Japan, once a major power in chip manufacturing, has tried to rejuvenate its semiconductor industry in recent years to become more competitive with countries like Taiwan and South Korea.
The Japanese government has touted subsidies to lure foreign chipmakers such as Taiwan Semiconductor Manufacturing Company (TSMC) to set up shop in Japan to boost the domestic chipmaking sector. Then there is the massive 920 billion yen ($6.2 billion) funding for Rapidus, a semiconductor maker to be founded in 2022 that aims to produce advanced chips domestically.
And on Friday, the Japanese government announced that it would expand its list of “core business sectors” to include foreign trade regulations on companies that manufacture chip-making equipment or advanced electronic components, a move that can be seen as an attempt to strengthen the security of Japan’s semiconductor supply chain.
Foreign investors must now submit prior notification when making direct investments and acquiring 1% or more of the voting rights of a listed company or when acquiring a share of an unlisted company.
The list of key economic sectors is overseen by the Ministry of Finance. The list includes sectors considered to be of high national security interest, and inclusion on the list is intended to help ensure stable supply chains and prevent the loss of technology or diversion of commercial technology for military purposes. Other sectors added to the list on Friday include companies that manufacture machine tool components such as ball screws, as well as companies that manufacture marine engines.
Japan’s semiconductor industry
Although Japan does not currently have a company that dominates global chip manufacturing like TSMC in Taiwan or Samsung in South Korea, the country has a long history in the semiconductor sector.
In the 1980s, six of the top ten chip manufacturers were Japanese, and by 1988 Japan controlled about half the market. A combination of changing market trends, new competition, and geopolitical pressures eventually undermined Japan’s dominant market position.
Nevertheless, Japan still plays an important role in the global semiconductor ecosystem, as Japanese companies are still major players in the supply of materials and equipment for semiconductor manufacturing.
Companies like Shin-Etsu Chemical or Tokyo Ohka Kogyo may not be familiar to many people, but these companies are major players in the chip manufacturing materials sector. It is estimated that Japanese material suppliers hold a market share of around 48%.
Companies such as Tokyo Electron, Lasertec and Nikon also provide machines and tools that chip manufacturers use during the chip manufacturing process.
Morris Chang, the founder of TSMC, predicted that TSMC’s new factory in Japan would trigger a “chip renaissance” in the country.
Washington is also aware of the importance of Japanese companies to the semiconductor industry: the Biden administration has reportedly put pressure on Tokyo to tighten restrictions on the export of chip manufacturing equipment to China.
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