Analysis: Japan takes Taiwan's helping hand on long road to chip revival

Rohm Co

23/02/2024 23:00

(Repeats story that ran on Friday, with no change to text)
    By Sam Nussey and Miho Uranaka
       TOKYO, Feb 23 (Reuters) - Chipmaker TSMC  2330.TW 
formally opens its first Japanese plant on Saturday,
highlighting the Taiwanese firm's critical role in Tokyo's
multi-billion dollar efforts to reboot its once-mighty
semiconductor manufacturing industry.
    That Japan turned to TSMC  TSM.N  for help on an industry it
once dominated reflects the Taiwan chipmaker's dominant position
in the foundry business and Tokyo's heightened concern over
China's growing prowess in a wide swathe of technology.
    The arrival of TSMC, the world's leading contract chipmaker,
in Japan is seen as having sparked investment across a sector
vital to economic security even as the government eyes a greater
prize with its backing for homegrown foundry venture Rapidus.
    "The possibility of having TSMC build a fab in Japan really
rallied support from disparate parts of the semiconductor
industry," said Damian Thong, head of Japan research at
Macquarie Capital Securities.
    "They have built a snowball effect around it," he said.
    By 2027, Taiwan is projected to control two-thirds of
foundry capacity for advanced processes as its lead is eroded by
aggressive expansion in the U.S., according to research firm
TrendForce, with Japan increasing its global share to 3%.  
    TSMC, which is also building capacity in the U.S. and
Germany, is targeting mass production at the fab later this year
and has announced plans for a second plant, bringing total
investment in the venture to more than $20 billion. 
    Partnering with companies including Sony  6758.T  and Toyota
 7203.T , monthly capacity across the two fabs will exceed
100,000 12-inch  wafers, strengthening Japan's access to chips,
which are essential for the electronics, automotive and defence
industries.
    TSMC sees Japan as a natural fit with an industrious work
culture suited to chipmaking and a government that is easy to
deal with and generous with subsidies, Reuters has reported.
    Japan has also benefited from Taiwan's willingness to
approve the export of foundry and supply chain technology,
particularly for advanced node technologies below 16 nanometres,
said David Chuang, an analyst at Isaiah Research.
    "With the prospect of fabricating more advanced roadmaps in
Japan, it's reasonable to expect that foundry customers may be
more inclined to commit to long-term development and procurement
of capacity," said Chuang. 
    Japan can leverage its expertise in areas such as
photoresists - chemicals that are needed for chipmaking - image
sensors and packaging, which is becoming increasingly important
to eke out chip performance gains, said Joanne Chiao, an analyst
at TrendForce.
    Momentum in Japan's chip sector is growing, with Taiwan chip
companies arriving in Japan not only to support the TSMC plant
but also being attracted by the industry's renewed dynamism,
Reuters has reported.
    
    ECONOMIC BOOST 
    In the chipmaking hub on the southern island of Kyushu where
TSMC's plant is located, companies ramping up investment include
power chip maker Rohm  6963.T , wafer maker Sumco  3436.T  and
equipment maker Tokyo Electron  8035.T .  
    The regional economic boost is forecast to hit 20.1 trillion
yen ($134 billion) over a decade, according to the Kyushu
Economic Research Center, with activity rippling out from fabs
being constructed and run, and from consumption by workers. 
    A major bottleneck is labour shortages, said Soei Kawamura,
a researcher in the business development department at the
centre. 
    "Large companies like TSMC and Sony will be able to secure
the necessary personnel, but the economic development of the
Kyushu region will change depending on how many people can be
recruited in the local semiconductor-related and other
industries," he said. 
    The number of workers in Japan's chip-related businesses has
declined by around a fifth over the last roughly two decades.
    Leading domestic chip firms need to find 40,000 workers over
a decade, according to estimates from the Japan Electronics and
Information Technology Industries Association (JEITA). 
    Tokyo's grander vision is of building a homegrown champion
through foundry venture Rapidus, which is headed by industry
veterans and targeting mass production of cutting-edge chips on
the northern island of Hokkaido from 2027. 
    A potential rival to TSMC, which has spent decades honing
its processes, Rapidus is partnering with IBM  IBM.N  and chip
research organisation Imec. But its prospects for success are
viewed with scepticism by many in the industry. 
    "I don't doubt TSMC will be dominant, but Japan will seek to
prove that they are valid as a number two," said Macquarie's
Thong.  
($1 = 150.3100 yen)

 (Reporting by Sam Nussey and Miho Uranaka; Additional reporting
by Fanny Potkin in Singapore; Editing by Muralikumar
Anantharaman)
 ((sam.nussey@tr.com;))