One only needs to look back a few decades to see when the semiconductor landscape had Japan on top, controlling over 50% of the market. However, since then, a combination of geopolitical pressures, particularly from the United States, alongside increasing competition from rival Asian nations like South Korea and Taiwan has led to a steep decline in Japan’s market share. By 2021, Japan’s share had plummeted to a low of just 7%. Now, Japan is making a concerted effort to reclaim its place as a global leader in semiconductor manufacturing, driven by a combination of government support, strategic partnerships, and a renewed focus on innovation.
The rise and decline
Japan’s initial dominance in the semiconductor industry was fuelled primarily by substantial investment from both the government and private sectors during the 1980s and early 1990s. Japanese companies like NEC, Toshiba, and Hitachi were at the forefront of technological advancements, and by 1988, Japanese firms accounted for over half of the global semiconductor sales. However, this high level of success was also Japan’s downfall, being met with resistance from the United States. Fearing monopolisation of the market, the United States accused Japan of flooding the market and monopolising certain segments of the industry. The result of these accusations was the 1986 US-Japan Semiconductor Agreement, which allowed the US to set prices and access the Japanese market, significantly snubbing Japan’s competitive edge.
This would mark the steady decline of the Japanese semiconductor market, and over the next few decades Japan’s semiconductor industry would struggle to keep pace with its Asian neighbours, particularly South Korea and Taiwan. These two nations capitalised heavily on Japan’s fall, utilising the Japanese blueprint of a homegrown semiconductor industry. By the early 2000s, Japan’s once-tall semiconductor empire had waned, and its share of the global market had shrunk significantly.
A strategic rebirth
Recognising the strategic importance of semiconductors for economic security and technological sovereignty, the Japanese government has launched an ambitious plan to revitalise the domestic semiconductor industry. In 2023, the government committed over ¥2 trillion ($13 billion) to strengthen semiconductor production, with significant portions allocated to support the development of next-generation chip technologies.
One of the flagship initiatives of this revival is Rapidus, a government-backed company focused on developing cutting-edge semiconductor technology. Rapidus is collaborating with global research institutions like the University of Tokyo and France’s CEA-Leti to develop advanced 2nm and 1nm chip processes. These initiatives are part of a broader effort to position Japan at the leading edge of semiconductor technology, targeting applications in artificial intelligence, autonomous vehicles, and other emerging fields.
Strategic partnerships and technological advancement
Japan’s resurgence in the semiconductor industry is being bolstered by strategic partnerships with global industry leaders. A key example is the joint venture between Taiwan Semiconductor Manufacturing Company (TSMC), Sony, and Nippon Denso in Kumamoto Prefecture. This partnership is expected to commence mass production of semiconductors using advanced 12nm technology by the end of 2024. This move marks a significant technological leap for Japan, transitioning from older 40nm processes to more sophisticated semiconductor fabrication.
Beyond logic chips, Japan is also expanding its production capabilities in other critical areas. Companies like Kioxia and Western Digital are preparing for mass production of 3D NAND flash memory, while Renesas Electronics is ramping up its production of power semiconductors essential for electric vehicles (EVs). These developments are crucial for supporting the growing demand in the automotive and consumer electronics sectors, both domestically and globally.
Innovation and the future
Innovation is at the heart of Japan’s strategy to reclaim its position in the semiconductor industry. The government has established the all new Semiconductor Technology Centre as a hub for research and development in areas such as power semiconductors, photonics systems, and AI technologies. These efforts are designed not only to catch up with global leaders but also to create new technologies that can propel Japan to the forefront of the industry once again.
Moreover, Japan’s semiconductor revival is intertwined with its broader goals of achieving carbon neutrality and advancing digital transformation. The government’s Green Innovation Fund, which includes significant investments in semiconductor technology, underscores the importance of semiconductors in Japan’s efforts to reduce carbon emissions and lead in the global push towards sustainability.
Global and geopolitical implications
Japan’s return to semiconductor manufacturing is also a response to the shifting global geopolitical landscape. The ongoing US-China trade tensions have highlighted the risks associated with over-reliance on foreign semiconductor supplies. By strengthening its domestic production capabilities, Japan aims to secure its supply chains and reduce vulnerability to external pressures. This strategic move is in line with the global trend of countries seeking to enhance their semiconductor production capabilities as a matter of national security.
A new era for Japan’s semiconductor industry
Japan’s ambitious plans for its semiconductor industry signal the beginning of a new era. By leveraging government support, strategic partnerships, and a renewed focus on innovation, Japan is well on its way to reclaiming its position as a global leader in semiconductor manufacturing. The coming years will be crucial as Japan seeks to navigate the challenges of competition, technological advancement, and sustainability in a rapidly evolving industry.
The success of these initiatives will not only bolster Japan’s economy but also have significant implications for the global semiconductor supply chain and the broader tech industry. As Japan moves forward, the world will be watching to see how this once-dominant player re-establishes itself on the global stage.
