Ahead of the G7 leaders' meeting in the Japanese city of Hiroshima, some of the world's largest chipmakers, including Taiwan Semiconductor Manufacturing Co. (TSMC), South Korea's Samsung Electronics, as well as Intel Corp and Micron Technology of the US, have reached agreements to invest billions of dollars in Japan, enhancing the country's position and role in the chip industry and the global semiconductor value chain.
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| Japanese Prime Minister Kishida (center) and Minister of Economy, Trade and Industry Yasutoshi Nishimura (third from left) pose for a photo with leaders of the world's leading chipmaking companies at the G7 Summit. (Source: Kyodo) |
Japan "back on track"
As part of the deal, Micron Technology announced it would invest up to 500 billion yen ($3.6 billion) over the next few years, with support from the Japanese government. The company said the Hiroshima plant will enable the next wave of advanced chip innovation, such as 1-gamma node memory chips, which are expected to begin production in 2025.
In a statement, Prime Minister Kishida Fumio called Micron Technology's investment "an excellent example of the Japan-US semiconductor manufacturing cooperation model."
Micron’s new Japanese venture is a sharp contrast to its troubled relationship with China, where the company last year disbanded its Shanghai chip design team despite the world’s second-largest economy accounting for 11 percent of its sales. Micron’s products are currently under investigation by Beijing over national security concerns.
Gareth Leather, an economist at Capital Economics in London, said Japan's appeal to chipmakers was due to the efforts of allies such as the US, the European Union (EU) and the UK.
Japan was once a key player in the world semiconductor industry, accounting for more than half of the market share in 1988, but that position has since been taken over by Taiwan, according to experts. Taiwan now produces the majority of the world’s semiconductors, including 80 percent of the most advanced chips.
However, growing geopolitical tensions between the two superpowers, the US and China, are pushing developed countries to diversify their chip supplies beyond Taiwan.
TrendForce, a global technology market intelligence provider, predicts Taiwan's advanced chip processing capacity will fall to 71% by 2025, down 9% from 2022.
Containing China's Power
Last year, President Joe Biden signed the “Science and Chips Act,” which provides $52 billion in funding for domestic chip research and manufacturing. Companies that receive the funding will be banned from building chip factories in China for 10 years, a move widely seen as aimed at curbing the high-tech rise of the world’s second-largest economy.
In March 2022, the US government also proposed establishing a semiconductor industry alliance with Asian partners, including South Korea, Japan and Taiwan (China) to take advantage of each member's strengths, dominate all key areas of the value chain, and shake China's position in the global chip supply chain.
The alliance held its first meeting in February 2023, focusing on semiconductor supply chain resilience and future cooperation.
As the four partners deepen cooperation, TSMC, the world's largest contract chipmaker, said on May 18 that it will continue to invest in Japan. The company has built a factory in Japan in partnership with Sony Corp.
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| TSMC, the world's largest contract chipmaker, said on May 18 that it will continue to invest in Japan. (Source: Reuters) |
At a regular press conference on May 19, Chinese Foreign Ministry spokesman Wang Wenbin said that the US “Science and Chips” Act showed how Washington was using its power to force its allies to follow its lead.
According to the Financial Times , at the G7 Summit, which opens on May 19 and ends on May 20, Prime Minister Kishida and President Biden are expected to announce a $70 million deal to train 20,000 chip engineers at 11 universities in the US and Japan, including many prestigious universities such as Purdue University, Hiroshima University and Tohoku University.
Meanwhile, Prime Minister Kishida and British Chancellor Rishi Sunak have agreed for Japan and the UK to cooperate on semiconductor research and development and exchange skills, as part of a new global strategic partnership called the “Hiroshima Accord”.
Last year, Britain blocked a Dutch subsidiary of a Chinese company from acquiring Britain's largest semiconductor maker, Newport Wafer Fab, on national security grounds.
As the US and its allies push to increase domestic semiconductor production to isolate China, this could have implications for the world's second-largest economy, according to Gary Ng, senior Asia-Pacific economist at French investment bank Natixis.
For now, however, the US and its allies appear to be focusing on “containment of China’s technological advancement and rebalancing of manufacturing capacity,” rather than asking chipmakers to leave China.
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