Japan's semiconductor industry is launching its most aggressive comeback in 30 years, backed by U.S. support and setting its sights on catching up with South Korea.
Three days before Japan's general election on October 5, TSMC Chairman C.C. Wei met with Prime Minister Sanae Takaichi in Tokyo and delivered a surprise announcement. The world's largest foundry officially submitted plans to the Japanese government to produce 3-nanometer chips at its second Kumamoto plant, scheduled for completion late next year—an advancement from the originally planned 6-12nm production.
Bloomberg noted that TSMC's 3nm mass production plan "strengthens Japan's semiconductor manufacturing roadmap and represents a victory for Prime Minister Takaichi's technology ambitions."
Following the Takaichi cabinet's landslide election victory, Japan's semiconductor industry rebuilding has accelerated, supported by massive budgets and state-led chip development initiatives. The government plans to leapfrog eight technology generations, advancing from the current 40nm domestic production capability to 2nm by next year.
According to foreign media and industry sources on November 9, Rapidus—a foundry established in 2022—is targeting simultaneous production of 2nm and 3nm chips next year. Nikkei recently reported that Rapidus plans to begin producing 1.4nm chips by 2029.
Japan's ability to mass-produce both 2nm and 3nm chips stems from securing TSMC as an ally. Rapidus will pursue 3nm production through TSMC while developing 2nm chips using its own technology. To avoid unnecessary competition, Japan is strategically dividing production: TSMC's 3nm chips will target AI and robotics applications, while Rapidus's 2nm chips will serve supercomputing needs.
Japan has committed astronomical funding to this effort. Government investment in Rapidus has reached 2.9 trillion yen ($18.1 billion). Including broader semiconductor and AI initiatives, Japanese government spending will expand to 10 trillion yen ($62.5 billion) by 2030. The Takaichi government plans to use this as seed funding to attract a total of 50 trillion yen ($312.5 billion) in combined public-private investment.
The government's aggressive fiscal commitment has attracted growing private sector participation. Rapidus shareholders have increased from 8 at its 2022 founding to 30, with total capital contributions rising to 160 billion yen ($1 billion). Capital markets have responded positively. Goldman Sachs recently reported that major U.S. investors have begun accumulating Japanese semiconductor stocks.
Japan's near-monopoly on materials, components, and equipment technology provides another competitive advantage. If Japan develops advanced chip manufacturing capabilities, it could establish an integrated business model spanning design through front-end and back-end processing.
Rapidus has also gained U.S. backing. IBM, which has provided technical guidance to Rapidus, is currently undergoing U.S. regulatory review to become an investor. Industry observers suggest the U.S. may support Japan to counterbalance South Korea and expand supply sources for American companies. If Rapidus successfully establishes 2nm production, it could challenge Samsung Electronics' foundry supply network.
Market demand outlook remains positive. The AI boom has created chip shortages severe enough that big tech companies expanding data center infrastructure are considering Chinese suppliers. The Financial Times projected that Google, Amazon, Meta, and other tech giants will spend over $660 billion on AI infrastructure this year. If Rapidus achieves planned 2nm mass production, it could emerge as another major cutting-edge semiconductor supplier. According to Nikkei, Rapidus has already begun supply negotiations with Apple and Google.
South Korean industry is watching Rapidus's progress with intense interest. Some express concern that Japan could mount a comeback based on its legacy as the former world leader in semiconductors. A Korean semiconductor industry official analyzed: "Unlike China's government-led approach, Japan is fundamentally different—it was once the world's number one player."