Japan’s Bid to Secure Semiconductor Supply Chains: Navigating Global Challenges and Strategic Partnerships

Jakarta, INTI - Semiconductors are the lifeblood of modern technology, underpinning everything from smartphones and laptops to advanced artificial intelligence systems. In a world where access to semiconductors has become both an economic and a national security concern, countries are taking aggressive measures to secure their supply chains. Amid this global race, Japan is leveraging its financial strength and technological expertise to rebuild its semiconductor industry.

Japan's ambitious plan involves a 10 trillion yen investment aimed at reviving domestic semiconductor production. This initiative is part of a comprehensive economic package expected to be approved by Japan’s cabinet by November 22, 2024. This plan, however, is not without its challenges. Japan must navigate a highly competitive international market and secure sufficient funding sources to realize its vision. In addition, Japan faces the challenge of keeping pace with cutting-edge technologies already mastered by competitors in Taiwan, South Korea, and the United States.

Strategic Foreign Partnerships and Technological Investments Japan’s efforts to modernize its semiconductor industry are bolstered by strategic partnerships with foreign firms. TSMC, the Taiwan Semiconductor Manufacturing Company, opened its first plant in Japan with strong governmental support, reflecting Japan’s commitment to diversifying its semiconductor supply chains amid growing geopolitical tensions with China. Japan’s alliance with TSMC is a significant development, as TSMC is one of the most advanced chip manufacturers in the world, known for its cutting-edge fabrication technologies.

American companies, such as Micron Technology, have also announced plans to make significant investments in Japan's semiconductor sector. Micron's expansion into Japan signals the country’s attractiveness as a semiconductor production hub, especially for companies looking to mitigate the risks associated with having production concentrated in one region. Furthermore, Japan’s close collaboration with IBM and the Belgian research organization Imec is expected to support its goal of producing 2-nanometer chips by 2027.

Economic Impact and Funding Challenges While Japan’s semiconductor revitalization strategy is promising, questions remain regarding the funding sources for these massive investments. Some funding is derived from green transformation bonds intended to promote environmentally friendly projects. However, experts argue that Japan needs more transparent and sustainable funding mechanisms to fully finance its semiconductor ambitions. Public-private partnerships are expected to play a key role, as the government aims to attract private sector investment to support the industry's long-term growth.

Japan’s semiconductor initiative is projected to generate around 160 trillion yen (US$1.04 trillion) in economic impact over the next decade, according to government estimates. This economic boost could ripple across other sectors, enhancing Japan’s overall industrial capacity and technological competitiveness. Moreover, Japan’s strategy aligns with a broader trend among countries to bolster domestic manufacturing capabilities in the face of global supply chain vulnerabilities.

Challenges of Scaling Up in a Competitive Market Despite Japan's plans to re-establish itself as a semiconductor powerhouse, the country faces formidable challenges. According to the ARC Group, Japan's semiconductor industry lags nearly a decade behind major players like TSMC and Samsung Electronics in terms of production technology. While Japan excels in memory chips, it remains weaker in the production of advanced logic chips—a gap it must close to become a comprehensive leader in the semiconductor sector.

Additionally, Japan’s industry will need to navigate the high costs and technological barriers associated with advanced semiconductor fabrication. Building fabrication plants (fabs) for leading-edge chips requires billions of dollars in investment, as well as access to highly skilled engineers and scientists. Japan must also compete for talent in a market where other countries are aggressively courting semiconductor expertise.

Japan’s semiconductor strategy reflects a calculated response to the shifting landscape of global technology and supply chain dynamics. As it builds strategic partnerships, secures foreign investments, and overcomes funding challenges, Japan is positioning itself to become a resilient player in the global semiconductor market. While the path forward is fraught with challenges, Japan’s commitment to innovation and technological leadership may prove pivotal in securing its place as a key semiconductor producer in an increasingly interconnected world.