Japan Renews Chip Strategy, Boosts Sales Target to $108 Billion

Yoshiaki Nohara, Bloomberg News

An evaluation sample of a chip-on-wafer used for the 2.5D package, developed by the JOINT2 (Jisso Open Innovation Network of Tops 2) consortium, comprised of Showa Denko Materials Co. and 11 other companies, displayed at the Semicon Japan exhibition in Tokyo, Japan, on Wednesday, Dec. 14, 2022. The exhibition will run through Dec. 16. Photographer: Kiyoshi Ota/Bloomberg , Bloomberg

(Bloomberg) -- The Japanese government revamped its chip strategy with a goal of tripling sales of domestically produced semiconductors to more than 15 trillion yen ($108 billion) by 2030, as the nation centers chips at the heart of its economic security policy.

The revised strategy, released Tuesday, aims to strengthen efforts to develop and produce cutting-edge semiconductors that are critical for economic security measures and advanced technology like generative AI, according to the economy ministry.

The sales target for firms that make chips in Japan will help secure a stable supply of semiconductors for the nation, according to the strategy. The target, which appeared in earlier drafts of the revised strategy, compares with sales of about 5 trillion yen in 2020.

“Various investments are being made by Japanese chip-related companies including smaller ones, and we’d like to back up these investments,” economy minister Yasutoshi Nishimura told reporters prior to the release of the strategy. “We want to secure the necessary budget to support these efforts.”

The 274-page strategy didn’t say how much the government plans to dole out over the coming years in addition to the billions of dollars already in place to encourage Taiwan Semiconductor Manufacturing Co. to add production capacity and to fund Japan’s own chip venture Rapidus Corp.

But Japan will consider tax breaks and subsidies for companies investing in semiconductors, storage batteries, biomanufacturing and data centers, in a bid to stay competitive with the rest of the world, according to a revised economic plan also issued Tuesday.

In an update to Prime Minister Fumio Kishida’s signature New Capitalism economic policy, the government said it would consider tax rules and financial support for the four “strategic sectors,” saying they “won’t fall below global standards.”

Last month, Kishida met with the heads of the world’s largest chipmakers as part of efforts to bring semiconductor production and investment to Japan. The chipmakers said they would consider more investment in Japan depending on financial incentives and demand.

The government has pledged financial support worth 330 billion yen for Rapidus and up to 476 billion yen for TSMC’s new factory in Kumamoto in southern Japan. The government is also providing up to 92.9 billion yen in subsidies to Kioxia Holdings Corp.’s plant in Mie in central Japan.

The government expects the TSMC and Kioxia projects alone to boost Japan’s gross domestic product by 4.2 trillion yen, create about 463,000 jobs and generate roughly 760 billion yen in tax revenue, the revised strategy showed.

--With assistance from Isabel Reynolds.

(Adds background from revised New Capitalism plan in sixth paragraph.)