Japan is fast-tracking financial support for Rapidus, its cutting-edge semiconductor venture, to drive domestic production of advanced chips. Since April, the Japanese Senate has passed key legislative amendments—including revisions to the Information Processing Promotion Act and extensions to the Development Bank of Japan's (DBJ) investment mandate—to bolster next-generation semiconductor enterprises. Government funding is expected to be deployed in the second half of fiscal 2025, accelerating Rapidus's capital mobilization.
Kumamoto-Taiwan collaboration seeks to address semiconductor talent shortage
With TSMC's manufacturing expansion in Kumamoto, Japan faces an urgent demand for semiconductor talent. In response, Kumamoto City's Kaishin Gakuen educational foundation has forged a partnership with Taiwan's Minghsin University of Science and Technology.
This cross-border collaboration has launched Japan-focused semiconductor classes, with graduates poised to intern at industry leaders such as TSMC and Powertech Technology. The collaboration reflects a broader trend: Japan is not only rebuilding physical infrastructure but also investing in the human capital needed to power its semiconductor revival.
From market dominance to decline—and a bid for revival
Japan's aggressive pivot is rooted in historical context. Once commanding over 50% of the global semiconductor market, Japan's share had plummeted to just 10% by 2019. In the early 2000s, as the industry transitioned from vertically integrated models (IDM) to horizontal specialization (i.e., the rise of fabless design and contract foundries), Japan struggled to adapt.
Nevertheless, the country has retained significant strengths in key niches, including NAND flash memory, CMOS image sensors, and power semiconductors—sectors where it still holds substantial global market share and competitive advantage.
In recent years, Japan has sought to rebuild its chip supply chain by attracting major players such as TSMC and Micron while launching Rapidus to lead domestic efforts in logic chip production. The company aims to begin volume production of sub-2nm logic semiconductors by 2027.
Tokyo has set a bold target: reclaiming a 20% share of the global semiconductor market by 2030. While Japan remains weak in logic IC manufacturing, it remains a global powerhouse in semiconductor materials and equipment, controlling approximately 50% and 30% of those respective markets.
Rapidus plant commenced operations in April. Credit: Rapidus
Tokyo's JPY5 trillion strategy to reshape semiconductor landscape
In 2021, the Ministry of Economy, Trade and Industry (METI) introduced its inaugural comprehensive strategy targeting the semiconductor and digital industries. The strategy centers on five key areas: advanced logic chips, next-generation memory, industrial specialty semiconductors, advanced packaging, and manufacturing equipment and materials.
The plan proposes an investment exceeding JPY5 trillion (approx. US$34.76 billion) from both public and private sectors aimed at advancing semiconductor technology and strengthening supply chain infrastructure by 2030.
Calls for 'Semiconductor Strategy 2.0' amid fiscal strains and global shifts
Amid the growing likelihood of a second Trump presidency and Japan's mounting fiscal challenges, the Japan Electronics and Information Technology Industries Association (JEITA) is urging the government to enact a "Semiconductor Digital Strategy 2.0." This would promote domestic production of high-value semiconductors, such as power devices, memory chips, and image sensors, to ensure international competitiveness.
Amari's vision: Taiwan-Japan alliance at the core of a resilient supply chain
Former LDP heavyweight and long-time semiconductor policy advocate Akira Amari argues that Japan and Taiwan must anchor a more resilient and secure semiconductor supply chain. Amari—who helped craft Japan's chip strategy and lobbied for TSMC's Kumamoto facility—emphasizes that it is unrealistic for any single country, including the US, to internalize the entire chip supply chain.
Advanced semiconductors, he noted, require the coordinated input of hundreds of firms and thousands of process steps. While the US excels in chip design, 80% of semiconductor equipment is produced by the US, Japan, and the Netherlands; 55% of critical materials originate in Japan; and roughly 90% of advanced chips are manufactured in Taiwan. Cooperation among global leaders is essential.
Amari also pointed out that TSMC's Arizona fab is reportedly achieving better yields than its facilities in Taiwan, largely due to the deployment of 1,300 experienced Taiwanese engineers. He warned, however, that if the US insists on local-only staffing for such complex operations, efficiency could suffer. "If American workers start checking their watches at 5 p.m. and head out the door, the lines won't run," he quipped.
Credit: Akira Amari
JEITA is also flagging growing geopolitical risks tied to Taiwan's dominance in advanced logic chip manufacturing. As tensions between the US and China escalate, Taiwan's strategic role in the global tech supply chain is becoming increasingly critical. Beijing has not ruled out the use of force to assert control over the island, while Washington continues to ramp up military support. Any conflict in the Taiwan Strait would send shockwaves through the global semiconductor industry.
Even without a confrontation, tighter Chinese controls—similar to those imposed on Hong Kong—could disrupt Taiwan's business environment, dealing a major blow to chipmakers and triggering ripple effects across the supply chain. Japan's stepped-up investments, paired with deeper collaboration in Taiwan, are aimed at building a more resilient, innovation-led semiconductor ecosystem capable of weathering these geopolitical headwinds.
Article edited by Jack Wu
