[The Revival of Japanese Semiconductors] ① Latecomers Make a Bold Move... Revival Projects Gain Momentum

TSMC Completes Kumamoto Plant No.1 on 24th with Sony and Denso
Japan's First 16nm Production Capacity
Operates 12-inch Wafer Fab
Signal for Long-term Semiconductor Project

Editor's NoteJapan, standing at the tail end of a prolonged economic recession lasting nearly 30 years, has begun to make a decisive move in the semiconductor market. In the intensified 'semiconductor competition' landscape among global companies, including South Korea, Japan is clearly regarded as a 'latecomer.' However, leveraging its experience leading the semiconductor market in the 1980s and its abundant capital resources, Japan is aiming for a revival. Particularly, Japan's geopolitical status amid the US-China conflict is drawing attention, which is positive for semiconductor reconstruction. The foundry (semiconductor contract manufacturing) plant that Taiwan's TSMC will complete at the end of this month in Kumamoto, Japan, is being highlighted as a signal flare for Japan's 'long-term semiconductor project.'

According to foreign media and related industries on the 15th, Taiwan's largest foundry company TSMC, together with Japan's Sony and Denso, will complete the first plant under construction in Kikuyomachi, Kumamoto Prefecture, on the 24th. This plant will operate as the first 16nm (1nm = one-billionth of a meter) process production-capable 12-inch (300mm) wafer fab (semiconductor manufacturing plant) in Japan. It will have production lines for 12, 16, 22, and 28nm and produce 55,000 wafers per month on 12-inch wafers.

The TSMC Kumamoto plant is being evaluated as a symbol of Japan's semiconductor revival. Local media refer to the Kyushu region, where semiconductor companies are concentrated, as 'Japan's Silicon Valley.' The Japanese economic newspaper Nihon Keizai Shimbun recently stated, "With the TSMC plant construction acting as a catalyst, the supply chain for semiconductor parts and equipment is expanding mainly around Kyushu in Japan," adding, "From the perspective of economic security, the greatest progress is that self-sufficiency has increased amid global competition." Additionally, Yahoo Japan, which has its own reporting staff, recently reported, "The economic ripple effect from the establishment of the TSMC plant is estimated to exceed 20 trillion yen (approximately 177 trillion won) over the next decade," calling it "the first step toward Japan's revival." Kim Samsik, head of KOTRA's Japan regional office, said, "Japan is trying to regain its former glory in semiconductors," and added, "Japanese economic newspapers are featuring the opening of TSMC's Kumamoto plant on their front pages daily, showing expectations and positive reactions."

This plant is drawing attention because it marks the starting point of the long-term semiconductor strategy established by the Japanese government. In May last year, Japan's Ministry of Economy, Trade and Industry announced the 'Semiconductor and Digital Industry Strategy,' pledging to strengthen semiconductor investments. Accordingly, the domestic semiconductor industry sales target was raised from 5 trillion yen (approximately 44 trillion won) set in 2022 to 15 trillion yen (approximately 133 trillion won) by 2030, with a phased roadmap established. The first step was TSMC's establishment of the joint venture 'JASM' with Denso and Sony Semiconductor Solutions. Subsequently, open R&D, mass production bases were built, and support was provided for the establishment of the advanced semiconductor research center (LST) of the Technology Research Association and Rapidus.

Japan Highlighted Amid US-China Conflict and Trump’s Second Term

Japan's semiconductor investment has recently gained more prominence in connection with international affairs. The US has excluded China, with which tensions are high, and formed the 'Chip4 (Chip4: South Korea, US, Japan, Taiwan) alliance,' creating a semiconductor supply chain including South Korea, Taiwan, and Japan. Japan, strong in materials, parts, and equipment (SoBuJang), has also begun full-scale semiconductor production investment, raising expectations that it will play a significant role in the market. The prospect of former President Donald Trump winning re-election in the US presidential election this November and ushering in a 'Trump 2nd term' government is also seen as a positive factor for Japan. It is anticipated that trade conflicts with China will intensify under Trump's return, potentially broadening Japan's relative engagement. Atsuyoshi Koike, president of Rapidus, recently emphasized in an interview with local Japanese media that regarding the cooperation with US IBM on 2nm semiconductor technology development agreed upon in May last year, "IBM first proposed to join Rapidus," highlighting significant US interest in Japan.

On the other hand, Japan may have judged this as the right time to reclaim its former glory. Japan dominated the semiconductor market in the 1980s. In 1988, Japanese semiconductors accounted for more than half (50.3%) of the global market share. However, unable to keep pace with rapidly changing market demands and trends, Japan's global market share gradually declined after the 1990s, remaining at 6% in 2021.

Overcoming Cultural and Social Limitations

This semiconductor investment is also expected to serve as a measure to overcome the so-called 'Japan Syndrome.' Jang Sang-sik, head of the Trend Analysis Office at the Korea International Trade Association, said, "Looking at precedents of semiconductor investments led by the Japanese government, many cases failed to achieve their goals," adding, "The targets are very high." He also noted, "Japan is influenced by the 'otaku' culture in its industry." 'Otaku' is a Japanese term referring to people who are obsessively devoted to a single field. He pointed out that Japanese companies tend to stubbornly focus on specific parts, often failing to keep up with global trends and becoming obsolete. Japan led the global market in cathode-ray tube (CRT) TVs in the 1980s but insisted on CRTs even after TVs transitioned to digital in the 2000s, eventually losing competitiveness. There is a possibility of repeating this pattern in semiconductors. Jang said, "It is true that semiconductors are a field where Japan can excel, but bold investment and flexible movement according to market conditions are also important. Japan tends to focus solely on technology, often missing the flow."

Seeking Synergy with Japanese SoBuJang Companies

The impact of Japan's moves on our semiconductor industry must also be considered. Opinions differ on whether it will be beneficial or detrimental to our companies. Jang said, "If Japan increases speed and competitiveness in semiconductors, nominally, there will be many export opportunities for us in memory semiconductors, but practically, the disadvantages may increase." He added, "Currently, Japan's planned investments are partly in memory but mostly in systems, and we currently have a significant trade deficit with Japan in systems. The deficit scale could grow." Kim, the head of the regional office, observed, "If South Korea and Japan divide and cooperate in their respective strong areas, synergy effects can be expected." He added, "Japanese SoBuJang companies with competitiveness are investing heavily in South Korea. Our companies are also growing based on this. While there will be competition, there are many areas where they can complement each other's weaknesses."