On Saturday, chipmaker TSMC will officially open its first plant in Japan, underscoring the Taiwanese company’s pivotal position in Tokyo’s multibillion-dollar attempts to revive its once-dominant semiconductor manufacturing sector.

Tokyo’s rising anxiety over China’s expanding technological superiority and the Taiwan chipmaker’s strong position in the foundry business are the reasons behind Japan turning to TSMC for assistance in an industry that it once controlled.

The entry of TSMC, the largest contract chipmaker in the world, into Japan is said to have spurred investment in a sector crucial to the country’s economic stability, even as the government pursues a bigger goal by supporting the domestic foundry company Rapidus.

The possibility of having TSMC build a fab in Japan really rallied support from disparate parts of the semiconductor industry,” said Damian Thong, head of Japan research at Macquarie Capital Securities.

“They have built a snowball effect around it,” he said.

According to research firm TrendForce, as aggressive development in the U.S. erodes Taiwan’s dominance, Taiwan is expected to control two-thirds of foundry capacity for advanced processes by 2027, with Japan expanding its worldwide share to 3%.

Targeting mass production at the fab later this year, TSMC is also expanding its capacity in the United States and Germany. The company has also revealed plans to build a second factory, increasing its total investment in the initiative to almost $20 billion.

By collaborating with businesses like Sony, the two fabs’ combined monthly capacity will surpass 100,000 12-inch wafers, enhancing Japan’s access to chips—which are crucial for the defence, automotive, and electronics sectors.

TSMC views Japan as a natural fit because of the country’s hardworking ethic, which is ideal for the chip industry, and its friendly and generous government policies, according to Reuters.

According to David Chuang, an analyst at Isaiah Research, Taiwan’s readiness to permit the export of foundry and supply chain technology, particularly for advanced node technologies below 16 nanometers, has also helped Japan.

“With the prospect of fabricating more advanced roadmaps in Japan, it’s reasonable to expect that foundry customers may be more inclined to commit to long-term development and procurement of capacity,” said Chuang.

According to Joanne Chiao, an analyst at TrendForce, Japan may take use of its skills in photoresists, which are chemicals required to make chips, image sensors, and packaging, which are all becoming more and more crucial to squeeze out advances in chip performance.

According to Reuters, Taiwanese chip businesses are entering Japan to support the TSMC factory and are also drawn by the industry’s increased energy, which is driving the growth of the semiconductor sector in Japan.

Wafer manufacturer Sumco, equipment maker Tokyo Electron, and power chip manufacturer Rohm are among the businesses increasing their investment in the chipmaking hub on the southern island of Kyushu, where TSMC has its plant.

The Kyushu Economic Research Centre projects that the boost to the region’s economy will total 20.1 trillion yen ($134 billion) over a ten-year period, with worker spending and the building and operation of fabs serving as spillover effects.

According to Soei Kawamura, a researcher at the center’s business development department, a significant barrier is manpower shortages.

“Large companies like TSMC and Sony will be able to secure the necessary personnel, but the economic development of the Kyushu region will change depending on how many people can be recruited in the local semiconductor-related and other industries,” he said.

Over the course of the last nearly two decades, the number of workers in Japan’s chip-related firms has decreased by around a fifth.

According to projections from the Japan Electronics and Information Technology Industries Association (JEITA), top domestic chip companies will need to hire 40,000 people over the course of ten years.

Tokyo’s more ambitious plan calls for creating a domestic champion with the foundry company Rapidus, which is led by professionals in the field and plans to start producing advanced chips in large quantities on the northern island of Hokkaido in 2027.
Rapidus, a possible competitor of TSMC, which has spent decades perfecting its procedures, is collaborating with IBM and Imec is a chip research organisation. But many in the sector are sceptical about its chances of success.

“I don’t doubt TSMC will be dominant, but Japan will seek to prove that they are valid as a number two,” said Macquarie’s Thong.

(Adapted from ThePrint.com)

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