Attract semiconductor manufacturers to strengthen domestic industry

Countries are actively trying to attract companies to establish semiconductor production bases. Japan also needs to promote human resource development and revitalize its semiconductor industry while putting necessary systems in place.

Related laws were enacted to financially support the building of new semiconductor plants in Japan. The central government will subsidize up to half the cost of building new plants that produce high-performance semiconductors, with about ¥620 billion earmarked in the fiscal 2021 supplementary budget.

The related laws are expected to be applied for the first time for the construction of a plant in Kumamoto Prefecture by Taiwan Semiconductor Manufacturing Co. (TSMC) that is scheduled to start this year, with a subsidy of about ¥400 billion likely to be provided.

There had been no law in Japan to provide large-scale subsidies for new plant construction by private companies. The government has said the new system is intended to provide a legal basis to help companies make investment decisions.

However, it is unusual for the government to provide vast funds to foreign companies. It would be problematic if decisions on where to ship semiconductors are left up to foreign companies and this results in supply shortages in Japan.

Under the related laws, increasing the production for the domestic market when supply is likely to stagnate will be a condition to receive the subsidies. It is vital to ensure that the laws lead to an increase in the domestic supply of semiconductors.

Procurement difficulties have continued amid an economic recovery from the novel coronavirus pandemic that has led to a rapid recovery in demand for semiconductors. As a result of production cutbacks in automobiles, there have been many cases of customers waiting several months or longer for new cars to be delivered. In addition to game consoles and digital cameras, even water heaters have been in short supply.

Stable procurement of semiconductors is becoming a prerequisite for economic activities. The U.S. and Europe, positioning semiconductors as a crucial commodity for economic security, have a policy of investing the equivalent of trillions of yen or more in subsidies or other means to expand domestic development and production systems.

It is also vital for Japan to make effective use of the new system and promote the building of new factories in the footsteps of the TSMC plant.

However, attracting factories alone will not lead to sustainable industrial development. Human resource development is essential.

In 1988, the Japanese semiconductor industry boasted about 50% of the global market share, but this figure declined rapidly, plummeting to 10% by 2019. During this period, engineers are said to have gravitated toward South Korean and Chinese companies.

In order to enhance Japan’s human resources again, it is desirable to improve school education. Kumamoto University said it will set up a semiconductor education and research center at its graduate school in April this year to conduct advanced research. The central government, companies and universities need to work together to attract talented people.

The development of industries that utilize semiconductors is also urgently needed. Fields such as robotics, autonomous driving and data centers, which involve managing large amounts of data, should be developed and strengthened in tandem with the semiconductor industry.

— The original Japanese article appeared in The Yomiuri Shimbun on Jan. 7, 2022.