In recent developments within the global semiconductor industry, tensions have escalated following Japan’s decision to tighten export controls on semiconductor technologies, a move that has significantly concerned China. This situation not only highlights the geopolitical intricacies of international trade but also underscores the strategic importance of semiconductors as a cornerstone of modern technology sectors.
Japan’s Tightening of Semiconductor Export Controls
On a Monday, the Chinese Ministry of Commerce publicly expressed its deep concerns regarding Japan’s announcement to impose stricter export controls on semiconductors and related goods. The Chinese government views these measures as potentially detrimental to the normal trade operations between Chinese and Japanese companies and disruptive to the stability of the global supply chain. In its statement, the ministry called for Japan to “correct wrong practices and jointly maintain the stability of global industrial and supply chains,” emphasizing the need for cooperation and stability in the global economic landscape.
These concerns from China arise at a critical juncture when the semiconductor industry is witnessing significant strategic shifts. Notably, in March, reports from Bloomberg indicated that the United States was intensifying efforts to persuade allies—including the Netherlands, Germany, South Korea, and Japan—to restrict China’s access to advanced semiconductor technology. This coalition aims to support Washington’s strategy to limit Beijing’s reach into high-tech equipment crucial for various applications, from consumer electronics to military systems.
The Strategic Role of TSMC’s New Plant in Japan
Amidst these geopolitical tensions, Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading contract chipmaker, has been playing a pivotal role in Japan’s semiconductor strategy. TSMC’s commitment to establishing its first chip manufacturing facility in Kumamoto, Japan, marks a significant milestone in Japan’s efforts to revitalize its semiconductor industry. During a visit to the plant, TSMC’s CEO, C.C. Wei, informed Japan’s Prime Minister Fumio Kishida about the company’s ambitious plan to achieve a 60 percent domestic sourcing target by 2030 for its Kumamoto facility. This target focuses on secondary materials used in chip production, highlighting TSMC’s strategy to integrate deeply into the Japanese industrial fabric.
The Japanese government has invested ¥476 billion ($3.1 billion) in this venture, which is a joint effort with major Japanese corporations such as Denso, Sony Group, and Toyota. This substantial investment is expected to generate positive effects across various sectors, including electric vehicles and electronics, illustrating the broad impact of the semiconductor industry on modern technology-driven markets.
Further, TSMC announced plans to construct a second facility in Kikuyo, Japan, with Tokyo committing an additional ¥732 billion ($4.8 billion) in subsidies to support this expansion. These developments are part of Japan’s broader strategy to not just revive its semiconductor sector but also to establish a robust domestic manufacturing base that could serve as a bulwark against geopolitical uncertainties and supply chain disruptions.
Challenges and Opportunities
However, the road ahead is fraught with challenges. Japan faces a significant workforce shortage in its semiconductor industry, which has seen a 20 percent reduction over the past two decades. According to estimates from the Japan Electronics and Information Technology Industries Association (JEITA), Japan must recruit an additional 40,000 employees over the next decade to meet industry demands. This labor shortage poses a critical barrier to achieving Japan’s ambitious goals in the semiconductor sector.
Furthermore, while Taiwan is projected to maintain a dominant position in the global foundry market, controlling about two-thirds of the capacity for advanced processes by 2027, this lead could diminish as the U.S. continues its aggressive expansion in the semiconductor field. Japan’s strategic positioning as a potential second in the global ranking highlights its plans to leverage its partnership with TSMC and other technological innovations to secure a competitive edge.
