Revitalizing Japan's Semiconductor Industry: Reclaiming Global Market Leadership Amid Rising Demand

Jakarta, INTI -  The global semiconductor industry is experiencing unprecedented demand, largely fueled by advances in artificial intelligence (AI), 5G, electric vehicles, and the Internet of Things (IoT). These innovations have heightened the need for high-performance chips, turning semiconductors into a strategic asset with national security implications. In the 1980s, Japan was a powerhouse in the semiconductor market, controlling over half of the global supply. However, fierce competition from Taiwan and South Korea led to a steady decline in Japan’s market share, which fell to just 9% by 2022. Now, Japan is determined to reclaim its position as a major player, launching a robust national strategy to reinvigorate its semiconductor industry and fortify its supply chains.

To achieve this ambitious goal, the Japanese government is committing over 10 trillion yen (approximately US$65 billion) to boost its semiconductor manufacturing capabilities. The funding, aimed at enhancing domestic production and technological innovation, forms part of a broader economic strategy focused on strengthening Japan's technological independence and resilience in the face of global supply chain disruptions. The proposal is set to be discussed in the upcoming parliamentary session, signaling Japan's serious commitment to the semiconductor sector amid intense global competition.

A Focus on Advanced Chip Production A key pillar of Japan’s strategy is its investment in cutting-edge chip technology. The government has earmarked significant funding for Rapidus, a joint venture involving the Japanese government and several major domestic companies, including Toyota and Sony. Established to foster advanced semiconductor manufacturing within Japan, Rapidus is a key part of Japan’s plan to regain technological leadership.

Rapidus aims to achieve mass production of advanced 2-nanometer chips by 2027 in Hokkaido. This project is being pursued in collaboration with IBM and Imec, a leading Belgian research organization known for its expertise in nanotechnology and semiconductor research. The 2-nanometer technology represents a significant leap in chip design, allowing for smaller, more efficient semiconductors that are capable of handling complex, data-intensive applications with lower energy consumption. Such advancements are crucial as industries increasingly demand chips with more computational power, especially for AI applications.

Japan’s Semiconductor Industry: Current Landscape and Key Players Several major players dominate Japan’s semiconductor landscape, including:

• TSMC: The Taiwan Semiconductor Manufacturing Company, now operating a facility in Japan to diversify its production base.
• Rapidus: The government-backed initiative that focuses on producing advanced chips.
• Sony Semiconductor Solutions: A major producer of image sensors.
• Renesas Electronics: Known for microcontrollers and automotive semiconductors.
• Kioxia: Specializes in flash memory production, crucial for storage devices.
• Toshiba: A longstanding semiconductor player with diversified offerings.
• Rohm Semiconductor: Produces power semiconductors and automotive solutions.

With this diverse mix of companies, Japan is poised to enhance its semiconductor production capacity significantly, building a resilient and innovative ecosystem that can support both domestic and global demand.

Expanding the Government’s Economic Commitment Japan’s government previously allocated around 2 trillion yen (US$13 billion) to support its semiconductor sector, but the latest proposal represents a notable escalation of these efforts. As part of its overall economic strategy, the Japanese government aims to invest a total of 50 trillion yen (approximately US$325 billion) in the semiconductor industry over the next decade. This investment is projected to generate an economic impact of roughly 160 trillion yen (US$1.04 trillion), underscoring the government’s resolve to create a self-sustaining and competitive semiconductor ecosystem.

This massive economic commitment is expected to not only stimulate job creation and technological advancements within Japan but also enable the country to secure a strategic foothold in an industry that has become a focal point of global power dynamics. In an increasingly interconnected world, where semiconductor supply chains are vulnerable to geopolitical shifts, Japan’s investment signals its intention to reduce reliance on foreign suppliers and strengthen its autonomy in critical technology production.

Japan’s Competitive Position in a Shifting Global Landscape Japan’s renewed commitment to the semiconductor sector is taking place in a highly competitive global market. Other major economies are also ramping up their efforts to strengthen their semiconductor industries. The United States, for instance, has implemented the CHIPS Act to bolster its domestic chip production and reduce dependency on Asia. Meanwhile, European countries are also investing heavily to build up their semiconductor capacities and avoid potential supply chain disruptions.

Despite these competitive pressures, Japan's strategy holds promise. Analysts from the ARC Group note that Japan’s share of the global semiconductor market has declined from over 50% in 1989 to only 9% in 2022, largely due to fierce competition from Taiwanese and South Korean firms. However, Japan still has strengths in certain segments, such as memory chips, where it maintains a strong presence through companies like Kioxia and Toshiba. To regain a broader market share, Japan’s focus will likely need to extend beyond memory chips to encompass a more diversified semiconductor portfolio, including advanced logic chips.