Japan sees danger in the US chip hub to counter China


Japan worries that US plans to pour billions of dollars into chip manufacturing to fend off China could destroy the remnants of a Japanese semiconductor industry that once dominated the world.

After “three lost decades”, according to the Japanese Ministry of Industry, the country’s share of global chip production has fallen from half to a tenth because customers were passed on to cheaper competitors and the lead in top production could not be maintained.

As China and the United States, fueled by a trade war and security concerns, step up support for making chips that power everything from smartphones to missiles, officials fear Japan will be completely ousted.

“We cannot just go on with what we have done so far, we have to do something on a completely different level,” said former Prime Minister Shinzo Abe at an initial party meeting in May to discuss how the country can be a leading digital economy .

To illustrate Japan’s fear of being excluded from a new technological world order, documents distributed 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 a zero chip -Industrial share by 2030.

A major concern is the future of the country’s still world leaders who supply chip manufacturers with items such as silicon wafers, chemical films and production machinery.

Officials fear the United States could trick these companies into following them by luring Asian chip foundry giants like Taiwan’s Semiconductor Manufacturing Co (TSMC) to their ground.

“Companies can build and export in Japan, but the closer you are as a supplier, the better it is to share information,” said Kazumi Nishikawa, director of IT at METI.

While the shift may not come immediately, “it could happen in the long term,” he said.

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

“We are always ready to respond to policy changes in any country,” said a spokesman for JSR, which makes photosensitive photoresist coatings for chip engraving in Japan, Belgium and the United States.

When asked by Reuters, none of the companies said they are currently planning to move production to the US.

Tech war

In order to keep them, Japan needs chip foundries that buy their wafers, machines and chemicals, and also ensure a stable supply of semiconductors to automobile companies and electronic device manufacturers.

TSMC, looking to expand overseas, given the potential vulnerability of its operations in Taiwan to mainland China’s territorial ambitions, has established a research and development center near Tokyo. It is also considering a plan to build a factory in Japan.

However, its largest overseas company by far is a $ 12 billion (approximately Rs 89.140 billion) facility it is building in Arizona, United States.

To keep up with the technology race, Prime Minister Yoshihide Suga’s government in June approved a strategy devised by Nishikawa’s team at METI to ensure Japan had enough chips to compete in technologies that will drive future economic growth, including artificial intelligence , high-speed 5G connectivity and self-driving vehicles.

One initiative is to make Japan an Asian data center hub. Such hubs create tremendous demand for semiconductors, which in turn will lead chipmakers to build factories nearby.

Spending support

However, the success of your industrial policy will depend on money.

So far, the country has allocated JPY 500 billion (around Rs 33,900 billion) to bolster technology supply chains, help businesses cope with the shortages of chips and other components during the coronavirus pandemic, and encourage a move to 5G.

That is only a fraction of the spending proposed by other countries.

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

The U.S. Senate has passed a bill authorizing $ 190 billion (approximately 11/14,490 rupees) in public money for new technologies, including $ 54 billion (approximately Rs 4.01,160) for chips while the European Union plans to spend 135 billion euros (approximately 11.75.840 billion rupees) on promoting its own digital economy.

To offset these expenditures, Japan would have to provide large sums of public money that the graying nation would otherwise spend on health and welfare. METI has yet to say how much it thinks it takes.

“Given Japan’s financial situation, it will be difficult to keep up with the United States, the EU and China,” said Akira Amari, LDP group leader, former Minister for Economic Revival, and leader of the LDP group, Japan want to make it back to number one, “said Reuters.

© Thomson Reuters 2021


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