.S. encourages partnerships with allies like Japan, South Korea, and Taiwan, the foreign direct product rule threatens to further complicate matters. This rule could prevent Japanese and Dutch companies from exporting certain semiconductor equipment to China, potentially impacting their existing business partnerships.
Beyond the Nanometer: Japan’s Strengths
Despite the challenges, Japan still boasts a strong presence in the semiconductor supply chain. Its expertise lies in specialized components, materials, and precision equipment manufacturing. Japanese companies dominate the global market share for coaters, developers, silicon wafers, photoresists, and other critical components. Leveraging these strengths, Japan aims to participate actively in the growing demand for advanced chips, particularly those for AI, data centers, and electric vehicles (EVs).
A Future Shaped by Collaboration and Innovation
Japan’s semiconductor revival is driven by a mix of economic aspirations, national security concerns, and the promise of technological advancements. However, the path to achieving these goals is fraught with challenges. Rapidus’ goal of manufacturing 2 nanometer chips is ambitious, and Canon’s attempt to challenge ASML’s dominance in EUV lithography faces significant hurdles.
The future of Japan’s semiconductor industry hinges on its ability to leverage its historical strengths, adapt to the changing landscape, and embrace collaboration with both domestic and international players. The success of this revival will be determined by its capacity to innovate and develop new technologies that can contribute to the global semiconductor ecosystem, while simultaneously ensuring its own national security and economic interests.
