Japan Provides Financial Support for Semiconductor and Rare Earth Supply Chains

Enhancing the International Competitiveness of Japanese Companies

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The Japanese government is preparing measures to provide financial support for building supply chains to facilitate domestic procurement of essential items for social and economic activities, such as semiconductors and rare earth elements. The plan views strengthening supply chains as key to economic stability and aims to enhance the international competitiveness of Japanese companies.

According to the Nihon Keizai Shimbun on the 17th, the Japanese government plans to submit the "Economic Security Promotion Bill" to the National Diet on the 17th and enact the bill within 2023. This is based on the judgment that, as Japan's supply chain vulnerabilities, such as semiconductors, were exposed during the COVID-19 pandemic, it is urgent to prepare measures to prevent disruptions in procuring essential items during emergencies.

The Japanese government intends to designate and manage items that require stable procurement as "Specified Important Materials." Currently, these include semiconductors, pharmaceuticals (such as COVID-19 vaccines), batteries, and rare earth elements.

Among the Specified Important Materials, businesses that meet national standards will be selected as support targets, and the Japanese government will provide subsidies. Businesses will prepare investment plans for research and development facilities or factories and undergo national review. Conditions include maintaining production for a certain period, managing information on advanced technologies, and promising stable domestic supply.

The scale and duration of support will be narrowed down during the business selection stage. Additionally, even after the bill is enacted, the Japanese government plans to add fields of "Specified Important Materials" as needed.

Such measures are already being implemented in the United States and the European Union (EU). The U.S. announced a policy last June to designate semiconductors and pharmaceuticals for domestic production support. Accordingly, the U.S. Congress allocated a total of $52 billion to the semiconductor industry, which was used to attract Samsung Electronics and TSMC. The EU also selected six strategic fields, including raw materials, batteries, and hydrogen, for support last May.

Earlier, the Japanese government's financial support policy promised when attracting TSMC's factory construction to Kumamoto Prefecture is also in this context.

The Nihon Keizai Shimbun expressed concerns, stating, "While the demand for strengthening supply chains is high, such industrial support measures may prevent the exit of less competitive companies and hinder the creation of promising businesses and market expansion. Without policies that facilitate the transition from declining companies to those with growth potential, medium- to long-term growth could be impaired."