TSMC's wafer fab under construction in Kumamoto aligns with the purpose of the Economic Security Promotion Act (ESPA) legislated by the Japanese government in 2022, which highlights Japan's self-sufficiency in the supply of semiconductors and other specific critical technologies and materials. It appears that the foundry's Kumamoto Fab 2 investment project is under negotiation, but there are concerns whether the infrastructure there is sufficient to support this project, especially land and water supply.
The Nikkan Kogyo Shimbun recently reported that with Japan's introduction of the ESPA and related industry investment subsidies, there has been a significant growth in local technological and material industry investments. However, bottlenecks for further growth have emerged. While electricity supply, talent availability and transportation infrastructure are still manageable issues, the more challenging problems resolve around land and water resources, the report said.
Japan was once known as the world's factory in the latter half of the 20th century, boasting ample electricity, water, and human resources. Though an aging population and the depopulation of rural areas spurred concerns about a labor shortage, the conversion of agricultural land to industrial use was seen as a beneficial development. However, since the bursting of the economic bubble in the 1990s, Japan's manufacturing sector began to relocate overseas, a trend that has continued for nearly 30 years. This relocation led to a reduction in industrial water usage, resulting in outdated industrial water supply infrastructure and a continuous decline in supply capacity in Japan.
Among the industries designated as specific critical technologies and materials in 2022-2023, each semiconductor or battery factory requires an average of over 3,000 tons of clean water per day, compared to over 5,000 tons for each fertilizer or pharmaceutical plant and nearly 13,000 tons for a mining facility, according to a report compiled by Japan's Ministry of Economy, Trade and Industry (METI) based on the latest available data of fiscal 2021 (April 2021-March 2022). With this, a battle for water resources is about to unfold as investments in related industries, led by semiconductor manufacturing, continue to expand.
On another front, the availability of industrial land in Japan has dwindled significantly due to the construction boom of solar power plants in the 2010s. In terms of converting agricultural land for industrial use, it involves coordination between METI and the Ministry of Agriculture, Forestry, and Fisheries. Just like semiconductors or batteries, fertilizers associated with agricultural products and food resources agricultural products are also categorized as specific critical materials. Therefore, the release of agricultural land for industrial purposes will inevitably require negotiations between the ministries over the importance of food production versus industrial needs.
Nikkan Kogyo Shimbun pointed out that the Japanese government in July 2023 amended the Regional Future Investment Promotion Act in order for local governments to expedite the process of converting agricultural land for industrial use. This is aimed at reducing the lead time for large-scale new factory construction, ensuring that investors, especially foreign companies, do not opt to establish their facilities outside of Japan.