[Chip Talk] "Revival of the Lost Semiconductor Kingdom" Japan Dream Team's Final Showdown

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] "Japan is 10 to 20 years behind in the advanced semiconductor process field. Regaining (its status) is not easy. This opportunity is the last chance given to (us)."

Koike Atsuyoshi, president of Rapidus, a semiconductor company jointly established by eight companies including Toyota Motor Corporation of Japan, said this at a press conference on the 11th. He strongly expressed his determination to create a semiconductor dream team and reclaim the semiconductor throne that Japan had to concede to countries like Korea since the 1990s.

While major countries such as the United States and China are competing for semiconductor supremacy by investing enormous funds, technology, and manpower, Japan is also entering the semiconductor competition in earnest. Leading Japanese companies are investing funds and technology in Rapidus, and even the Japanese government has rolled up its sleeves to support the effort.

As the company name, which means 'fast' in Latin, suggests, Rapidus is drawing attention by presenting a vision to quickly catch up with the technologies of Korea and Taiwan, which already lead the market. However, there are many challenges to be solved immediately, so achieving the goal does not seem easy.

◇"Goal to produce 2-nanometer chips in 5 years"

The lineup of companies participating in the joint venture Rapidus is dazzling. It includes Toyota, the world's largest automobile company; Kioxia, the world's third-largest NAND flash manufacturer; Sony, which once built an electronics empire; and NTT, Japan's largest telecommunications company. In addition, SoftBank, NEC, Denso, Mitsubishi UFJ, and four other companies are involved. Among the investing companies, some reportedly decided to invest because they judged that stable semiconductor procurement might be difficult in the future and domestic production would be necessary.

Rapidus cited the following as the background for its establishment: △increasing importance of semiconductors and concerns over the decline of Japan's semiconductor industry △semiconductor economic security becoming an urgent issue △expansion of applications such as automobiles and artificial intelligence (AI) in the 2030s △development of next-generation semiconductors by the U.S. and Japan.

First, Rapidus will focus on developing next-generation semiconductors needed for future technologies such as supercomputers, smart cities, AI, and autonomous driving. The goal is to mass-produce semiconductors using a 2-nanometer (nm; 1 nm is one-billionth of a meter) process by 2027. This is a bold plan to catch up with the technology within five years, given that foundry companies Samsung Electronics, Taiwan's TSMC, and Intel have declared they will introduce 2-nanometer processes starting in 2025.

Veterans with deep experience in the semiconductor field have joined the company's management. President Koike and Chairman Higashi Tetsuro, who have been in the semiconductor industry for over 40 years, led the establishment. Chairman Higashi is a former CEO of Tokyo Electron and a member of the Japanese government's semiconductor industry advisory group. President Koike, who recently served as head of Western Digital's Japan branch, is an engineer from Hitachi Manufacturing and was president of a semiconductor company jointly established by Hitachi and Taiwan's UMC in 2000. When asked whether the project to localize advanced semiconductors (domestic production in Japan) has a chance of success, Koike said, "I am confident that Japan has the technology to properly manufacture semiconductors."

As companies united, the government also stepped in. On the day the establishment was announced, the Ministry of Economy, Trade and Industry of Japan announced it would support the company with 70 billion yen (approximately 665 billion won). Minister of Economy, Trade and Industry Nishimura Yasutoshi emphasized, "Semiconductors are truly important from the perspective of economic security," and added, "Japan's academia and industry must unite to strengthen semiconductor competitiveness."

◇Insufficient investment and technology... Low expectations even within Japan

Although Rapidus declared an ambitious start, expectations within Japan that the company will achieve its goals are not very high. Developing advanced semiconductor process technology requires a combination of large-scale corporate investment, government support, and accumulated research and development (R&D) achievements and know-how. This is why, despite Intel's announcement last year to resume its foundry business and investment plans, it is expected to take time to catch up with Samsung Electronics and TSMC. The investment scale Rapidus has announced and Japan's current technological level are considered far from sufficient to achieve the goal within five years.

The eight Japanese companies investing in Rapidus have contributed 7.346 billion yen (approximately 70.25 billion won). Even combined with the amount the Japanese government plans to support, it does not reach 1 trillion yen. Samsung Electronics alone declared an investment of 17 billion dollars (approximately 22 trillion won) for its Taylor plant in the U.S. TSMC's capital expenditure last year was 30 billion dollars (approximately 40 trillion won). Although the investing companies recognize that growth in the semiconductor industry is impossible without investment, they remain cautious until they gain confidence that this company will succeed, according to Nihon Keizai Shimbun.

Moreover, Japan's current logic semiconductor process technology level is stuck at around 40 nanometers. Japan has made continuous efforts, such as providing subsidies to attract TSMC's advanced process investments, but the process level at the Kumamoto Prefecture fab remained between 12 and 28 nanometers.

Given this situation, concerns have arisen that Japan's semiconductor industry might lose even in the mature (legacy) processes where it still holds some market share while competing in advanced processes. On the 21st, Nihon Keizai Shimbun editorial board member Ota Yasuhiko wrote in a column, "China is investing in the legacy market. Japan is so focused on the nanometer competition that it overlooks the risk of price destruction from China in the legacy market," and pointed out, "No single company can revive the semiconductor industry. Without a strategy in the legacy area, the dream of revival will end up as a 'pipe dream.'"

In response, President Koike emphasized that alliances with the U.S. would help strengthen technological capabilities. He explained that unlike TSMC and Samsung Electronics, which produce semiconductors for final products with large shipment volumes such as smartphones, Rapidus will differentiate itself by focusing on shortening the semiconductor process period, which takes several months.