Japan's trade minister has pledged the government will hike its financial support for chipmaker Rapidus as it works to develop cutting-edge semiconductors, arguing domestic production of such components is essential for the country to excel in artificial intelligence and autonomous driving.

"I have high hopes that Rapidus can mass produce 2-nanometer chips and beyond in Japan, and the government is ready to continue and beef up financial support to the company as it will need to spend trillions of yen to make that happen,” Yasutoshi Nishimura, minister of economy, trade and industry, said in an interview.

Tetsuro Higashi, former chairman of Tokyo Electron, and Atsuyoshi Koike, former president of Western Digital, established Tokyo-based Rapidus last year with the goal of making the cutting-edge, 2-nanometer chips in Japan by 2025. The duo drew investment from companies including Toyota Motor, Sony Group and NTT.

The project is seen as a quasi-public sector effort, with Rapidus becoming a potential national champion as the country tries to develop a strong local chip sector. The government contributed ¥70 billion ($530 million) in financial aid for its launch.

Japan’s efforts come as countries around the world are seeking to build their own semiconductor capabilities, a strategic priority after the COVID-19 pandemic shut down global commerce and as the U.S.-China conflict threatens the old standards of free trade. The U.S., China, South Korea and Europe are all pouring billions into the sector to secure supplies.

Japan was once a semiconductor superpower with a dominant share of the memory chip market, but it ceded that position in part because of its own clash with the U.S. over what constituted fair industrial policy. Former trade minister Akira Amari said in January that Japan lost its edge because individual companies made development choices independently and the government failed to work well with the U.S. administration of the time.

Some analysts are skeptical that Rapidus can achieve 2-nm production in such a short period of time, considering it’s more advanced than what leaders like Samsung Electronics and Taiwan Semiconductor Manufacturing Co. offer now. They also question whether Japan will have many buyers for such chips; the country’s biggest industries, including automaking, use mostly older, less advanced chips.

"Unfortunately, Japan isn’t a home of companies like Apple that would use a lot of the newest chips today,” Nishimura said in the interview. "But cutting-edge chips will be key for a wide range of industries within next five to 10 years, such as autonomous driving and ChatGPT-like AI services, as well as quantum computing.”

The 60-year-old said the government will monitor Rapidus’s progress with a plan to "provide continued, bigger support” if necessary. Rapidus has international support: It is working on its production plans with IBM of the U.S. and Interuniversity Microelectronics Center of Belgium.

"I want to see Japan once again make top-notch chips domestically,” Nishimura said. "There are already a lot of Japanese firms that have long been providing the world’s top-class chip production machinery and materials.”