After "three lost decades", according to Japan's
industry ministry, the country's share of global chip manufacturing has fallen
from a half to a tenth as it leaked customers to cheaper rivals and failed to
maintain a lead in cutting edge production.
As China and the United States, driven by a trade war and
security concerns, ramp up support for the manufacturing of chips that run
everything from smartphones to missiles, officials worry Japan will be squeezed
out altogether.
"We can't just continue what we have been doing, we
have to do something on a completely different level," former Prime
Minister Shinzo Abe told fellow ruling LDP party members in May at a first
party meeting to discuss how the country can be a leading digital economy.
Illustrating Japan's fear of being left out of a new
technology world order, documents distributed by the Ministry of Economy Trade
and Industry earlier this year showed a thick red dotted line over a bar graph
pointing to the possibility of a zero chip industry share by 2030.
A major concern is the future of the country's still
world-leading firms that supply chipmakers with items such as silicon wafers,
chemical films and production machinery.
Officials fear that by luring Asian chip foundry giants such
as Taiwan's Semiconductor Manufacturing Co (TSMC) to its soil, the United
States could tempt these firms to follow.
"It's possible for companies to build in Japan and
export, but the closer you can be as a supplier the better, it's easier to
exchange information," said Kazumi Nishikawa, director of the IT industry
at METI.
While the shift may not come immediately, "it could
happen over the long term," he said.
The companies Nishikawa worries about include wafer makers
Shin-Etsu Chemical and Sumco photoresist supplier JSR Corp and production
machinery builders Screen Holdings and Tokyo Electron.
"We are always prepared to respond to policy changes in
each country," said a spokesperson for JSR, which makes light sensitive
photoresist coatings used for engraving chips in Japan, Belgium and the United
States.
When asked by Reuters, none of the companies said they
currently plan to shift production to the United States.
Tech war
To retain them, Japan needs chip foundries that will buy
their wafers, machinery, and chemicals, and will also ensure stable supplies of
semiconductors for the country's car companies and electronic device makers.
TSMC, which is looking to expand overseas amid concern about
the potential vulnerability of its Taiwan operations to mainland China's
territorial ambitions, has established a research and development centre near
Tokyo. It is also reviewing a plan to build a fabrication plant in Japan.
However, its biggest foreign venture by far is a $12 billion
plant it is constructing in Arizona in the United States.
In a bid to keep up in the technology race, Prime Minister
Yoshihide Suga's government in June approved a strategy devised by Nishikawa's
team at METI to ensure Japan has enough chips to compete in technologies that
will drive future economic growth, including artificial intelligence,
high-speed 5G connectivity, and self driving vehicles.
One initiative is to turn Japan into an Asian data centre
hub. Such hubs generate huge demand for semiconductors, which in turn will lure
chipmakers to build plants nearby.
Spending support
The success of its industrial policy, however, will depend
on money.
So far the country has allocated JPY 500 billion to
reinforce technology supply chains to help companies grapple with shortages of
chips and other components during the coronavirus pandemic, and to promote a
shift to 5G.
That's only a fraction of spending proposed by other
countries.
"At the current level of support, it's tough for
Japan's semiconductor industry, and we want government incentives that are
comparable with elsewhere in the world," The Japan Electronics and
Information Technology Industries Association (JEITA) said in an email.
The US Senate has approved a bill authorising $190 billion
of public money for new technology, including $54 billion on chips, while the
European Union plans to spend EUR 135 billion on nurturing its own digital
economy.
To equal this spending, Japan would have to earmark large
sums of public money that the greying nation might otherwise spend on health
and welfare. METI has yet to say how much it believes it needs.
"Given Japan's financial situation it will be difficult
to match" the United States, the EU, and China, former economic
revitalisation minister, Akira Amari and leader of the LDP group looking to
"make Japan number one again," told Reuters.
© Reuters
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