The island of Hokkaido, traditionally known for its agricultural prowess, is undergoing a significant transformation as Japan invests billions to establish it as a global hub for advanced semiconductor manufacturing. With a rich history in dairy production and tourism, Hokkaido is now witnessing a surge in construction, with factories and research centers emerging across the region. This ambitious initiative aims to revitalize Japan’s chip-making industry and position the country as a key player in the competitive global semiconductor market.
An unlikely player
Central to this ambitious plan is Rapidus, a relatively unknown company that has garnered support from the Japanese government and major corporations like Toyota, Softbank, and Sony. Rapidus was formed through a partnership with IBM and has successfully raised billions to establish Japan’s first state-of-the-art chip foundry in decades. The government has committed $12 billion to support the construction of a massive semiconductor factory, or “fab,” in Chitose, a city in Hokkaido.
Atsuyoshi Koike, the CEO of Rapidus, highlighted Chitose’s advantageous water and electricity infrastructure, as well as its scenic beauty, as key factors in selecting the location. The design of the factory aims to blend seamlessly with the natural landscape, featuring a grass-covered exterior. Additionally, local authorities have noted that Chitose is less prone to earthquakes compared to other potential sites in Japan. A significant milestone for Rapidus was the acquisition of an extreme ultraviolet lithography (EUV) system from ASML, a Dutch company. This advanced machinery enabled Rapidus to produce prototype two-nanometer (2nm) transistors, a feat achieved only by leading competitors TSMC and Samsung. Koike emphasized the importance of the IBM partnership in reaching this milestone, which positions Rapidus as a contender in the high-stakes semiconductor race.
The sceptics
Despite Rapidus’s ambitious goals, skepticism remains regarding its ability to achieve mass production of 2nm chips by 2027. The company faces significant challenges in ensuring the yield and quality necessary to compete in a market dominated by established players like TSMC and Samsung. A report from the Asean+3 Macroeconomic Research Office indicated that while Rapidus is receiving government support, the funding falls short of the estimated $31.8 billion needed for mass production.
Furthermore, the Center for Security and International Studies has raised concerns about Rapidus’s lack of experience in manufacturing advanced chips and its ability to access the necessary expertise from established companies. Additionally, finding customers may prove difficult, as TSMC and Samsung have long-standing relationships with global clients that rely on their chips.
The lost decades
Japan’s government is making a substantial investment in the semiconductor industry, committing $27 billion between 2020 and early 2024, which surpasses the relative commitment made by the United States through the CHIPS Act. In late 2024, Tokyo announced a $65 billion package aimed at bolstering artificial intelligence and semiconductor initiatives, potentially aiding Rapidus’s growth.
Historically, Japan was a leader in semiconductor production, accounting for over half of the global market four decades ago. Today, that figure has dwindled to just over 10%. Experts attribute this decline to trade tensions in the 1980s, which weakened domestic companies and hindered their competitiveness. Unlike its rivals, Japan failed to maintain consistent subsidies to support its chipmakers. However, Koike asserts that the current government is united in its efforts to revitalize the industry.
Japan faces broader economic challenges, including a shrinking population and an increasing elderly demographic, which has strained the national budget and limited funding for research and technology. The country is also grappling with a shortage of semiconductor engineers, with an estimated shortfall of 40,000 workers in the coming years. Rapidus is collaborating with Hokkaido University and other institutions to train new talent, but it acknowledges the need to rely on foreign workers amid low public support for immigration.
Growing an ecosystem
The government’s initiatives are already attracting significant global players to Japan’s semiconductor landscape. TSMC is currently producing 12–28nm chips in Kumamoto, marking a notable advancement for Japan, even as it lags behind TSMC’s cutting-edge facilities in Taiwan. This expansion has revitalized the local economy, drawing suppliers, increasing wages, and prompting infrastructure development.
Japan’s strategy appears to follow a model where establishing a semiconductor “fab” leads to the growth of an entire ecosystem. TSMC is set to begin construction on a second plant in Kyushu, expected to commence production by the end of 2027. Alongside Rapidus and TSMC, local companies like Kioxia and Toshiba are receiving government support to expand their operations.
In Hokkaido, chipmaking equipment firms such as ASML and Tokyo Electron have opened offices in Chitose, driven by Rapidus’s establishment of a production facility. Koike envisions a “global ecosystem” where collaboration will enable the production of semiconductors that contribute significantly to the global market. Rapidus aims to differentiate itself by focusing on speed and customization, promising to deliver bespoke chips faster than its competitors.
As global demand for semiconductors surges, particularly with the rise of artificial intelligence, Japan’s government views investment in Rapidus as a critical step to reviving its semiconductor industry and enhancing its technological prowess. Analysts suggest that this initiative may be Japan’s best opportunity to build a domestic ecosystem capable of supplying advanced chips to its manufacturers and potentially emerging as a formidable competitor in the global market. Observer Voice
AloJapan.com