Japan can’t build a cutting-edge chip development and manufacturing base on its own, and must seek to cooperate with Taiwan Semiconductor Manufacturing Co. (TSMC), according to Akira Amari, a senior lawmaker from the ruling Liberal Democratic Party.
Amari, a former economy minister who heads an LDP working group on semiconductor strategy, added that the government must be prepared to spend trillions of yen to keep up with the U.S. and Europe. Both have plans to pour money into the industry amid a global shortage of semiconductors, including advanced logic chips that are essential for everything from artificial intelligence to autonomous driving.
"Unlike the purely domestic, independent way it was done in the past, I think we need to cooperate with overseas counterparts,” Amari said in an interview in Tokyo on Monday. "The world’s top logic chipmaker is TSMC, so we must think about how to cooperate with them.”
His remarks came days after the powerful Ministry of Economy, Trade and Industry issued a report saying Japan would seek to drive growth in the nation’s chip industry as a "national project,” on a par with securing food and energy, including through joint ventures with overseas chip foundries. Semiconductor shortages have plagued the global economy as it has started to emerge from the COVID-19 pandemic, costing automakers, for example, a projected $110 billion in lost sales.
From a security point of view, Japan should work only with allies and "like-minded countries,” Amari added, saying that it would be "absolutely out of the question” to look at bringing in a Chinese company.
Although South Korea boasts some of the world’s top chipmakers, Amari described it as an "extremely difficult country” whose relationship with China is complicated.
While Japan has in the past tried to bolster its semiconductor industry, the idea has gained new urgency amid the chip shortages that have weighed on manufacturing across a range of industries. Japan's automakers, from Toyota Motor Corp. to Nissan Motor Co., are critical to its economy.
The nation's share of global semiconductor sales dwindled to just 10% in 2019, down from 50% in 1988. The country still has 84 chip factories, the most in the world, but they’re not producing enough high-end products. As a result, Japan now has to import 64% of its semiconductors.
Former Prime Minister Shinzo Abe and Finance Minister Taro Aso act as advisers to Amari’s working group on semiconductors. Abe has told the group that the industry needs support on a different scale from before. Prime Minister Yoshihide Suga has also said the issue will be an important part of his government’s growth strategy.
Japan lost its place as a semiconductor superpower because of a number of factors, including trade tensions with the U.S. in the 1990s and an industry shift toward customization that gave rise to so-called foundries like TSMC.
The government’s approach of creating a single local champion by combining struggling units of domestic companies largely missed the mark.
Elpida Memory Inc., the country’s last manufacturer of computer memory chips, filed for bankruptcy in 2012. Japan Display Inc., the equivalent effort to save the flat-panel industry, hasn’t made a profit in seven years as it struggles against South Korean and Chinese rivals.
"This sort of made-in-Japan, self-reliance approach hasn’t worked out well,” said Kazumi Nishikawa, a director at METI’s IT industry division, in a separate interview. "This time the goal is to offer a strong incentive for an overseas logic foundry to come to Japan.”
The ministry’s strategic roadmap includes plans for a joint venture between one of the world’s leading logic manufacturers — a small group comprised of TSMC, Samsung Electronics Co. or Intel Corp. — and some combination of Japanese chip end-users, equipment and materials makers. The country’s most advanced chip factories currently produce chips using 40-nanometer technologies, well behind the cutting edge that is now pushing into the single-digit nanometer scale.
The focus at first would be on creating manufacturing facilities that make chips with 10- to 20-nanometer technologies for industrial applications, Nishikawa said. Building that kind of factory from scratch could cost more than ¥500 billion ($4.6 billion), he added.
Japan has an advantage in that there is a ready infrastructure of legacy chip manufacturing facilities that could serve as a base for the new plant, helping to reduce initial costs.
He declined to comment on how much the government is prepared to contribute to tempt foreign firms here, but he echoed Amari’s comments that it’s time for the country to open its checkbook.
"Japan needs to show that it’s serious about offering incentives” to foreign partners, Nishikawa said. "Our initiative has to be on par with other countries.”
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