Japan’s Rapidus Helping to Create a Global Tech Incubator

September 2023

With semiconductor supply chains being buffeted by rising geopolitical tensions and trade restrictions, Japan is moving decisively to revive its semiconductor industry, working with partner countries and industry leaders to meet the fast-growing needs of technologies such as 5G and AI.

Welcoming inbound investment is a core part of the new strategy. Under the “Semiconductor and Digital Industry Strategy” formulated in 2021 and bolstered in June 2023, the government has set a goal of increasing semiconductor-related total sales of companies manufacturing semiconductors in Japan to 15 trillion yen by 2030. In fact, approximately 1.3 trillion yen was allocated for semiconductor-related spending in the FY2022 supplementary budget.

Spearheading this effort in Japan is the creation of Rapidus by a consortium of Japanese companies in 2022 with the goal of bringing the next-generation semiconductor production to Japan. The company is at the center of a new chip eco-system that will create global collaborations with the leaders in this critical technology.

At its peak in the 1980s, Japan had a 50% share of the global semiconductor market, while it had less than 10% in 2019. Given the decline of the semiconductor industry to date, Japan is working not only to revitalize its semiconductor manufacturing industry, but also to gain even greater resilience through cooperation with domestic and global partners throughout the supply chain, leading to the growth of a global center for innovative technology businesses.

And while the bulk of semiconductor manufacturing has moved elsewhere during the past few decades, Japan’s semiconductor production equipment and materials, which are essential for world-leading semiconductor manufacturing, have still remained a crucial part of the industry, with the country possessing experienced engineers and specialist talent.

Rapidus focuses on the development of advanced 2 nanometer (nm) semiconductor manufacturing, with an ambitious timetable to create the world’s-first mass production of the next-generation semiconductors by 2027.

Having looked throughout Japan for the best location, Rapidus decided to base its factory in the city of Chitose in Japan’s northern main island, Hokkaido. Rapidus CEO Atsuyoshi Koike has advocated for the "Hokkaido Valley" concept, gathering companies from Japan and abroad here in order to enable the rapid growth of Japan’s technology industry.

As part of the “Hokkaido Valley” concept, Rapidus expects the region to attract global investment and become a base for a long-term industrial movement that spreads through other industries and leads to growth at all levels. “I want to see Hokkaido grow and develop new cutting-edge industries and cutting-edge technologies through international cooperation, and I hope that we can make Hokkaido a place where it will spread its wings to the world,” said Rapidus Chairman Tetsuro Higashi.

The concept also aligns with the initiatives of the Hokkaido regional government related to drawing firms in the digital industry.

“We would like to maximize the synergy between semiconductors, as the hardware of the digital industry, and data centers as the software, while utilizing this in community development” said Hokkaido vice governor Shunsuke Tsuchiya.

The Rapidus story is also one of global cooperation, a vital part of the revitalization strategy. Rapidus has teamed up with IBM from the U.S. and imec, an EU-based R&D consortium. It also has investors from some of Japan’s largest technology and corporate players including Denso, Kioxia, MUFG Bank, NEC, NTT, SoftBank, Sony, and Toyota.

The efforts are part of the encompassing Japanese strategy that is being led by Prime Minister Fumio Kishida. The goal is to set the policy direction for the future of information technology in Japan, to include not only semiconductors, but also advanced information and telecommunications infrastructure, battery storage and related advanced industries.

Prime Minister Kishida met with global semiconductor leaders in May 2023 to call for investment and to reiterate Japan’s support for the semiconductor industry. “We will make a concerted government effort to support the semiconductor industry,” he said at the time.

Major semiconductor players are already strengthening their investments in Japan under the government’s “a New Form of Capitalism.”

In an important vote of confidence in Japan’s technological future, Taiwan Semiconductor Manufacturing Company (TSMC), the leading global producer of advanced chips, is building its first plant in Kumamoto prefecture in southern Japan backed by government grants of ¥476 billion, and already planning to build a second plant.

They are not alone. U.S.-based Micron Technology will invest up to ¥500 billion in Japan over the next few years, including expansion at its Hiroshima plant, while semiconductor equipment maker Applied Materials has recently announced plans to hire over 800 new engineers for its Japan operations.

At JETRO, we believe that Rapidus, TSMC, and the other investment stories are just the start of a new era of true international collaboration, bringing together Japanese and international industry leaders. As part of our focus on attracting new technologies, we are ready to help foreign companies that wish to participate in these exciting new developments. Opportunities are unlimited.