[Japan Semiconductor Revival]② TSMC Completed in 3 Years - SK Hynix Takes 8 Years... Falling Behind in the Speed Race

Opening Ceremony of TSMC Kumamoto Plant on the 24th
Japan Supports with 12 Trillion Won and 50-Year Greenbelt Release

SK Hynix Yongin Plant Faces Complaints and Compensation Issues
First Fab Operation Delayed to 2027 According to Analysis

Japan, long regarded as lagging behind South Korea and Taiwan in the semiconductor industry for years, has embarked on an unprecedented race against time to boost its semiconductor competitiveness. To attract the world's largest foundry (semiconductor contract manufacturing) company, Taiwan's TSMC, Japan has unveiled a record-breaking subsidy package of 12 trillion won and even lifted greenbelt restrictions that had been in place for over 50 years. In contrast, the South Korean government is offering only modest support measures such as corporate tax cuts to encourage semiconductor companies' facility investments. There are no direct cash subsidies returned to companies. Concerns are rising that the forecast of "Japan's semiconductor industry overtaking South Korea within 10 years" could become a reality.

An industrial complex near Kikuyo-machi, Kumamoto Prefecture, where Taiwanese semiconductor company TSMC is building a factory.
[Photo by Yonhap News]

'Smooth Sailing' for TSMC's Kumamoto Plant

TSMC's first foundry plant in Kumamoto Prefecture, Japan, which is scheduled to hold its opening ceremony on the 24th, took less than three years from the announcement of the plan in October 2021 to completion. This made the usual five-year fab construction period seem irrelevant.

The background to this was Japan's extraordinary government support. The Japanese government provided subsidies amounting to 40% of the investment, 476 billion yen (approximately 4.43 trillion won), to accelerate construction. The only conditions were "to operate the plant in Japan for more than 10 years and to prioritize supply to Japan when semiconductors are in shortage." For TSMC, this was an opportunity to increase price competitiveness by about 10%.

The local government of Kumamoto Prefecture also actively engaged in creating the factory site, directly addressing issues such as industrial water supply from groundwater and road maintenance. This contrasts with South Korea, where securing infrastructure such as water and electricity often involves years of conflicts among the government, local authorities, and residents.

Japan's financial company Kyushu Financial Group projected that TSMC's impact on the Kumamoto regional economy would reach 6.9 trillion yen (approximately 62.87 trillion won) over 10 years. They described it as a "once-in-a-century opportunity" for the Kyushu economy. If TSMC confirms the construction of the 2nd and 3rd plants following the 1st foundry plant investment of 11.2 trillion won, the effects are expected to be even greater.

SK Hynix's Yongin Cluster Stalled for 3 Years

Unlike Japan, South Korea has already fallen behind in the race against time. The site for SK Hynix's Yongin plant was selected in February 2019, but groundbreaking has been postponed more than five times to date. Originally, construction was supposed to start last year, but it is now expected to begin next year.

The reasons for the delays are a series of challenges. These include local complaints about the environmental impact assessment (delayed by 11 months), prolonged land and property compensation (delayed by 1 year and 6 months), and extended infrastructure development for water supply (delayed by 1 year). As a result, it is analyzed that SK Hynix's first fab operation has been pushed back to 2027.

Delays also increase project costs. The initial project cost of 1.79 trillion won has risen to about 2.35 trillion won, an increase of approximately 560 billion won. This means the semiconductor complex will be built at a higher cost and later than planned.

Unlike Japan, South Korea's government provides indirect support through tax incentives and infrastructure when private companies invest. The permitting process, land compensation, negotiations with local governments, and infrastructure development such as power and water inevitably consume enormous energy and time.

An industry insider said, "Our government is relying heavily on private investment in the semiconductor industry," adding, "The gap in support measures by country is expected to have a significant impact on the domestic semiconductor ecosystem in the future, and South Korea may be excluded from investments by domestic and foreign companies."

'Supply Chain' Chosen Over 'Self-Containment'

Japan has chosen a strategy of securing semiconductor supply chains rather than all-in-one production by domestic companies. Japan is known as a conservative country toward foreign companies. Until now, it has adhered to a 'self-containment' policy, building everything from research and development (R&D) to materials, equipment, and manufacturing with domestic companies. However, Japan now considers geopolitical location more important than the nationality of companies and has adopted a method of attracting investment and production in Japan regardless of company nationality.

As a result, TSMC and U.S. semiconductor company Micron have decided to establish production bases, and Intel is reportedly considering opening an R&D center in Japan. Jensen Huang, CEO of U.S. Nvidia, also announced plans to set up research and development bases in Japan and support startups through various initiatives. Samsung Electronics is also establishing an advanced semiconductor R&D base worth 40 billion yen (approximately 36.3 billion won) in the Minatomirai district of Yokohama City, Japan, by 2025.

The government-led domestic semiconductor company Rapidus is also receiving substantial funding for semiconductor R&D and production investments, focusing on securing its own technological capabilities. Rapidus, established in August last year, has already started building a semiconductor plant in Hokkaido and aims to commercialize 2nm process technology by 2027. It has announced plans to develop more advanced process technologies such as 1.4nm by 2030 and 1nm thereafter, aiming to catch up with leading companies like TSMC and Samsung Electronics.

Professor Park Jae-geun of Hanyang University's Department of Convergence Electronics Engineering said, "Semiconductors are structured so that profits can be made only if factories operate at the right timing," adding, "It is fortunate that the current government is trying to reduce the time required for permits and administrative procedures through measures like the time-out system, but infrastructure projects such as water and power supply need to be reviewed more systematically to accelerate the timeline."