Japanese government pledges further $13.3B to shore up domestic chip sector

The Japanese government has allocated an extra $13.3 billion (two trillion yen) to boost its domestic semiconductor industry.

The funding is expected to be split between manufacturing and R&D, according to The Japan Times, which reported that the majority of the money will likely go to supporting TSMC and Rapidus. About $376 million (570 billion yen) will be assigned to a separate fund to enhance the stable supply of chips to Japan, the report said.

The decision comes at the end of a year where both government subsidies and company investments and innovations have sought to significantly bolster the country's chip manufacturing abilities and place it at the cutting edge of semiconductor technology.

In April, the Japanese government pledged $532 million for projects to develop and make next-generation chips in the country, including a deal with Rapidus to make 2nm chips in Japan by 2025.

This was followed in June by Japanese semiconductor equipment maker JSR accepting a buyout offer of $6.4 billion (909.3 billion yen) from the Japanese government, providing Japan with greater control over the manufacturing of photoresists, the chemicals used for the process of printing circuit designs on chip wafers.

Chipmakers Micron and TSMC also announced investments in Japan's semiconductor industry. TMSC pledged about $7.4 billion to set up a second semiconductor manufacturing plant in Japan, while Micron announced plans to invest up to $3.6 billion to bring extreme ultraviolet lithography (EUV) to Japan.

Last month, Japan-based Canon announced it would be launching a nano-imprint lithography (NIL) machine that it claims is capable of producing parts down to a 5nm node, and could eventually produce 2nm nodes once the technology has been refined even further.

Japan is currently caught in the crosshairs of the ongoing trade war between the US and China. At the start of 2023, Japan agreed to an export ban on advanced computing chips, devices that included them, and certain semiconductor manufacturing items including extreme ultraviolet lithograph machines.

As a result, in addition to financially shoring up its homegrown semiconductor industry, Japan is also seeking to form partnerships with other jurisdictions and strengthen its global standing in the chip space.

In July, the EU-Japan Digital Partnership was formed to improve cooperation between the two regions on digital issues. In addition to focusing on issues relating to undersea cable connectivity, investment in quantum and high-performance computing (HPC), and AI regulation, the governments pledged to monitor the global chip supply chain and provide support to Japanese semiconductor companies looking to operate within the EU.

"We believe that it's extremely important to secure the supply chain of semiconductors," EU Commissioner Thierry Breton told Reuters at the time, adding that the EU was seeking to "de-risk" its own technology supply chains by implementing policies to reduce its dependence on China-made technology such as chips.