Govt to set conditions for chip plant construction subsidies in Japan

The government plans to require computer chip companies to commit to at least 10 years of continuous production as one of the conditions for receiving a state subsidy to build new semiconductor plants in Japan.

The government will provide a massive ¥400 billion subsidy to leading chip manufacturer Taiwan Semiconductor Manufacturing Co. (TSMC) to build a plant in Kumamoto Prefecture. It aims for stable chip procurement for economic security.

The government has stepped up support for the construction of semiconductor plants in Japan, and a related law was passed in December. The condition of a minimum of a decade of production will be included as a criterion to receive a subsidy in the Economy, Trade and Industry Ministry ordinances to accompany the enforcement of the related law. The condition is expected to ensure continued employment in the region.

Under the subsidy system, companies submit a plan, describing the types of semiconductors they will produce and their production prospects, to be approved by the economy minister based on the conditions. The conditions also include increasing production in times of tight supply and preventing technology leakage to outside Japan. To ensure stable procurement, the government will prevent easy shutdown of operations and closure of factories.

Violations, such as ending production after a short period of time, will trigger an obligation to return subsidy money.

TSMC and Sony Group Corp. plan to start construction of the plant in 2022 and employ about 1,500 people. If they were to withdraw after a short period of operation, it would have a significant impact on employment, so local residents are calling for long-term operation.

Support for TSMC is an unusual policy, as large sums of taxpayer money are to be spent on a foreign firm. The government hopes to win public understanding by raising the requirements for the subsidies.