Japan's chip plan is backed by 80% of business leaders: executives cautiously optimistic about supply chain

While chip shortages have eased since around 2020, supply constraints remain -- especially certain older parts and products that use semiconductors, according to Bloomberg.

"Semiconductors are a core component of our digital society, and their shortage could cause Japan to fall behind in the global competition for productivity in various industries," the head of a major distribution company said in the survey.

The Economic Security Promotion Law passed in May aims to strengthen the supply chain of strategic materials. To this end, the Japanese government has identified 11 priority areas.

Japan will provide subsidies of up to 476 billion yen ($3.56 billion) for TSMC's new factory in Kumamoto, the southernmost island of Kyushu, which is due to start production in 2024. TSMC is the world's largest chipmaker.

In terms of technology development, Tokyo is backing Rapidus, a domestic advanced chipmaker to be established in 2022. The supplementary budget for fiscal 2022 includes more than 1 trillion yen in funding for the company.

Surveys of Japan's policies show mixed views among business leaders. "It is desirable to promote domestic production and the development of semiconductor-related human resources through industry-government-academic cooperation," said Shingo Hamada, president of seafood maker Nissui.

Supporting domestic production is "important not only for economic security and promoting digital transformation of companies, but also from the perspective of nurturing domestic growth industries and improving the overall economic level," said East Japan President Yuji Fukasawa.

Nearly three-quarters (74.6%) of respondents said they were affected by shortages that started around 2020. Among them, 91.4% said that the impact is still continuing. Shortages eased as demand for smartphones and PCs cooled.

But semiconductors have a wide range of applications and performance levels, such as memory and logic chips. Supply constraints remain, especially in automobiles and industrial machinery. In addition, recovery effects take time to propagate further downstream in the production process and into the final product.

As for when the supply shortage will be resolved, only 22.5% of the respondents gave the answer that it will decline in the first half of 2023. The most common answer was the second half of 2023, at 35.3%. "It will take until 2024 for supply to catch up with demand," said the head of a major automaker. 21.1% of the respondents think that there is no chance of solving it.

Chipmakers including TSMC and South Korea's Samsung Electronics will open new factories in the U.S. and elsewhere in 2023 and 2024. Still, 22 percent of respondents said they believed supply would remain short or slightly short by early 2025. Another 50.3% said they did not know what the supplies would look like by then.

When respondents were asked why they predicted shortages in 2025, 74.1% of respondents said there was a discrepancy between semiconductors that are needed and those that are produced more. Increased demand was the second most popular answer at 70.4%.。