At a seminar hosted by APARC’s Japan Program, industrial economist Jun Akabane, a professor at Chuo University and a current visiting scholar at the center, evaluated Japan’s efforts to revitalize its semiconductor industry and boost economic security by contrasting the strategies taken by two government-backed projects led by TSMC Kumamoto and Rapidus.

In the 1980s, Japan was a dominant player in the semiconductor industry, particularly in Dynamic Random Access Memory (DRAM), but by the 1990s, misjudgments in market trends and trade frictions led to a decline in competitiveness. Japan’s semiconductor giants, such as NEC and Hitachi, were slow to embrace advanced technologies, and the country ultimately dropped out of the 22/20nm process scaling race.

Akabane argued that Japan’s economic security today is fundamentally tied to semiconductor resilience. Supply chain disruptions, such as those seen in the 2020 global semiconductor shortage, prompted Japan to reconsider its role in global semiconductor production. The government’s current strategy, initiated by Prime Minister Kishida’s administration in 2021, aims to secure critical technologies and materials, with a focus on the semiconductor sector.

Implementing this strategy, the 2022 Economic Security Promotion Act outlines four key objectives: ensuring a stable supply of critical minerals, safeguarding critical infrastructure, supporting the development of advanced technologies, and implementing a patent non-disclosure system. Against this backdrop, Japan launched two major projects currently underway:  one based on a collaboration with Taiwan’s TSMC on a new plant in Kumamoto, the other betting on Rapidus as a domestic attempt to reclaim competitiveness in advanced logic integrated circuit production.

Two Approaches to Supply Chain Resilience

Japan’s semiconductor revitalization strategy centers on two major initiatives that take very different approaches. The TSMC Kumamoto project is a semiconductor manufacturing plant in Kumamoto, built by Taiwan Semiconductor Manufacturing Company (TSMC) with support from the Japanese government and local partners, including Sony and Denso. Its goal is to produce widely used “mature-node” chips that power products like automobiles, industrial equipment, and consumer electronics, thereby strengthening Japan’s domestic supply chain.

Rapidus, by contrast, is a newly created Japanese semiconductor company established in 2022 with government backing and funding from eight major Japanese firms, including Toyota, Sony, and SoftBank. Rather than focusing on currently available chips, Rapidus aims to develop and manufacture cutting-edge logic semiconductors, such as next-generation 2-nanometer chips, in collaboration with global partners such as IBM and the Belgian research center Imec. The project represents Japan’s attempt to reenter the global race to produce the most advanced semiconductors.

The two projects represent distinct strategic approaches. TSMC Kumamoto is a critical part of strengthening Japan’s semiconductor supply chain, as it enables better integration with Japan’s equipment, materials, automotive, and electronics sectors. Conversely, Rapidus signals Japan’s ambition to enter the global semiconductor supply chain for advanced logic ICs, a sector previously dominated by the U.S. and Taiwan.

The differences between TSMC Kumamoto and Rapidus are stark. TSMC Kumamoto benefits from direct support from TSMC in Taiwan, ensuring access to cutting-edge manufacturing processes. This project focuses primarily on meeting Japan’s domestic needs, targeting sectors such as data centers and cell phones. By bringing chip fabrication back to Japan and integrating it with the country’s strong semiconductor materials, equipment, automotive, and electronics industries, the TSMC Kumamoto project has already strengthened linkages across the domestic supply chain. According to Akabane, these reinforced connections are raising expectations that the project will improve Japan’s resilience to future supply disruptions.

In contrast, Rapidus, with funding from eight Japanese corporations and technical support from IBM and Imec, aims to become a player in the global semiconductor ecosystem. Yet, Rapidus faces significant challenges. The project is still in its early stages of development (working with 14nm technology) and lacks the advanced equipment needed to manufacture 2nm chips. Rapidus also faces competition for limited resources, particularly in securing the necessary machinery from ASML in the Netherlands.

Strategic Risks and Criticisms

Akabane highlighted several criticisms of both projects. Regarding TSMC Kumamoto, critics question why Japan is investing heavily in a foreign-owned company. Some argue that this approach does not significantly enhance Japan’s domestic supply chain. Rapidus, on the other hand, has been criticized for its reliance on foreign technology and its uncertain future. The project has yet to achieve the scale necessary for mass production, and its focus on high-end logic ICs could divert attention away from strengthening Japan’s core semiconductor industries.

Questions remain whether the Japanese government should continue to intervene so heavily in the market. Some experts fear that excessive government involvement could lead to inefficiencies, as seen in Japan’s past industrial policies. Others doubt whether Rapidus can survive in the competitive landscape dominated by TSMC, Samsung, and NVIDIA.

Geopolitical Considerations

Japan’s semiconductor strategy also carries significant geopolitical implications, especially amid U.S.-China tensions. The Japanese government aims to reduce dependency on foreign suppliers while strengthening its alliances with the U.S. and Taiwan. Critics warn that this approach could create vulnerabilities if geopolitical tensions escalate, particularly in the event of a Taiwan contingency that disrupts global supply chains.

Future Implications

Looking ahead, the success or failure of TSMC Kumamoto and Rapidus will have profound implications for Japan’s economic security. If TSMC Kumamoto succeeds, it could provide Japan with a more robust and resilient domestic semiconductor supply chain. By contrast, if Rapidus falters, Japan’s efforts to re-enter the global semiconductor race could be undermined.

Ultimately, Japan’s current semiconductor strategy reflects a delicate balance between domestic resilience and global integration. The success of these projects will depend not only on government support but also on private-sector innovation and Japan’s ability to navigate complex geopolitical and technological challenges.

Key Takeaways:

• Japan’s semiconductor strategy is shaped by historical setbacks and current geopolitical pressures, particularly the U.S.-China rivalry.
• TSMC Kumamoto and Rapidus represent two distinct approaches to revitalize Japan’s semiconductor industry: domestic collaboration vs. global integration.
• Both projects face significant challenges, including criticism of Japan’s reliance on foreign partnerships and the high costs of technological advancement.
• The success of these projects will have major implications for Japan’s economic security and its role in the global semiconductor ecosystem.