Focus: Taiwan chip firms flock to Japan as China decoupling accelerates

Marketech International

21/02/2024 23:00

By Sam Nussey, Fanny Potkin and Miho Uranaka
       TOKYO, Feb 22 (Reuters) - Japan's efforts to rebuild its
semiconductor industry are getting a shot in the arm as more and
more Taiwanese chip companies expand here - not only to support
a new TSMC  2330.TW  plant but also excited about the Japanese
sector's prospects.
    The influx comes amid shifting alliances and priorities in
the global chip industry as the United States pushes to limit
China's progress in cutting-edge semiconductors and strengthen
partnerships between its allies. 
    Fabless chipmaker Alchip Technologies  3661.TW , which
specialises in customised chips known as application-specific
integrated chips (ASICs), is illustrative of the China
decoupling trend.
    In 2022, the bulk of its research and development engineers
were based in China but Alchip has begun moving roles overseas,
many to Japan, said a source who was briefed on the matter.
    The company said it is hiring in Japan, North America and
Taiwan but declined to comment further on personnel matters. 
    "We're expecting Japan semiconductor market growth, we're
continuously capitalising on Japan ASIC opportunities and
already engaging in several good projects," said Hiroyuki
Furuzono, general manager of Alchip Japan.  
    At least nine Taiwanese chip firms have set up shop or
expanded operations in Japan over the past two years, according
to a Reuters count. 
    Chip design company eMemory Technology  3529.TWO , for
example, opened an office two years ago in Yokohama, which
neighbours Tokyo, and has 11 employees after hiring from Japan
conglomerates which once dominated the industry.
    "After we built the office there we are receiving more
frequent communication with the customers and they are more
willing to talk in Japanese with our local people, so we see
business is booming," eMemory President Michael Ho told
Reuters. 
    More Taiwanese chip sector firms are also looking at
increasing their presence or making their first foray into
Japan, said the source and another person with knowledge of the
matter, adding that a weak yen has made such decisions easier.
        The sources declined to be identified as the information
was not public. 
     
    PROACTIVE SUPPORT
    While Japan still boasts leading semiconductor material and
equipment makers, it has seen its share of the global chip
manufacturing market shrink to 10% from around 50% in the 1980s
after trade tensions with the U.S. and competition from South
Korean and Taiwanese rivals.
    But in recent years Japan has thrown huge sums to rebuild
its chip manufacturing sector, recognising that semiconductors
are vital for economic security and spurred on by the global
chip shortage during the pandemic as well as encouragement from
Washington.    
        This Saturday, TSMC, formally known as Taiwan
Semiconductor Manufacturing Co, will hold the opening ceremony
for its first plant on the southern island of Kyushu, a
chipmaking hub.
    The on-track plan contrasts with the troubled construction
of TSMC's Arizona factory. It has also just announced plans for
a second fab in Japan, bringing total investment in the venture
to more than $20 billion. 
    The chipmaking giant, Reuters has reported, sees Japan as a
natural fit in terms of an industrious work culture and a
government that is easy to deal with and generous with
subsidies.
    "The core strength of a strong semiconductor country lies
not just in leading firms but in a robust ecosystem," said Nori
Chiou, investment director at White Oak Capital.
    "Japan's proactive government support, marked by substantial
subsidies and minimal political interference, sets it apart,
fostering superior progress compared to many other countries."
    In addition to TSMC, the Japanese government-backed chip
foundry venture Rapidus plans to mass produce chips on the
northern island of Hokkaido from 2027. Taiwan's Powerchip
 6770.TW  is also seeking government subsidies to set up a $5.4
billion foundry in Japan.
    Taiwanese firms boosting their presence in Japan include
TSMC-backed Global Unichip Corp (GUC)  3443.TW , another fabless
designer of ASICs, which said it is attracted by both the
engineering talent and business opportunities.
    Additionally, Materials Analysis Technology (MA-tek)
 3587.TWO , which inspects semiconductor materials and cites
TSMC as its biggest client, opened a new lab in Kyushu late last
year. Semiconductor equipment and maintenance firm Finesse
Technology  7704.TWO , another key TSMC contractor, is building
a factory in Japan.
    TSMC supplier Marketech  6196.TW  is also expanding in
Japan, the sources said. Marketech declined to comment. 
    "The trend will continue for the foreseeable future as part
of decoupling," said Takamoto Suzuki, head of China economic
research for trading house Marubeni. He warned, however, that
Japan may not have sufficient young science industry workers to
meet demand.
    The number of workers in Japan's chip-related businesses has
declined by around a fifth over the last roughly two decades,
although the government and universities have ramped up efforts
to encourage students into the field.
     

 (Reporting by Sam Nussey and Miho Uranaka in Tokyo and Fanny
Potkin in Singapore; Editing by Edwina Gibbs)
 ((mailto:sam.nussey@tr.com;))