Japan Revives Semiconductor Industry with Dual Strategy

Industry Insights from Next Move Strategy Consulting

Japan is intensifying efforts to rebuild its semiconductor capabilities as part of a broader strategy to strengthen economic security and supply chain resilience. The country’s renewed focus on the semiconductor sector reflects both historical lessons and emerging geopolitical pressures, as policymakers seek to restore competitiveness in a technology field that once defined Japan’s industrial leadership.

At a seminar hosted by Stanford University’s Asia-Pacific Research Center (APARC) Japan Program, industrial economist Jun Akabane, a professor at Chuo University and visiting scholar at the center, assessed Japan’s current semiconductor revitalization strategy by examining two major initiatives: the TSMC Kumamoto project and the Rapidus venture. His analysis highlights how these initiatives represent contrasting approaches to rebuilding the country’s position in the global semiconductor ecosystem.

Rebuilding an Industry After Decades of Decline

Japan was once a dominant force in the semiconductor industry, particularly during the 1980s when the country held a strong position in Dynamic Random Access Memory (DRAM) production. However, by the 1990s, a combination of external pressures and internal strategic missteps eroded its market share.

Trade friction between Japan and the United States, along with a sharp appreciation of the yen, contributed to the decline. Meanwhile, major Japanese firms such as NEC and Hitachi were slow to adopt emerging technological shifts, ultimately falling behind in the 22/20-nanometer process scaling race.

Today, the Japanese government views semiconductor capability as essential to national economic security. Disruptions during the global semiconductor shortage of 2020 highlighted vulnerabilities in international supply chains, prompting renewed efforts to secure access to critical technologies and production capacity.

Under the administration of Prime Minister Fumio Kishida, Japan introduced a strategic framework in 2021 to strengthen supply chain resilience. The policy direction was reinforced by the 2022 Economic Security Promotion Act, which focuses on four priorities:

• Ensuring stable supplies of critical minerals

• Protecting key infrastructure

• Supporting advanced technology development

• Establishing a patent non-disclosure system

Within this framework, Japan launched two major semiconductor initiatives designed to address both domestic needs and global competitiveness.

Two Distinct Paths Toward Semiconductor Resilience

Japan’s revitalization strategy revolves around two large-scale projects that pursue markedly different objectives.

The first initiative involves a semiconductor fabrication plant in Kumamoto developed by Taiwan Semiconductor Manufacturing Company (TSMC) with support from the Japanese government and domestic partners such as Sony and Denso. The facility is designed to produce “mature-node” chips widely used in industries including automotive manufacturing, industrial machinery, and consumer electronics.

By focusing on widely used semiconductor components, the Kumamoto facility aims to reinforce Japan’s domestic supply chain and reduce vulnerability to future disruptions. Integrating chip fabrication with Japan’s established strengths in semiconductor materials, manufacturing equipment, and electronics industries is expected to deepen linkages across the domestic technology ecosystem.

The second initiative, Rapidus, represents a fundamentally different strategy. Established in 2022 as a new Japanese semiconductor company, Rapidus seeks to develop next-generation logic chips, including advanced 2-nanometer technology. The company is backed by government funding and investment from eight major Japanese corporations, including Toyota, Sony, and SoftBank.

To support its technological ambitions, Rapidus is collaborating with international partners such as IBM and the Belgian research center Imec. Through these partnerships, Japan hopes to regain a foothold in the global race for advanced semiconductor manufacturing, a sector currently dominated by major players in the United States and Taiwan.

Progress and Challenges Across Both Initiatives

The Kumamoto project has already demonstrated early momentum due to its direct collaboration with TSMC, which provides access to established manufacturing expertise and proven processes. By targeting sectors such as automobiles, data centers, and mobile devices, the facility is positioned to strengthen Japan’s domestic semiconductor supply chain.

According to Akabane, this integration with Japan’s existing industries has increased expectations that the project will enhance the country’s resilience against potential supply disruptions. Rapidus, however, faces a more uncertain path. The project remains in its early stages of development and is currently working with 14-nanometer technology while aiming to transition toward 2-nanometer production in the future. Achieving this goal requires highly specialized equipment and significant technological advancements.

One of the key challenges lies in securing advanced semiconductor manufacturing machinery, particularly from global suppliers such as ASML in the Netherlands. Competition for these resources is intense across the global semiconductor industry.

Strategic Criticism and Policy Debate

Both projects have generated debate among industry observers and policy analysts.

Critics of the Kumamoto project question Japan’s substantial financial support for a facility operated by a foreign company. Some argue that the investment may not sufficiently strengthen Japan’s domestic semiconductor capabilities.

Rapidus has faced scrutiny as well. Observers highlight its reliance on foreign technological partners and the uncertainty surrounding its ability to reach large-scale commercial production. Others warn that focusing heavily on high-end logic chips could divert attention from reinforcing Japan’s existing semiconductor strengths.

Another area of concern involves the level of government intervention in industrial policy. Some experts caution that excessive state involvement could lead to inefficiencies similar to those experienced in earlier industrial initiatives.

Geopolitical Pressures Shaping Semiconductor Strategy

Japan’s semiconductor policies are unfolding against a complex geopolitical backdrop, particularly amid ongoing tensions between the United States and China.

The government aims to reduce reliance on foreign supply chains while strengthening strategic partnerships with key allies, including the United States and Taiwan. However, analysts warn that geopolitical developments such as potential disruptions involving Taiwan could significantly impact global semiconductor supply networks.

These geopolitical considerations add another layer of complexity to Japan’s semiconductor revival strategy.

Future Implications for Economic Security

The long-term success of the Kumamoto and Rapidus initiatives will play a critical role in determining Japan’s future position in the global semiconductor industry.

If the Kumamoto facility succeeds in strengthening domestic supply chains, it could provide Japan with greater resilience against supply disruptions and support key industrial sectors. Meanwhile, the outcome of the Rapidus initiative will determine whether Japan can reenter the global competition for advanced semiconductor manufacturing.

Ultimately, Japan’s semiconductor strategy represents a careful balance between reinforcing domestic industrial capabilities and participating in global technology ecosystems.

Next Move Strategy Consulting’s View

According to Next Move Strategy Consulting, semiconductor market are increasingly shaped by supply chain resilience, geopolitical alignment, and technological innovation. Governments worldwide are prioritizing semiconductor investments to secure critical infrastructure and support emerging digital technologies.

Japan’s dual-track approach combining domestic supply chain reinforcement through collaborative manufacturing with long-term investments in advanced semiconductor technologies reflects a broader global shift toward strategic semiconductor independence.

As competition intensifies across the global semiconductor ecosystem, initiatives such as TSMC Kumamoto and Rapidus illustrate how nations are attempting to balance economic security with participation in the highly interconnected semiconductor value chain.

Prepared by: Next Move Strategy Consulting

Source: Stanford University