As TSMC Enters, the 'Semiconductor Bubble'... Kumamoto Land Prices in Japan Rise to No.1

Prices Soar for Nearby Factory Sites and Apartment Land
Supply Fails to Keep Up with Demand

[Asia Economy Reporter Jeon Jinyoung] "There are many buyers, but no land available."

This is the situation faced by Kumamoto Prefecture in Japan, which is preparing for the entry of Taiwanese semiconductor foundry company TSMC's factory. Real estate prices in the Kumamoto Kikuyocho industrial area, where the factory will be built, and nearby areas are rising simultaneously. This is the so-called 'semiconductor bubble' phenomenon. Since commercial districts and residential areas will be developed around the factory site, attention is focused not only from company officials but also from investors.

On the 14th, Nihon Keizai Shimbun (Nikkei) reported that as of September last year, the land price increase rate in Kumamoto Kikuyocho industrial area ranked first nationwide at 31.6%. The TSMC Kumamoto factory is scheduled to be completed by the end of this year and open next year. Parts suppliers are actively searching for nearby land. Since last year, 30 hectares (ha, about 90,000 pyeong) of industrial park land operated by Kumamoto Prefecture have already been sold, leaving only 6 ha remaining. Not only Kumamoto Prefecture but also the city is working to secure an additional 20 ha of land.

The construction site of TSMC's new factory in Kumamoto, Japan, by the Taiwanese semiconductor company. [Image source=Yonhap News]

Land prices are literally soaring to the sky. A man who sold land near the factory said, "A mountain near the factory was about 991㎡ (approximately 300 pyeong) and cost around 1.5 million yen (about 14 million KRW). Now it is sold for 6 million yen, four times higher." Real estate agents say, "Supply cannot keep up with demand." Due to the lack of land, some people are trying to secure land even far from the factory. Nikkei reported that someone purchased the site of a closed elementary school about a 40-minute drive from the TSMC factory. The president of this company, which will be subcontracted by TSMC, told Nikkei, "It's far, but we have to buy this place. We have no choice."

Kumamoto Prefecture is a region scheduled for large-scale development due to TSMC's entry. Among the 1,700 TSMC employees, 300 are expected to come from Taiwan, so rental housing must be built for them. It is known that 30 new apartment buildings are needed for this purpose. Additionally, an international school for their children will also be constructed.

Accordingly, investors aiming to build and rent apartments are also continuing to arrive. The fact that land acquisition costs in Kumamoto are cheaper compared to the Tokyo metropolitan area has also influenced the investment boom. Nikkei reported, "Commercial land is priced at 1/14 and industrial land at 1/20 compared to Tokyo." As a result, dealers are raising prices one after another, and landowners are refusing to sell, saying "it could rise further."

Although Japanese media report this as a 'semiconductor bubble,' the atmosphere is more positive, seeing it as a rare boom rather than with concern. Since the Japanese government subsidized 476 billion yen (about 4.575 trillion KRW) for this factory construction, the industrial complex development around TSMC has effectively become a national project.

Japan is currently focusing on reviving the semiconductor industry with state intervention. Japan's semiconductor sales share, which accounted for more than half of the world in 1988, failed to continue its success due to restrictions such as the US-Japan semiconductor agreement, and eventually dropped to 10% of the global sales share in 2019.

Professor Tadahiro Kuroda of the University of Tokyo said, "TSMC's entry into Japan will give momentum to domestic semiconductor mass production, which has been the Achilles' heel of the Japanese industry," adding, "Although there was past US-Japan semiconductor friction, it has now shifted to US-China conflicts, and with the continued weak yen, favorable winds will blow for the Japanese semiconductor industry."