Japan Kitakyushu signs preliminary contract for factory site with Taiwan ASE
Focusing on unresolved issues to attract semiconductor companies
"Must secure construction contractors, national subsidies, and expansion land"
Can Kitakyushu City in Kyushu, Japan, which dreams of a semiconductor revival, successfully attract the factory of Taiwan's ASE Technology, the world's largest semiconductor back-end process company? Analysts suggest that for Kitakyushu to embrace the world's number one semiconductor back-end process company, it must focus on solving three key challenges: securing construction contractors, resolving national subsidy issues, and preparing expansion land.
On the 26th, Nihon Keizai Shimbun diagnosed that for Taiwan ASE to build a factory in Kitakyushu, it must be possible to secure city-level construction companies. ASE Japan, ASE's Japanese subsidiary, signed a tentative contract with Kitakyushu and the Wakamatsu Ward for the acquisition of city-owned land with the factory site in mind on the 31st of last month. However, it is still at the tentative contract stage, with no rapid progress. On the day after the contract, the 1st of this month, Kitakyushu officials said, "Negotiations are ongoing," but also indicated that "it is important to proceed sincerely going forward," suggesting that many issues remain to be resolved before attracting the factory.
In Kyushu, Japan, not only construction contractors but also companies handling electrical equipment and air conditioning for factories are difficult to secure. According to the Ministry of Land, Infrastructure, Transport and Tourism's 'Construction Work Order Status Statistics,' the order amount for construction companies headquartered in Kyushu and Okinawa last year was 9.3922 trillion yen (approximately 86.6 trillion KRW), an 11% increase compared to the same period the previous year. Since 2021, when Taiwan's TSMC, the world's largest foundry (semiconductor contract manufacturer), confirmed its entry into Kumamoto, Kyushu, semiconductor-related investments have intensified, increasing by more than 1 trillion yen over two years.
Kitakyushu views it as difficult to secure construction companies due to many construction projects in Kumamoto, Kyushu, where TSMC has entered, and in the central redevelopment areas of Fukuoka City, and believes coordination among local governments is necessary. Nihon Keizai Shimbun reported, "It appears ASE is scouting other factory sites within Japan besides Kitakyushu, so whether the city can resolve its difficulties and secure contractors will be key to the success of attracting the factory."
At the same time, how much subsidy the Japanese central government can provide to Taiwan ASE is also expected to greatly influence the decision to attract the factory. A Kitakyushu official stated that government support is included as one of the conditions in the main contract with ASE.
ASE's subsidy demands align with the Japanese government's active efforts to attract global companies' manufacturing facilities to build semiconductor supply chains. Previously, Japan decided to provide up to 1.2 trillion yen in subsidies to attract TSMC's Kumamoto Plants 1 and 2. In addition, subsidies were promised for various semiconductor factory constructions, including 243 billion yen for Kioxia, 192 billion yen for Micron, and 75 billion yen for Sumco. However, some opinions suggest that since the Japanese government plans to invest in companies like Rapidus with new technologies, support for expanding factories using existing technologies may be less.
Whether ASE can secure new factory sites near the city-owned land where it signed the tentative contract with Kitakyushu is also expected to play an important role in finalizing the contract. Kitakyushu understands that ASE plans to build three additional factories near the city-owned land under tentative contract for factory construction. Since there is a forest area nearby and developing it into industrial land would take more than 10 years, it has been pointed out that the city must act swiftly.
Nihon Keizai Shimbun conveyed the atmosphere, saying, "The city-owned land acquired by ASE is the last remaining industrial land in the 'Kitakyushu Academic Research City,' where Kitakyushu City University, Kyushu Institute of Technology, and Waseda University are concentrated," and added, "(Under current circumstances) Kitakyushu's shadow in the story of Silicon Island's revival is faint."
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