Original text [1]: Yoshiaki Nohara - 202402.21
Bloomberg) -- In snowy Hokkaido, Japan is pouring billions of dollars into restoring its chip-making capabilities and separating the economy from growing tensions between China and the United States.
Excavators and trucks weave across the frozen ground, and a high-tech factory is under construction, overlooking the free-roaming horses of the prairie. The project is changing the face of the region, known for its agriculture, military bases and new Chitose airport, and also aims to change the landscape of Japan's chip industry.
A newly formed local company, Rapidus, plans to start from scratch and mass-produce state-of-the-art 2nm logic chips by 2027. By industry standards, this is an incredible challenge for an 18-month-old start-up in a country that lags far behind overseas competitors in semiconductor production. However, as the U.S. and China scramble for access to the latest chip-making expertise and equipment, Japan has seen an opportunity to re-enter the once-dominant game by capitalizing on Washington's concerns about chain security.
The stakes are huge. Advanced chips will be the foundation for more than a dozen key technologies, including artificial intelligence, ** systems, and electric vehicles. Most of the world's production is concentrated in Taiwan and South Korea, which makes the future ** likely to be affected by regional tensions.
Atsuo Shimizu, an executive at Rapidus who is in charge of launching the new plant, said: "It's about geopolitics, economic security, and other factors. In order to survive as a nation, Japan needs to become a global player with technology, and we can clearly demonstrate this through semiconductors. ”
Tokyo has shown its resolve. In less than three years, Japan has set aside about 4 trillion yen (about 192.1 billion yuan) to revitalize its semiconductor strength, and Japanese Prime Minister Fumio Kishida plans to eventually provide 10 trillion yen in financial support for the industry, including from the private sector. One of the goals is to triple the sales of domestically produced chips to more than 15 trillion yen by 2030.
Japan's new chip strategy has two main directions. First, the country is seeking to reassert itself as the go-to choice for manufacturing traditional chips by attracting the industry's largest foreign companies to Japan and offering generous subsidies of up to half the set-up cost. The second and more ambitious part of the strategy is the Rapidus project in Hokkaido, which aims to restore Japan's position as a cutting-edge player in silicon chips. "Why are we doing so much for chips? Kazumi Nishikawa, director of economic and security policy at the Japanese Ministry of Economic Affairs and one of the architects of the strategy, said, "Frankly, it's because of the confrontation between China and the United States." If Taiwan's chips** are interrupted, there will be trillions of dollars of negative impact everywhere, and the economy will collapse. ”
Tokyo has already had some success in the first and larger parts of the strategy. The world's largest chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC), has a $7 billion factory in Kumamoto City in southern Japan that is about to start production, another is about to start, and there are rumors of a third factory. The Taiwanese giant quickly realized that chip projects, partially funded by Tokyo, could be launched much faster than in the United States or other countries.
By drawing on the expertise of the world's leading manufacturers, Japan hopes to rebuild the chip-related ecosystem and provide jobs and opportunities for its regional economy to grow again. At the same time, these initiatives will help strengthen Japan's credentials as a key ally in the U.S.-led global ** chain, which is committed to keeping production lines running for important semiconductors, from smartphones and automobiles to the latest missile systems. However, the fate of the second part of the Tokyo strategy looks far uncertain, and the Rapidus project is both exciting and doubtful. Its success depends on making a huge technological leap without knowing how much the final product will cost or reliability, or whether there will be a buyer. It's a goal that even industry leaders are striving to achieve.
This time, though, Japan can count on the United States as its ally, not its technological enemy – as was the case in 1986 when Washington pressured Tokyo to restrict its chip exports. As part of the Rapidus project, IBM is training about 100 experienced Japanese engineers in Albany, N.Y., to equip them with cutting-edge chip expertise in the United States. "We're partners, allies, and we're aligned together to make sure our economic security is aligned because the threat comes from somewhere else, and that place is China," said Rahm Emmanuel, the U.S. ambassador to Japan. "We are in the same boat, paddling in the same direction. ”
Japan's strategy marks a divergence from previous attempts to support its chip industry, which largely argued that it did not need outside help – and failed.
Like TSMC, Micron Technology, Asmail and Samsung Technology are investing in production or research facilities in Japan, as companies are looking for the best solutions to secure their future output in a world of uncertainty. The CHIPS and Science Act of 2022 set $39 billion in direct subsidies for accelerated manufacturing in the U.S., but the first major $1.5 billion reward was only announced this week. Labor and cost challenges have also delayed the start of production of TSMC's new factory in Arizona. In Germany, the turmoil in the budget has sparked concerns about subsidies from TSMC and Intel. "This time Japan took a bold approach and made very quick decisions," said Luc van den Hove, CEO of imec, a Belgian microelectronics research center. "If I look back 20 years or 15 years ago, I think the policy was more closed. ”
TSMC's factories have a lot of reasons for their success. The first factory's products, 12nm to 28nm logic chips, have matured technology. Kumamoto is located on the island of Kyushu in southern Japan, where there are about 1000 related tech companies. And there are customers - including Japanese car manufacturers.
TSMC's second factory, which was officially announced earlier this month, will produce chips from 6nm to 7nm nearby. Yoshishi Sekiya, secretary general of a coalition within Japan's ruling party dedicated exclusively to chips, said that by 2037, tax revenues from factories may have repaid the initial investment.
Japan is also an attractive location for other reasons, it has a disciplined workforce and reliable service, and the depreciation of the yen against the dollar has kept it at its weakest level in decades, which has also made Japan much less expensive as a production base. Japan is also a major global supplier of chemicals and equipment used in chip manufacturing. Some of these Japanese companies, including Tokyo Electron, have taken advantage of the other side of the economic security issue, the surge in demand from China, as China looks to enhance its existing technology before more restrictions emerge.
While Japan's appeal as a chip manufacturing base is also present in Hokkaido, the situation is quite different. Rapidus started in a long-forgotten manufacturing area where there are only about 20 local businesses related to chip manufacturing. Japan's National Institute of Technology expertise has long been stagnant at 45nm, so Rapidus' massive output of 2nm chips using unproven IBM technology in about five years looks like a very high target. Even if Rapidus is able to reach its target in 2027, TSMC and Samsung may already be in the market, and their high-volume production will bring cost advantages.
Shigeru Fujii at Fujitsu Ltd. in JapanAs head of chip manufacturing, the company has lost out to cheaper Taiwanese and South Korean rivals over the past few decades. He hasn't seen evidence yet that Rapidus can break into the competitive global market. "The question is: will there be any customers? Fujii said.
This time will be different, and Shimizu, a Rapidus employee who worked under Fujitsu's direction of Fujii, said that as the name suggests, Rapidus will increase the value of its products by shortening the lead time for its custom chips — not only through the manufacturing process, but also by helping customers shorten the time-consuming design process. The company can't compete with TSMC and Samsung in commoditized devices, so it's targeting a more high-end niche.
The shift in technology may also help rapidus, Shimizu added. It envisions a 2nm chip that will use a gate-all-around structure instead of the current FinFET structure, making it easier for newcomers to break into the field, Shimizu said. "We can do it," he said. "I don't see why we can't. ”
*330 billion yen has been committed to date, and an additional 646 billion yen has been set aside in one** to support the Rapidus project. This should cover half of the initial 2 trillion yen investment, but the private company has yet to say how it will raise the remaining capital or the additional 3 trillion yen needed to expand operations after the plant starts. In stark contrast to the ** support enjoyed by Rapidus, Japanese companies have reacted lukewarmly. A major company like Toyota Motor has so far committed only 7.3 billion yen to this business.
Masahiro Wakasugi, an analyst at Bloomberg Intelligence Tank, said: "Japan's latest chip strategy looks more thoughtful than ever, but the allocation of funds is slightly skewed in favor of Rapidus and Kumamoto. Perhaps more work should be done to support domestic chip design companies. The challenges for Rapidus are enormous, and success may not depend on profits. If it can produce any reliable 2nm chips by 2027, it will be a success for Japan's economic security. ”
Experts say that even if IBM trains engineers for the company, Rapidus will struggle to hire the roughly 1,000 engineers and workers needed to open the chip factory. According to Japan's Ministry of Economy, its chip industry lost about 30% of its jobs in the two decades leading up to 2019 as its share of the global chip manufacturing market fell from more than 50% to less than 10%. With a declining population, this will lead to a shortage of at least 40,000 workers over the next decade.
Takahashi, a former engineer at Hitachi, was in the news for violently criticizing past plans in parliament before the chip strategy was announced. He likened Rapidus' 2nm goal to a baseball minor league player trying to turn into a superstar overnight, Shohei Ohtani.
"Kids should have dreams, but if a baseball boy says he's trying to be a well-rounded player from tomorrow, I'll say, 'Wait, let's take it one step at a time,'" Takahashi said. ’”
However, in addition to IBM's support, California-based LAM Research Corpand imec plans to open a branch in Hokkaido. Rapidus also has a partnership with Canada's Tenstorrent IncAn agreement was reached to jointly develop semiconductor intellectual property for AI devices. "There are a lot of risks and challenges associated with rapidus. It is still in the R&D stage and has not yet become a business," said Nishikawa of the Japanese Ministry of Economy.
Still, Japan's massive subsidies show that the Ministry of Industry is determined to use this opportunity to restore the country's chip strength as much as possible. They also believe that in an increasingly hostile world, it is better to invest in chip technology than to have no contingency plan. The Russia-Ukraine conflict, the North Korean issue, and the Taiwan Strait issue are all reminding the world of the importance of securing chips** and strengthening defense systems. "Chips are used in drones, fighter jets, submarines and missiles," said Seki of the Liberal Democratic Party, "and if we can make other people feel that if they come into conflict with us, Japan can stop exporting chips, then that means our investment is also acting as a deterrent to war." ”
Chips