Japanese Prime Minister Fumio Kishida’s ambitious ¥4 trillion (US$26.64 billion) spending spree to revive the nation’s semiconductor industry also aims to help reorient the economy back to a positive growth cycle sought by the government and central bank.
Already there is anecdotal evidence emerging from the northern island of Hokkaido and from Kumamoto in the south that the new chip projects are starting to impact the local economies and stem the tide of people flocking to Tokyo for better jobs and schooling.
Yuto Oikawa, a realtor in Chitose, Hokkaido, cannot keep up with calls as the city transforms from a backwater to one of the nation’s hottest real-estate markets thanks to the construction of a ¥2 trillion semiconductor foundry subsidized by Kishida’s chip plan.
Photo: Bloomberg
“We are completely short-handed,” said Oikawa, 32. “It’s blown me away.”
The foundry is part of government-backed Rapidus Corp’s plan to make a giant leap in chip technology and re-establish Japan at the forefront of semiconductor expertise.
Kishida calls chips “a driving force” to help lead Japan out of its deflationary malaise of sluggish growth once and for all. A boost to wages is seen as critical to the Bank of Japan scrapping its negative interest rate, as is widely expected next month or in April, and to further increases after that.
“I hope the chip industry will take a lead on pay hikes in regional economies,” Kishida said in a video message at a chip expo in December last year. “The Japanese government will continue to give its full support to investment in the mass production of chips in our country.”
The hope is that the latest chip strategy would help fill an economic void left by the legions of companies that shifted production abroad when the yen was about twice its current strength more than a decade ago. That hollowing out of industry drained communities of spending power and employment opportunities, prompting many young people to leave.
Yet success is not guaranteed. The 2012 bankruptcy of Elpida Memory, a government-backed maker of DRAM memory chips, shows that an initial interventionist hand from the public sector can still end in failure.
Dai-Ichi Life Research Institute executive economist Hideo Kumano said that the global competitiveness of the chip industry means the latest strategy is far from certain of success.
“These subsidies are massive, but as fiscal stimulus measures, it’s possible they don’t end up paying off in the long run,” Kumano said.
The wave of people heading to the cities has resulted in four key urban areas surrounding Tokyo, Nagoya, Osaka and Fukuoka accounting for about 54 percent of Japan’s population and 60 percent of national output. From 2000 to 2020, the number of people living in Tokyo rose 16 percent, while the national population shrank.
The combined number of residents in Hokkaido and Kumamoto fell 7.7 percent during that period, while the size of their combined regional economies contracted 2.9 percent. The cheap yen has invited a wave of tourists to Japan, helping bring money into regions with sightseeing hotspots, but more needs to be done for areas off the beaten track.
The main goal of the Japanese government’s chip strategy is to triple domestic chip sales to about ¥15 trillion by 2030 and regain ground lost to Taiwanese and South Korean rivals.
The government’s spending spree to fund projects across Japan has already attracted foreign companies, such as the world’s biggest chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).
The Taiwanese giant has two factory projects in Kumamoto and there is talk of another to come. Kishida has highlighted the impact on the local community, as TSMC bumps starting salaries 20 percent above the national Japanese average.
The plant would generate an overall economic impact of ¥7 trillion and more than 10,000 jobs, Kyushu Financial Group Inc said, with an even bigger boost expected from the second TSMC foundry.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) would not produce its most advanced technologies in the US next year, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. Kuo made the comment during an appearance at the legislature, hours after the chipmaker announced that it would invest an additional US$100 billion to expand its manufacturing operations in the US. Asked by Taiwan People’s Party Legislator-at-large Chang Chi-kai (張啟楷) if TSMC would allow its most advanced technologies, the yet-to-be-released 2-nanometer and 1.6-nanometer processes, to go to the US in the near term, Kuo denied it. TSMC recently opened its first US factory, which produces 4-nanometer
GREAT SUCCESS: Republican Senator Todd Young expressed surprise at Trump’s comments and said he expects the administration to keep the program running US lawmakers who helped secure billions of dollars in subsidies for domestic semiconductor manufacturing rejected US President Donald Trump’s call to revoke the 2022 CHIPS and Science Act, signaling that any repeal effort in the US Congress would fall short. US Senate Minority Leader Chuck Schumer, who negotiated the law, on Wednesday said that Trump’s demand would fail, while a top Republican proponent, US Senator Todd Young, expressed surprise at the president’s comments and said he expects the administration to keep the program running. The CHIPS Act is “essential for America leading the world in tech, leading the world in AI [artificial
REACTIONS: While most analysts were positive about TSMC’s investment, one said the US expansion could disrupt the company’s supply-demand balance Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) new US$100 billion investment in the US would exert a positive effect on the chipmaker’s revenue in the medium term on the back of booming artificial intelligence (AI) chip demand from US chip designers, an International Data Corp (IDC) analyst said yesterday. “This is good for TSMC in terms of business expansion, as its major clients for advanced chips are US chip designers,” IDC senior semiconductor research manager Galen Zeng (曾冠瑋) said by telephone yesterday. “Besides, those US companies all consider supply chain resilience a business imperative,” Zeng said. That meant local supply would
BIG INVESTMENT: Hon Hai is building the world’s largest assembly plant for servers based on Nvidia Corp’s state-of-the-art AI chips, Jalisco Governor Pablo Lemus said The construction of Hon Hai Precision Industry Co’s (鴻海精密) massive artificial intelligence (AI) server plant near Guadalajara, Mexico, would be completed in a year despite the threat of new tariffs from US President Donald Trump, Jalisco Governor Pablo Lemus said. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), is investing about US$900 million in what would become the world’s largest assembly plant for servers based on Nvidia Corp’s state-of-the-art GB200 AI chips, Lemus said. The project consists of two phases: the expansion of an existing Hon Hai facility in the municipality of El Salto, and the construction of a