The Japanese government will pay for a significant part of a second Taiwan Semiconductor Manufacturing Co. factory in southern Kumamoto, according to the leaders of the ruling party’s lawmaker coalition on chips.
(Bloomberg) — The Japanese government will pay for a significant part of a second Taiwan Semiconductor Manufacturing Co. factory in southern Kumamoto, according to the leaders of the ruling party’s lawmaker coalition on chips.
Giving no support will be out of the question after the government pledged to shoulder half the cost of the first Kumamoto plant, said Akira Amari and Yoshihiro Seki, chairman and secretary general of the Liberal Democratic Party’s group on semiconductors. Amari said around one third of the cost is the norm for these types of projects, and the amount of support for the first was unusually large.
The subsidies will be part of Japan’s efforts to revive its domestic chipmaking industry, a sector that’s viewed as crucial for growth and economic security, Amari said.
“This is a national strategy,” Amari said in an interview in Tokyo on Wednesday. “We are facing the kind of choice that will set our course over the next decades. Are we going to be a receiver of chips or a provider? Which is better? We have no choice but to take on this challenge, regardless of the outcome.”
Whether or not the government will also pay for half of the second TSMC plant will depend on what type of chips will be made there, and how much of a wider economic impact it can generate in the region, Seki said. For example, the government would be more supportive if TSMC plans to train many Japanese engineers through its own more technically advanced workers, he added.
“The plant will certainly boost the economy and we will back it,” Seki said in a separate interview on Wednesday in Tokyo. “Around the globe, governments are pouring in support. If Japan alone doesn’t do anything, we won’t be able to attract top chip companies from the rest of the world.”
The lawmakers also said they would like to see at least 1 trillion yen ($7 billion) of chip-related support in an extra budget this year, which would likely be compiled toward the end of the calendar year.
“Investments in the trillions of yen are the global standard when it comes to chips,” Amari said. “We will secure a substantial budget amount.”
While the second TSMC plant hasn’t officially been announced by the company, aid for it could be part of that budget, Seki said. Money could also go to legacy and power semiconductor production in need of support.
TSMC Chairman Mark Liu said in June that the company is in discussions with Japan over subsidies for a second facility, which might be located alongside its current plant in Kumamoto.
If the additional support in the extra budget materializes, Japan will be largely on track with its plan to invest about 10 trillion yen in semiconductors over the span of a decade. Prime Minister Fumio Kishida had made that intention clear last year.
So far, about 1.76 trillion yen has been set aside for the nation’s chip and digital strategy that was created in 2021 and revised this year, according to the economy ministry. Of that total, 1.2 trillion yen is for semiconductors, 500 billion yen for storage batteries and 60 billion yen for software-related initiatives. Japan is aiming to triple the sales of domestically produced semiconductors to more than 15 trillion yen by 2030.
Government aid for chips will likely be pursued as special items in extra budgets rather than in the regular annual budgets, Seki added. That’s partly because such investments tend to be quite large and risky.
So far the government has boosted subsidies to aid the sector, but its approach may need to evolve down the road, he said. Other potential measures include tax deductions to help companies with high operation costs, especially in water and power bills.
Key aid pledged so far include 476 billion yen for the first TSMC plant, set to begin production in late 2024, and 330 billion yen for Japan’s homegrown chip venture Rapidus Corp. in northern Hokkaido. The TSMC case has justification in that it brings the world’s leading chipmaker to Japan, but the risk is higher for the Rapidus case, Seki said.
The latter is a brand new startup that aims to mass produce the most-advanced form of chips, uncharted territory for Japan, and the government is planning on providing further support.
“I recognize this is a tough project,” Seki said of the Rapidus case. “We won’t be able to succeed unless we think that there’s no choice but to succeed.”
–With assistance from Peter Elstrom and Mayumi Negishi.
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