Semiconductor Strategy: Steadily Establish Domestic Production of Next-Generation Products

Editorial

14:00 JST, December 2, 2024

In a world where digitalization is progressing, the mass production of next-generation semiconductors is an important challenge for the growth of the Japanese economy. While managing the risks of the project, the government needs to proceed with its support by drawing in the private sector.

In its comprehensive economic stimulus package that was compiled last month, the government announced measures to strengthen the industries related to the semiconductor and artificial intelligence (AI) fields. It plans to allocate around ¥6 trillion particularly in subsidies for next-generation semiconductor research and development, and more than ¥4 trillion in investment toward mass production, among other related projects, by fiscal 2030.

A good portion of the investment will be in medium- to long-term support measures for Rapidus Corp., which aims to domestically produce next-generation semiconductors.

It means that the government will prepare an unusually large amount of funding for the company, which has yet to produce any products, and consider investment in it. This is probably because the government is bearing in mind the extent to which cutting-edge semiconductor products could contribute to the growth of the Japanese economy.

Rapidus was established in 2022 with full governmental support as well as investment from companies such as Toyota Motor Corp. and Sony Group Corp. The company plans to begin mass production of cutting-edge products with circuit line widths of 2 nanometers — 1 nanometer is 1 billionth of a meter — that have yet to be put to practical use anywhere in the world, in Hokkaido in 2027.

Next-generation semiconductors with high information processing capabilities will be essential products in a wide range of fields that are expected to see high growth, including generative AI, data centers, autonomous driving vehicles and medical and pharmaceutical development.

Japan has more leading companies in the manufacturing equipment and materials fields than in semiconductor products. If Rapidus establishes a production foundation for cutting-edge products, the competitiveness of the entire industry can be expected to be improved, which is highly significant.

Rapidus has already entered into a partnership with IBM Corp. for the development of cutting-edge products, and leading U.S. semiconductor company Nvidia Corp. has also expressed an interest in forming a cooperative relationship with the company.

From the perspective of economic security, too, it is important to strengthen ties with the United States and build a supply chain.

The government has decided to provide financial support for Rapidus when recent supplementary budgets have been formulated — totaling over ¥900 billion in subsidies to date. It is said that ¥5 trillion in funding will be needed before Rapidus can start mass production, but the mechanisms for supporting Rapidus in the medium- to long-term have been weak.

The government has not been able to draw sufficient cooperation from the private sector, which considers it a high-risk project. By clearly showing its stance on medium- to long-term involvement, the government will likely be able to attract private-sector funding. International competition surrounding the miniaturization of semiconductors is fierce. This is a challenging project that involves a certain level of risk.

If the project were to fail and losses were incurred, the burden would fall on the public. The government and Rapidus, which bear a heavy responsibility, must carefully calculate the risks. They should also ensure the transparency of the project and be accountable.

(From The Yomiuri Shimbun, Dec. 2, 2024)