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As there is fierce competition among nations over advanced semiconductors, there is a strong need for the government to step in and implement financial support measures. However, demand for advanced technology changes rapidly.
The government must also be thorough in its management of business risk.
At a Cabinet meeting, the government approved a bill to revise the law on facilitation of information processing and the law on special accounts in order to significantly strengthen support for the semiconductor industry and the artificial intelligence sector. The aim is to allow the government to provide investment, loan guarantees and tax incentives, among other support.
More than ¥10 trillion in public support is expected to be provided by fiscal 2030 to companies, such as Rapidus Corp., that aim to domestically produce next-generation semiconductors, as well as to data center and other projects.
The United States, Europe, China and other countries are providing huge amounts of financial support to their semiconductor industries. It is important for Japan to invest funds as well based on a medium- to long-term perspective.
Rapidus has been placed at the core of the government’s semiconductor strategy. Beginning this spring in Chitose, Hokkaido, the company will begin producing prototypes of leading-edge products with a circuit line width of 2-nanometers — 1 nanometer is 1 billionth of a meter. It plans to begin mass production in 2027.
The government has so far invested nearly ¥1 trillion in Rapidus, but another ¥4 trillion or so is expected to be needed.
Taiwan Semiconductor Manufacturing Co. boasts a competitive strength that is overwhelming when it comes to leading-edge products and will likely begin mass producing products using 2-nanometer technology by the end of this year.
On the other hand, Japanese manufacturers have only produced products using 40-nanometer technology so far. The reality is that they have not been able to attract sufficient funds from the private sector, which is concerned about the high business risk.
The government has therefore decided to make its stance clear that it will provide full support and will even go a step further and invest in Rapidus. It plans to invest around ¥100 billion in fiscal 2025. The private sector also is expected to invest about ¥100 billion.
It is unusual for the government to invest large sums of money in a private company by assuming the business risk upfront. This is because the public will bear the burden of any losses incurred. The greater the government’s involvement, the more unclear the locus of responsibility becomes between the government and the private sector, and the risk of failure could also increase.
To prevent such a situation, it will be essential to have a system in which the government properly manages business risk while ensuring the autonomy of the private sector. A method for examining business risk from the outside should also be considered.
Meanwhile, the generative AI developed by DeepSeek, a Chinese AI startup, has come as a shock as the company achieved high performance without using a large number of state-of-the-art semiconductors. The stock market was shaken as the view spread that demand for expensive semiconductors would not grow as much as expected.
It will be important for both the public and private sectors to respond flexibly to changes in the situation.
