Tech war: Japan seeks bigger role in global chip supply chain as US tries to sideline China
- Taiwan Semiconductor Manufacturing Co, Samsung Electronics, as well as Intel Corp and Micron Technology, have pledged investment in Japan
- Chinese foreign ministry spokesman Wang Wenbin has accused Washington of using coercion against the other six G7 members
As part of the pact, Micron said it would invest up to 500 billion yen (US$3.6 billion) over the next few years, with support from the Japanese government. The company said its planned plant in Hiroshima would enable the next wave of advanced chip innovation, such as 1-gamma node memory chips, from 2025.
In a statement, Japanese Prime Minister Fumio Kishida called Micron’s investment “a great case of Japan-US semiconductor cooperation”.
Japan’s courting of global chip manufacturers follows similar efforts by allies like the US, European Union and, to a lesser extent, the UK, which are using money to entice semiconductor firms to relocate to their respective markets, according to Gareth Leather, senior emerging Asia economist with Capital Economics in London.
While Japan was once a major player in the global semiconductor industry with over half of the market share in 1988, Taiwan now makes the majority of the world’s semiconductors, including over 80 per cent of the most advanced chips, according to experts.
However, growing geopolitical tensions between the US and China are pushing developed countries to diversify chip sourcing away from Taiwan, Leather said.
TrendForce, a global tech market intelligence provider, predicts that Taiwan’s advanced chip process capacity will drop to 71 per cent by 2025, down 9 per cent from 2022.
Washington has been the most aggressive in its attempt to reorganise the global semiconductor supply chain.
Last year, President Joe Biden signed into law the US Chips and Science Act, which allocates US$52 billion to fund domestic chip production and research. Recipient companies of the funding will be barred from building “leading-edge” chip factories in China for 10 years, a move seen to be designed to counter the country’s technological advancement.
As the four partners deepen their cooperation, TSMC, the world’s largest contract chip maker, said on Thursday it would continue to invest in Japan, according to the Taipei Times.
China’s foreign ministry spokesman Wang Wenbin said at a routine press conference on Friday that the US Chips Act shows how Washington is using its power to force its allies into following its lead.
“If the G7 is set to discuss the issue of economic coercion, they should start by discussing how the US has used coercion against the other six members [in G7],” Wang said.
During the G7 summit, which kicked off on Friday and concludes on Sunday, Kishida and Biden are expected to announce a US$70 million deal to train 20,000 chip engineers at 11 universities in the US and Japan, including Purdue University, Hiroshima University and Tohoku University, according a Financial Times report on Thursday.
Meanwhile, Kishida and British Prime Minister Rishi Sunak have agreed for Japan and the UK to partner in semiconductor research and development, as well as skills exchange, as part of a new global strategic partnership called the “Hiroshima Accord”, according to a UK government statement.
As the US and its allies push to strengthen domestic semiconductor production in an attempt to isolate China, it could have implications for the world’s second-largest economy, according to Gary Ng, senior economist for Asia-Pacific at French investment bank Natixis.
“China will face the nightmare of being unable to attract [foreign direct investment] and more import restrictions in chip production,” he said.
For now though, the US and its allies seem to be focused on “containing China’s tech advancement and rebalancing the production capacity”, rather than asking chip makers to move out of China, Ng said.