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There was a sense of national pride in Japan last week when construction of a new Japanese chip factory kicked off and the semiconductor industry’s biggest players, from ASML to Applied Materials to Lam Research, gathered on the northern island of Hokkaido.
Economy, Trade and Industry Minister Yasutoshi Nishimura boasted before the guests that the factory of the new joint venture Rapidus would be built in Chitose, a city of fewer than 100,000 people that “has the potential to surpass Silicon Valley.”
The claim may be just typical groundbreaking grandstanding, but there’s no doubting Japan’s stake in spending 5 trillion yen ($34 billion) to revive its experiment as a semiconductor powerhouse. Success or failure could have major ramifications not just for Japan, but also for the U.S. and other allies seeking to reshape the global chip supply chain amid rising tensions with China.
Rapidus, backed by the government and Japan’s largest corporation, has teamed up with IBM to develop advanced chips, evidence of an industry bloc being formed among friendly nations to reduce reliance on TSMC for chips.
However, while many in Japan were desperate for this new strategy to work, it is hard to ignore the difficulties Lapidus faced in making it happen. Its challenges started with a severe labor shortage in the country. The number of construction workers has fallen by nearly 30 percent since 2009, with shortages extending to jobs such as truck drivers, plant operations managers and engineers.
Rapidus already employs more than 200 people, but in a place like Hokkaido that doesn’t have an ecosystem of chip companies and their suppliers, acquiring top talent will be a challenge. A sharp drop in the yen has also made it harder to recruit skilled workers from overseas.
In addition, there is the critical issue of manufacturing technology. Rapidus Chief Executive Atsuyoshi Koike said in an interview earlier this year that the company was founded on the lessons of Japan’s decline in the global chip industry, which dominated the global chip industry in the 1980s and would later become Its advantage ceded to South Korean rivals. South Korea, Taiwan, and finally China.
“Japan failed because it tried to make everything itself,” Koike said. “We’re not going to revive Japan’s semiconductor industry, but we’re talking about how Japanese manufacturing can contribute to the world.”
Rapidus will work with IBM with the goal of mass producing 2nm node chips starting in 2027. The company will also enter into a technical collaboration with IMEC, a nanotechnology research center outside Brussels that is used by state-of-the-art chipmakers to build prototypes.
But analysts have questioned how Rapidus can compete with rivals such as TSMC and South Korea’s Samsung in terms of production quality and stable yields, despite IBM’s dominance in research and development of advanced chip technology. Japan only has the expertise to make far less advanced 40nm chips.
IBM is also facing litigation Global Foundries accused the US company of illegally disclosing its intellectual property and trade secrets to partners, including Rapidus. Hiroshi Fushimi, an analyst at Shobayashi International Patent and Trademark Office, said that although it is difficult to completely rule out legal risks, the lawsuit may have limited impact on Rapidus.
IBM said Global Foundries’ allegations were “completely baseless.” Lapides declined to comment.
In addition to manufacturing capabilities, Fushimi also questioned whether Rapidus has the financial resources to be competitive as a semiconductor manufacturer. Rapidus estimates that the company needs about 5 trillion yen to achieve mass production of advanced chips. So far, the government has agreed to 330 billion yen in subsidies and has promised more.
Critics have long argued that Japan’s subsidies to the industry as a whole are too small compared with China and the United States, especially because the government tries to spread the subsidies evenly among many companies, rather than betting on a select few potential winners.
Perhaps most telling is the small investment that Toyota, Sony, Kioxia, NTT, SoftBank Mobile and three other corporate backers have agreed to provide: a total of 7.3 billion yen. Even so, Koike admits, it will take a lot of convincing: “It’s not easy for board members to agree to an investment that they think may end up being a fantasy.”
kana.inagaki@ft.com
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