Struggle for semiconductors: Japan launches major microchip offensive

"Eight top companies start a new semiconductor manufacturer with the help of the state. The struggle for global supremacy is intensifying.

In Japan, a national alliance of leading technology companies is being formed with the government to develop and produce the latest generation of microchips. Eight top players in the Japanese economy will participate in the joint venture, from Toyota Motor to Sony and NEC to Kioxia, NTT and Softbank. 

This is reported by the business newspaper “Nikkei” and the public television station “NHK”.

The initiative comes at a time when Western democracies like the United States, Germany and the European Union are seeking billions in financial aid to become less dependent on Asia through domestic semiconductor manufacturing. The high concentration of production of the most powerful chips in Taiwan and South Korea exacerbates geopolitical risks around China and North Korea. At the same time, America is trying to slow down the development of state-of-the-art semiconductors in China with export regulations that also bind foreign companies.

The Japanese government will provide financial support for the new joint venture. Tokyo and the American government had already agreed in the spring to jointly develop the latest generation of semiconductors and to secure their supply chains for microchips. A joint research center for which Japan intends to provide 350 billion yen (2.4 billion euros) should be up and running by the end of the year. The company of the Japanese economy will deepen this international cooperation. The company is to be called "Rapidus", which underscores the urgency of the task from a Japanese perspective.

A confirmation of the Ministry of Economics for the initiative could not be obtained for the time being. Toyota explained that the reports did not come from them. This is a common formulation in Japan when companies do not yet want to confirm a message.

Japan is catching up with Taiwan and South Korea

The joint venture is expected to develop and produce semiconductors using two-nanometer technology by around 2027. The number describes the width of the circuit lines. The smaller, the more energy-efficient and powerful the chips are. Under the plan, Japan would draw level with technology leaders Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea's Samsung Electronics. Samsung began mass-producing three-nanometer semiconductors in the summer. TSMC is about to. Both aim to produce two-nanometer chips by 2025.

Rapidus is not the only initiative for Japan to regain ground in semiconductor production. The government has already approved subsidies equivalent to up to 3.3 billion euros for a semiconductor factory run by TSMC and Sony. The memory chip manufacturer Kioxia, formerly Toshiba Memory, and the American Micron Technology will receive the equivalent of 640 million and 320 million euros for factories in Japan. In a supplementary budget, the government is providing 1.3 trillion yen (8.9 billion euros) for the promotion of semiconductors. For comparison: Germany could subsidize the settlement of an Intel chip factory in Magdeburg with up to 6 billion euros. Bosch recently received 200 million euros for a plant in Dresden.

New hope after 10 years

Japan has fallen behind in the production of semiconductors. Around 1990, the country still supplied around half of the microchips worldwide. Recently it was about 10 percent. However, in some areas of materials or machines for semiconductor production, Japanese companies are often among the best in the world.

The government has had mixed experiences with subsidizing and industrial governance in the semiconductor industry. The memory chip manufacturer Elpida, which was formed in 1999 from divisions of Hitachi and NEC, among others, went bankrupt in 2012. On the other hand, the chip manufacturer Renesas, which was launched with state aid, has stabilized quite successfully. Renesas is a key supplier to the auto industry.

According to reports, the leading automaker Toyota and its key supplier Denso are participating in the Rapidus initiative. Sony Group and Kioxia are among the leading manufacturers of image sensors and memory chips. NTT is Japan's largest provider of telephone services and networks. Electronics company NEC, technology investor Softbank and bank Mitsubishi UFJ also want to participate.”