Japan sees danger in US chip hub to fight China

Japan fears that US plans to pour billions of dollars into chipmaking to oust China could wipe out what is left of a Japanese semiconductor industry that once ruled the world.

After “three lost decades,” according to Japan’s industry ministry, the country’s share of global chip manufacturing has dropped from half to one-tenth as it leaked customers to cheaper rivals and failed to maintain its lead in the cutting-edge production.

As China and the United States, driven by a trade war and security concerns, increase support for making chips that operate from smartphones to missiles, officials fear Japan will be squeezed out of hand.

“We can’t just continue what we’ve been doing, we have to do something on a completely different level,” former Prime Minister Shinzo Abe told other LDP party members in May at a first party meeting to discuss how the country may be a leading digital economy.

Illustrating Japan’s fear of being left out of a new world order of technology, documents released by the Ministry of Economy, Trade and Industry earlier this year showed a thick red dotted line over a bar graph pointing to the possibility of zero participation. of the chip industry by 2030.

Of great concern is the future of the country’s still world-leading companies, which supply chip makers with items such as silicon wafers, chemical films and production machines.

Officials fear that by luring Asian chip smelting giants such as Taiwan’s Semiconductor Manufacturing Co (TSMC) into its territory, the United States could get those companies to do so.

“It is possible for companies to build in Japan and export, but the closer you are to a supplier, the better, the easier it will be to exchange information,” said Kazumi Nishikawa, IT industry director at METI.

While change may not happen immediately, “it can happen in the long run,” he said.

Companies Nishikawa is concerned about include wafer makers Shin-Etsu Chemical and photoresist supplier Sumco, JSR Corp, and production machine makers Screen Holdings and Tokyo Electron.

“We are always prepared to respond to changes in policy in each country,” said a spokesman for JSR, which manufactures light-sensitive photoresist coatings used for recording chips in Japan, Belgium and the United States.

When questioned by Reuters, none of the companies said they currently planned to move production to the United States.

technological warfare

To retain them, Japan needs chip foundries that buy its wafers, machinery and chemicals, and also secure stable supplies of semiconductors for the country’s automakers and electronic device makers.

TSMC, looking to expand abroad amid concerns about the potential vulnerability of its Taiwanese operations to the territorial ambitions of mainland China, has established a research and development center near Tokyo. It is also reviewing a plan to build a factory in Japan.

However, its biggest foreign venture by far is a $12 billion (about Rs. 89,140 crores) factory it is building in Arizona, USA.

In an attempt to stay in the technology race, Prime Minister Yoshihide Suga’s government in June approved a strategy devised by Nishikawa’s team at METI to ensure Japan has enough chips to compete in technologies that will drive future economic growth , including artificial intelligence. 5G speed connectivity and vehicles with auto steering.

One initiative is to transform Japan into an Asian data center hub. These centers generate a huge demand for semiconductors, which in turn will attract chip makers to build factories nearby.

Spending support

The success of its industrial policy, however, will depend on money.

So far, the country has allocated JPY 500 billion (about INR 33,900 crores) to strengthen technology supply chains to help companies deal with shortages of chips and other components during the coronavirus pandemic and to promote a shift to 5G .

This is only a fraction of the expenditure proposed by other countries.

“At the current level of support, it is difficult for Japan’s semiconductor industry and we want government incentives that are comparable to those in other parts of the world,” said the Japan Information Technology and Electronics Industry Association (JEITA) by email.

The US Senate has passed a bill authorizing $190 billion (about Rs. 14.11.49 billion) of public money for new technologies, including $54 billion (about Rs. 4.01.160 million) in chips, while the European Union plans to spend EUR 135 billion (about INR 11,75,840 crores) on boosting its own digital economy.

To match these expenditures, Japan would have to earmark large sums of public money that the aging nation could spend on health and well-being. METI has yet to say how much it believes it needs.

“Given Japan’s financial situation, it will be difficult to match” the United States, the EU and China, former economic revival minister Akira Amari and leader of the LDP group that seeks to “make Japan number one again,” he told Reuters.

© Thomson Reuters 2021


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