Japan Looking to Pay at Least Half Setup Costs of Chip Fabs

·3-min read

(Bloomberg) -- Japan is looking to stump up around half the setup costs of semiconductor factories built in the country and attract U.S. manufacturers as it looks to shore up its chip supplies, according to senior Japanese officials.

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Prime Minister Fumio Kishida’s record 56 trillion yen ($490 billion) fiscal stimulus unveiled Friday didn’t specify how much money would be made available, but the premier promised his government would keep looking to attract chipmakers to set up production facilities in Japan.

Those facilities include a new $7 billion chip factory in western Japan planned by Taiwan Semiconductor Manufacturing Co. and Sony Group Corp.

“TSMC has been a big topic recently for our national economic security,” Kishida said Friday. “But it doesn’t end there. It’s important we attract U.S. chipmakers and take other action to increase possibilities for the private sector.”

Trade minister Koichi Hagiuda meanwhile hinted that Japan was willing to pay half the costs or more, while confirming that the final amount to be set aside has yet to be decided.

The comments come amid local media reports that the government is planning to budget around $6.7 billion in an upcoming extra budget to support efforts to enhance the nation’s chip facilities.

Read more: Japan’s Kishida Looks to Make a Splash With Record Stimulus

Shoring up Japan’s chip fabrication expertise and capacity would provide essential support for the needs of domestic companies like Toyota Motor Corp., Nintendo Co. and Sony, each of which has faced severe production challenges due to silicon shortages. The task has become a national priority for Kishida as he emphasizes the importance of economic security.

“Given a trend for countries to provide half the initial setup costs or more, we’d also like to think along those lines for new chip fabs,” Hagiuda said.

The first recipients of government help are likely to be Sony and TSMC for their factory, which Kishida promised to help get built.

TSMC approved an initial investment of up to $2.12 billion to create a Japan-based subsidiary, the Taiwanese chipmaker said earlier this month, with Sony Semiconductor Solutions Corporation investing $500 million in that subsidiary. However, the government hasn’t so far made clear how much of the remaining $4.4 billion it will pay or which other companies are investing.

As the car industry’s move toward more automated and electric vehicles accelerates, each vehicle will require more semiconductors for sensors and processing of environmental data, escalating the need for chips.

Local media in Japan and in Taiwan have reported that Denso Corp., one of Japan’s largest autoparts companies, may be among the potential partners in the TSMC deal.

Denso declined to comment on the reports, as did all the other major Japanese car manufacturers.

Construction of the TSMC fab is set to begin in 2022 with production expected to start by the end of 2024. The chip plant is expected to create about 1,500 jobs with a monthly capacity of 45,000 12-inch wafers initially made with mature 22- and 28-nanometer technologies.

Japan’s plans to reboot its industry come as China, the U.S. and even the European Union also look to strengthen their own domestic sectors.

U.S. Commerce Secretary Gina Raimondo said this week that the U.S. wanted to both increase its own chip output and work closer with its allies on securing supplies, creating opportunities for Japanese industry to collaborate and expand.

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