Japan needs US$9 billion in chip investment this year to keep up with Taiwan and South Korea, adviser warns

Industry expert Tetsuro Higashi said it will take trillions of yen to revive Japan’s chip industry after decades of underinvestment

Japan is importing two-thirds of its chips amid a global shortage that has countries investing heavily in domestic production

Reading Time:2 minutes

Reviving Japan’s chip industry, which lags behind Taiwan and South Korea, will take billions of dollars in investment this year, according to government adviser Tetsuro Higashi. Photo: Shutterstock

Published: 12:04pm, 22 Jun 2021

Japan must put at least a trillion yen (US$9 billion) toward chip development this financial year and trillions more after that, if it is to have any hope of reviving its national industry, according to the government’s lead adviser on its new semiconductor strategy.

Anything less won’t be enough, given the high cost of chip factories and how far Japan lags behind South Korea and Taiwan in advanced manufacturing, according to Tetsuro Higashi, chairman emeritus at gearmaker Tokyo Electron Ltd and head of an expert panel advising the government.

“It will not be at all easy to stage a comeback,” the 71-year-old industry veteran said in an interview this week. “If we miss this opportunity now, there may not be another one.”

Chips shortages that have crimped global production of everything from refrigerators to game consoles to cars this year have sent governments in China, South Korea, the US and Japan scrambling to beef up their domestic supply. Japan is vulnerable because, after decades of underinvestment, its manufacturers have to import about two-thirds of their chips.

Governments from Beijing to Washington and Brussels are prepping unprecedented investments into local chip manufacturing, intent on securing the basic components for most modern-day devices and military systems. But the money will go fast in an era where a single advanced wafer fab runs more than US$10 billion.

President Joe Biden has laid out a US$52 billion plan to bolster domestic chip manufacturing, responding in part to China’s accelerating blueprint to place semiconductors at the heart of its development. South Korean companies like Samsung Electronics Co and SK Hynix Inc are committing US$450 billion over a decade on chip research and expansion, while leader Taiwan Semiconductor Manufacturing Co alone has earmarked US$100 billion over the next three years.

Taiwan Semiconductor Manufacturing Co (TSMC) has become the industry leader in chip production, causing concern about over-reliance on one market. Photo: Reuters

In a report this month, Japan’s trade ministry said it would treat boosting growth in the industry as a national project, as important as securing food and energy. Part of the plan includes setting up domestic manufacturing bases that could include joint ventures with overseas chip foundries.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x