Japan plans to subsidize local semiconductor manufacturing with US$2.8 billion

Japan will undertake some of the capital investment related to various semiconductors, expanding incentives for domestic chip manufacturing beyond cutting-edge products, Nikkei Asia reported. The Ministry of Economy, Trade and Industry will allocate 368.6 billion yen ($2.8 billion) from the 1.3 trillion yen supplementary budget for fiscal 2022 to fund a new government-designed subsidy program.

These subsidies cover power chips and microcontrollers that manage automatic steering and analog-to-digital converters, investment in chip manufacturing equipment and semiconductor components, and investment in raw materials such as inert gases. Domestic and foreign companies investing in Japan are eligible for subsidies.

The policy requires these companies to continue to produce semiconductors in Japan for 10 years, and during the semiconductor shortage, they will be required to give priority to domestic shipments in Japan.

Japan previously allocated 774 billion yen in the supplementary budget for fiscal year 2021 to support the domestic chip industry, and TSMC is currently building its first Japanese factory in Kumamoto Prefecture. TSMC's first plant in Kikuyo, Kumamoto Prefecture, Japan, drove related companies from Japan and abroad to flock here, leading to an increasingly serious shortage of surrounding industrial land.

Other countries have also boosted chipmaking incentives, hoping to boost domestic supply in an increasingly fragmented supply chain, the report said. Biden signed the CHIPS and Science Act in August last year, and the United States will provide subsidies worth $52.7 billion for domestic chip manufacturing.

"This could lead to excess global capital investment," said a Japanese chip industry group.