Japan’s semiconductor industry battles back

July 18, 2025, marked a historic milestone for Japan’s semiconductor industry. Rapidus, a company aiming to mass-produce cutting-edge semiconductors, announced that it had successfully prototyped a 2-nanometer (nm) generation GAA (Gate-All-Around) transistor at its IIM-1 manufacturing facility in Chitose, Hokkaido. This achievement is not simply a technological breakthrough; it also symbolizes a national strategy that will determine Japan’s economic security and industrial competitiveness.

Rapidus was established in 2022 with investments from major Japanese companies, including Toyota Motor Corporation, Sony Group, and NTT driven by a sense of crisis that Japan’s semiconductor industry, which once dominated the world, had, since the 1990s, fallen behind Taiwanese contract manufacturer TSMC and South Korea’s Samsung Electronics. In an effort to halt this trend, the government has designated Rapidus as a “national policy semiconductor company” and has pledged a total of 1.7225 trillion yen in support by fiscal 2025.

Rapidus’ technological core lies in the adoption of the GAA structure, a next-generation semiconductor processing technology developed in collaboration with IBM, and the introduction of extreme ultraviolet (EUV) lithography equipment. Compared to the conventional FinFET (fin field-effect transistor) structure, GAA is said to reduce power consumption by approximately 40% while improving performance by 10%. The clean room is scheduled to be completed by the end of 2024, with the exposure and development processes to be successful in April 2025, the first prototype to be manufactured in July, and customer samples to be provided by March 2026. The company is currently working to tighten process management and develop new customers, with the goal of commencing mass production in 2027.

However, the successful prototype is merely a milestone, and further fundraising is essential for mass production. Currently, eight companies, including Toyota and Sony, have invested approximately 7.3 billion yen, and the government has invested a total of approximately 920 billion yen. However, a total of 5 trillion yen is needed to mass-produce advanced semiconductors equivalent to 2 nanometers. While additional investment from both the government and private sector is needed, skepticism about the project’s profitability and international competitiveness remains strong. Given that even TSMC is only mass-producing up to 3 nanometers, improving yield rates and establishing a manufacturing system will require advanced technological capabilities and time. Domestic production of cutting-edge semiconductors, essential for next-generation industries such as AI, autonomous driving, and drug discovery, is a challenge that will determine Japan’s future. The successful prototype demonstrates that this challenge is not mere fantasy but is rooted in real technological foundations.

We spoke with Kazukazu Sekiguchi, one of Japan’s leading IT journalists, who has long covered the latest trends in the global information and communications field, how these efforts can be linked to the revival of Japan’s semiconductor industry.

Rapidus has succeeded in producing a 2-nanometer semiconductor prototype. Will this lead to a revival of Japan’s semiconductor industry?

Rapidus’ successful prototype is a symbolic achievement, but we need to think carefully about whether that alone can be called a “return.” It depends on how you define “return,” but in reality, it will be very difficult for Japanese semiconductor manufacturers to return to the situation they once were, dominating the global market. This is because there are almost no globally competitive semiconductor manufacturers left in Japan.

However, it is possible to rebuild a system that can meet domestic demand to some extent. Rapidus is one example of this. The COVID-19 pandemic has exposed the vulnerability of the semiconductor supply chain, reaffirming the importance of having semiconductor manufacturing technology domestically. There are high hopes for Rapidus as a foundation for Japan to once again play an important role.

What do you think is necessary to continue Rapidus’ efforts in the future?

The biggest key is how much support the government and industry can provide on an ongoing basis. The background to the establishment of Rapidus was the disruption of the supply chain caused by a shortage of semiconductors. With the lack of semiconductors making it impossible to manufacture automobiles, the traditional procurement policy of “buy parts from the cheapest place” reached its limits.

This incident has led to a growing awareness within Japan that “we should have some degree of our own semiconductor manufacturing capabilities.” Going forward, when Rapidus enters full-scale mass production, the key to success will be determining whether this is sustainable and how much funding the government and companies can invest.

Funding is important, but isn’t there also a serious shortage of human resources?

The lack of human resources is a more serious issue than funding. Once an industry comes to a halt, people, especially those with science backgrounds, will not return to their fields if there are no jobs. Rapidus has excellent managers such as President Atsuyoshi Koike and Chairman Tetsuro Azuma, but to launch a business, you need engineers who can take command on the ground. Japan is short of such talent, and launching a business is extremely difficult. Securing human resources is a major point, along with fundraising.

Is it possible to recruit personnel from overseas?

Theoretically, it’s possible, but in reality, I think it’s difficult. Japan has a seniority-based culture, with fixed salary ranges for each job type. There’s no concept of paying talented engineers more than the company’s internal regulations, so institutional reform is necessary to attract talent from overseas. Similar issues exist in the AI ​​field, but flexible compensation systems and workplace cultures are essential to winning the global battle for talent.

Towards an era of international collaboration: Collaboration strategies with Taiwan, South Korea, and the United States

In the context of the US-China conflict and economic security, what role do you think Japan’s semiconductor industry should play?

Going forward, Japan should position semiconductors as a “strategic material” that determines national security and technological sovereignty, and strengthen its domestic supply system. Currently, global semiconductor manufacturing is heavily dependent on Taiwanese foundries, and if production were to stop due to an emergency in Taiwan, the global supply chain would be severely affected.

Given these geopolitical risks, TSMC’s establishment of a factory in Kumamoto Prefecture is an important step toward stabilizing supply. Because semiconductors are small, it’s efficient to manufacture them in one location and ship them by air, which makes them less suited to distributed production like automobiles. However, if various factors make it impossible to procure them from overseas in this way, it becomes essential to have a stable manufacturing base within Japan. National policy companies like Rapidus are also extremely important from the perspective of economic security.

IBM’s involvement as a technology partner with Rapidus is a strategic decision by IBM, which does not have its own manufacturing capabilities, to choose Japan as a base for technology implementation. Micron Technology’s acquisition of Elpida Memory can also be understood in a similar context. Furthermore, the case of Japanese automakers being forced to suspend production due to a semiconductor shortage shows how important semiconductor supplies are to the stable operation of the entire manufacturing industry.

It seems that international collaboration will be the key going forward, rather than Japan doing things alone.

That’s right. Japan needs to build strategic and flexible cooperative relationships with major countries such as Taiwan, South Korea, and the United States. We should build a deeper cooperative relationship with Taiwan, including in the geopolitical context of vis-à-vis China. For example, in August 2024, Chunghwa Telecom, Taiwan’s state-run telecommunications company, and NTT successfully conducted a connection experiment using APN, a high-speed network technology for the next-generation optical communications infrastructure IOWN. This connected Taipei and Tokyo, 3,000 km apart, without delay, and was an important stepping stone to accelerating future industrial cooperation.

While South Korea has competitiveness surpassing Japan in the fields of home appliances and semiconductors, it still relies on Japan for the procurement of parts and manufacturing equipment. It is desirable to build a healthy cooperative relationship between the two countries as rivals who mutually improve their technological capabilities, rather than as enemies. However, since South Korea has a strong desire to be number one, ingenuity is required to build a cooperative relationship.

Japan and the United States have a close and inseparable relationship in both economic and security terms. IBM’s technical support was a major boost to the establishment of Rapidus. Compared to the US-China relationship, Japan-US relations are extremely friendly, and going forward, we must maintain and strengthen this win-win relationship. Movements for Japan-US collaboration have already begun, such as the collaboration between TSMC and Sony, and the collaboration between Rapidus and IBM. It is not realistic for Japan to revive its industry alone, and a sense of balance is essential, leveraging overseas technology, capital, and human resources while strategically protecting areas that need to be protected.

This article originally appeared on CIO Japan.