Japan’s efforts to reclaim its status as a semiconductor powerhouse are underway amid the decoupling between Taiwan and China. Once the world leader in the semiconductor industry, Japan boasted high productivity and competitive pricing through government-led vertical integration, from materials to equipment and manufacturing. However, competition from the United States and South Korea soon diminished Japan’s market share from nearly 50% in the 1980s to 10%.

In response, Japan has set ambitious goals to regain its semiconductor dominance, supporting the construction of private production bases and the development of next-generation semiconductors with substantial subsidies. Major Japanese corporations like Toyota and Sony have joined forces to establish a new company named Rapidus for next-generation semiconductor development, while Taiwan’s TSMC, a global foundry market leader, has also constructed a factory in Japan.

Japan continues to invest in rebuilding its semiconductor industry amidst a global chip shortage, with at least nine Taiwanese chip companies expanding into Japan in the last two years, supporting TSMC’s new factory and optimistic about Japan’s semiconductor market prospects.

Despite starting its semiconductor industry support policies later than the US, Europe, and China, Japan’s efforts seem positively influenced by current international circumstances. Challenges such as US export regulations have disrupted China’s semiconductor equipment and supply chains, while the US and Germany face uncertainties in funding and support for semiconductor factory subsidies.

Amidst the ongoing separation between China and Taiwan, Taiwan’s movement into Japan accelerates. Japan, while lagging in finished semiconductor product production and technology, remains a leader in equipment, materials, and components. Recognizing the essential role of semiconductors in economic security, Japan has invested significantly in rebuilding its chip manufacturing sector, encouraged by the US, especially during the global chip shortage experienced during the pandemic.

As a result, TSMC, officially known as Taiwan Semiconductor Manufacturing Co., is scheduled to inaugurate its first factory in Kyushu, southern Japan, contrasting with the challenges faced by its Arizona factory. In addition, Rapidus, a chip foundry venture supported by the Japanese government, plans to start mass production of chips in Hokkaido by 2027.