Memory chips by South Korean semiconductor supplier SK Hynix are seen on a circuit board of a computer in this illustration picture taken February 25, 2022.
Japan, once the world's largest semiconductor manufacturer, fell behind in the global race. In photo: memory chips by South Korean semiconductor supplier SK Hynix are seen on a circuit board of a computer in this illustration picture taken February 25, 2022. Reuters / FLORENCE LO


  • Japan can build its own chip value chain "like no other country can:'' UC San Diego's Ulrike Schaede
  • IBM says the company is ''confident'' its collaboration with Rapidus will be a success
  • The Japanese government recently pledged around $1.8 billion to support Rapidus' work

Japan, a key western ally, has the potential to rise as a major player in the semiconductor industry, at the heart of a raging technology war between the world's two largest economies, an expert has predicted.

Japan is now a laggard in the chips industry, existing in the shadows of leaders Taiwan and South Korea. But that was not always the case, and the east Asian country is now poised for a strong comeback -- aided in part by Tokyo's support to home-grown startup Rapidus, Ulrike Schaede, founding director of the Japan Forum of Innovation and Technology (JFIT) and Japanese business professor at the University of California, San Diego's School of Global Policy and Strategy, said.

"I believe that Japan has a unique opportunity to rise, like [a] Phoenix from the ashes, in the global semiconductor industry," Schaede told International Business Times in emailed comments.

She explained that Japanese companies have "quietly but steadily" built up capacities for upstream supplies over the past two decades, making them front-runners in supplies of materials, chemicals and manufacturing equipment. "What that means now, in this new time of decoupling of global supply chains, is that Japan can build up a domestic semiconductor value chain like no other country can," Schaede, who has authored multiple books on Japan's business and globalization, said. "Whereas others are dependent on Japanese suppliers for critical inputs, Japan has those inputs."

Japan was the world's largest manufacturer of semiconductors in the 1970s and the 1980s, but the country currently accounts for less than 10% of the world's production, according to the Japan Electronics and Information Technology Industries Association's (JEITA) 2022 Production Forecasts for the Global Electronics and Information Technology Industries report.

With the West worried about the integrity of semiconductor supply chains amid rising tensions with China, a global race to reshore those supply chains and insulate them from potential disruption by Beijing is underway. Among the countries trying to benefit from that redrawing is India, which has an ambitious plan to corner a large share of the semiconductor manufacturing.

But Japan, a traditional US ally, getting back into the game in force would be music to the ears of worried western policymakers. Tokyo, along with the Netherlands, recently joined the US in imposing export restrictions on advanced tools and materials for manufacturing AI chips in an attempt to limit China's access to those tools.

Hideki Tomoshige, research associate for the Center for Strategic and International Studies' Renewing American Innovation (RAI) Project, wrote last year that several factors affected Japan's decline in the chip industry, including US-Japan trade tensions, and the inability or unwillingness of many Japanese chip firms to adapt to the emerging global trends.

However, there has been renewed interest in the potential revival of the Japanese chip industry in recent months, especially after the government pledged more support to help startup Rapidus with its work on semiconductors.

In April, Yasutoshi Nishimura, Japan's minister of economy, trade and industry (METI) said the government "decided to provide 260 billion yen (approximately $1.8 billion) as additional financial assistance" to Tokyo-based Rapidus, which is looking to build a manufacturing facility for next-generation chips.

Around the same time, Rapidus announced that it received approval from the METI to start preparations for a manufacturing plant in Chitose City, Hokkaido.

Several months before that, Rapidus partnered with tech giant IBM to develop the latter's 2 nanometer (nm) node chip design ready for production and make them at scale in the next few years.

The most advanced semiconductors today are 3 nm chips. IBM's 2 nm node chip, which the company unveiled in 2021, is projected to achieve 45% better performance than the current leading 7 nm chips.

"This is a long-desired international collaboration, truly essential for Japan to once again play a vital role in the semiconductor supply chain," Rapidus president and CEO Atsuyoshi Koike said in a statement released by IBM on the partnership.

Rapidus said it has deployed a team of researchers to IBM's Albany Nanotech Complex to begin work on 2 nm technology.

"We are very confident this will be a successful and efficiently implemented project," Bethany Hill McCarthy, IBM's communications lead, told IBT when asked about the company's work with Rapidus.

McCarthy added that IBM has had a "track record of successful joint-development efforts with Japanese semiconductor manufacturers" and Japanese suppliers of equipment and other materials.

Taiwan's TSMC and South Korea's Samsung continue to lead Asia's semiconductor industry, with TSMC still holding the title of the world's largest chip manufacturer.

TSMC's PR Division told IBT that while the company does not comment on specific firms, it believes "it is good to see more and more resources and energy in the industry, which will benefit the ecosystem and add more value to the industry."