Japan’s semiconductor industry was once the dominant player in the global market, but it has since eroded as other countries like Taiwan and South Korea have taken the lead. Taiwan’s TSMC, the world’s largest and most advanced semiconductor manufacturer, has become the go-to player for chip production. The US is a key player in chip design, while the Netherlands’ ASML is a major manufacturer of tools required for cutting-edge chip production.
In response, Japan has launched a drive to revitalize its semiconductor industry, unlocking billions of dollars in subsidies for the sector. The government has founded Rapidus Corporation, a company established in 2022 to develop and manufacture advanced semiconductors. Rapidus aims to manufacture 2 nanometer chips by 2027, seeking to catch up with TSMC and Samsung.
Japan’s semiconductor industry has faced significant challenges, including a decline in government support and a shift towards the fabless model, where companies design chips without manufacturing them. This has led to a loss of competitiveness for Japanese chip makers, with their market share now below 10% globally.
The Japanese government has introduced restrictions on semiconductor exports to unfriendly foreign countries, including China, in response to growing geopolitical tensions. This has led to a surge in Japanese exports to China before the restrictions came into effect, with Chinese companies seeking to avoid the costs of the restrictions.
Japanese companies are exploring new technologies and collaborations to compete in the global semiconductor market. Canon, a traditional Japanese company, is developing a nano imprint lithography system to rival ASML’s extreme ultraviolet lithography machines. Sony is collaborating with TSMC to develop image sensors, and other Japanese companies are working with international partners to expand their global share.
Japan’s strengths in the semiconductor industry lie in niche areas, including materials, components, and precision chip making tools. The country holds an 88% market share globally for coaters and developers, 53% for silicon wafers, and 50% for photoresists. These areas can be leveraged to advantage in the long semiconductor supply or technology chains.
The cost required to make fabs for TSMC is estimated to be around $97 billion. The government of Japan has announced a plan to invest in the development of two nanometer chips, but the exact cost is not publicly disclosed. Tokyo Electron, a major Japanese semiconductor firm, has a market cap of over $97 billion as of August 1, 2024.
