Japan Revitalizes Semiconductor Industry with Rapidus, Aims for 2 Nanometer Chips by 2027

In the 1980s, Japan was the leading player in the semiconductor market, holding over 50% of the global market share. However, significant shifts in the chip supply chain saw other countries like Taiwan, the US, and the Netherlands emerge as dominant players in chip production and design, leaving Japan's semiconductor industry in decline, with a market share of below 10% and a focus on specialty semiconductors and legacy semiconductors.

Japan's Efforts to Revitalize the Semiconductor Industry

In response, Japan has initiated a comprehensive state-led initiative to revitalize its semiconductor industry, involving collaboration with private sector resources and foreign investment. The government has attracted TSMC to establish fabs in Japan, and eight Japanese electronic companies formed a consortium called Rapidus to produce two-nanometer semiconductors by 2027, although they will still be behind the leading edge from TSMC and Samsung. The country's efforts to improve its own technological capabilities and attract international investment are driven by economic growth and national security concerns.

Geopolitical Challenges and AI Urgency

Japan's semiconductor industry is also affected by geopolitical tensions and national security issues, as countries seek to reduce reliance on foreign suppliers. Additionally, as AI technology advances, Japan aims to catch up in the production of logic chips and memory chips to meet the demand for AI and cloud computing, with U.S. companies like Micron and Samsung establishing fabs in Japan. Japanese companies are also leveraging their strength in niche materials and precision chip-making tools to collaborate with existing market players and expand their global share.

Statistical Significance

As of August 1, 2024, the market cap of Tokyo Electron, a major Japanese semiconductor firm, was estimated to be 97 billion U.S. dollars. The government's investment requirement to produce two-nanometer chips is also significant, highlighting the importance of the semiconductor industry in Japan's economic landscape and its efforts to regain its position in the global market.

Japan's semiconductor industry is undergoing a comprehensive revitalization effort driven by both the government and private sector players. The country faces challenges from geopolitical tensions, national security concerns, and the need to catch up in the production of advanced logic and memory chips to meet the growing demand for AI and cloud computing. Despite the challenges, Japan leverages its strengths in niche materials and precision chip-making tools to collaborate with existing market players and expand its global share, while also attracting foreign investment to establish a stronger presence in the semiconductor market.