Japan Storms Back into the Chip Wars

The country used to be a semiconductor powerhouse. Can it be one again?

- 

Mr Atsuyoshi Koike likes to go fast. The 73-year-old semiconductor engineer is a motorcycle aficionado. He brings the same tempo to his latest company, Rapidus.

Founded in 2022, the firm opened its massive semiconductor factory, or "fab," in 2024 in Chitose, a small city on Hokkaido, Japan's northernmost main island. In December Rapidus became the first Japanese entity to acquire an extreme ultraviolet lithography system from ASML, the Dutch company that makes the unique devices; Rapidus had the complex up and running within months.

In mid-July, Mr Koike announced the successful pilot production of 2-nanometre (nm) transistors, the thinnest, most advanced chips yet. "A company that's been around less than three years managed to do it," he boasts. "It's an incredible pace."

Rapidus is the most ambitious element of a broader effort to revive the semiconductor industry in Japan. In the boldest industrial policy push in a generation, the Japanese government ploughed 3.9 trillion yen (S$34 billion) into support for semiconductors between early 2020 and early 2024.

As a share of gross domestic product, that amounts to a bigger commitment than America made to its semiconductor industry through the Chips Act. Japan wants both to revive its domestic champions and to attract foreign ones, such as TSMC, the Taiwanese semiconductor giant, which now makes chips in southern Japan. At the launch of its fab there in 2024, TSMC founder Morris Chang spoke of a chip "renaissance".

Japan once dominated the semiconductor industry. In the 1980s, Japanese firms accounted for more than half of the global market, and an even bigger share of the cutting-edge chips of the time.

But trade friction with America led to limits on Japanese chip exports, creating an opportunity for rivals in Taiwan and South Korea. Japanese companies also struggled to shift to an era of increasing specialisation in semiconductor production.