Japan plans to boost domestic semiconductor sales to JPY40 trillion (approx. US$253.5 billion) by 2040, a sharp increase from current levels, as the government intensifies efforts to rebuild its chip industry and capture growing demand from AI and data center applications, according to Nikkei.
The Japanese government will present the goal as part of a public-private "crisis management and growth investment" roadmap to be discussed at a meeting of the Council for Japan's Growth Strategy, chaired by Prime Minister Sanae Takaichi.
The target will form part of Japan's broader growth strategy, expected to be finalized this summer. Under the proposal, domestic semiconductor sales would expand eightfold from about JPY5 trillion in 2020. Japan had previously set a goal of raising the figure to more than JPY15 trillion by 2030, but the new roadmap extends the ambition to 2040 as demand accelerates.
The global semiconductor market is projected to grow from roughly JPY50 trillion today to around JPY190 trillion by 2035. The rapid adoption of AI is fueling demand for chips capable of processing massive amounts of data at high speed, particularly in data centers and advanced computing systems.
Focus on AI-driven chips and industrial applications
Japan's strategy places particular emphasis on semiconductors that support "physical AI," referring to chips used in robots, autonomous machines, and industrial equipment, areas where Japan's manufacturing ecosystem is considered competitive.
The government aims to secure more than a 30% share of the global physical AI market by 2040, putting Japan on par with the US and China in the sector.
To support the industry, the draft plan calls for the development of advanced semiconductor research, development, and design hubs to produce next-generation chips for applications such as autonomous vehicles at a lower cost.
Infrastructure support will also be expanded. The government plans to help companies acquire industrial land for semiconductor fabs and to invest in supporting infrastructure, such as electricity and water supplies. Regulatory reforms are also under consideration, including easing rules on industrial water use to attract data centers and semiconductor facilities.
Building on earlier chip revival efforts
The new roadmap builds on a series of semiconductor initiatives launched over the past several years as Japan sought to restore its role in the global chip industry. Under former Prime Minister Fumio Kishida, Japan introduced large-scale support programs to strengthen domestic semiconductor manufacturing. These efforts included backing for TSMC's manufacturing facilities in Kumamoto and the establishment of Rapidus in Hokkaido to develop next-generation advanced logic chips.
In November 2024, the government unveiled a framework to strengthen the AI and semiconductor industrial base, committing more than JPY10 trillion in public support over seven years.
Earlier initiatives also included the "Semiconductor and Digital Industry Strategy," first introduced in 2021 and later revised in 2023, as well as research programs such as the Post-5G Fund, which supports advanced chip technologies.
Broader industrial strategy
The semiconductor plan is part of a wider national strategy aimed at strengthening Japan's industrial competitiveness. The Takaichi government has designated 17 strategic sectors—including AI, semiconductors, quantum technology, shipbuilding, pharmaceuticals, and advanced medical care—and further identified 61 priority technologies.
Development roadmaps will be prepared for 27 of these technologies, including physical AI, next-generation semiconductors, hydrogen- or ammonia-powered shipbuilding, green steel production, permanent magnets, and video game technologies.
Officials said the long-term framework through 2040 is intended to provide companies with greater visibility for investment planning while demonstrating the economic impact of public–private investment in key industries.
Article edited by Jack Wu
