Chip Czar Sees Japan Funding One-Third of Second TSMC Plant
According to the lawmakers in charge of the ruling party's chip coalition, the Japanese government will contribute funds for a considerable portion of a second Taiwan Semiconductor Manufacturing Co. factory in the southern region of Kumamoto.
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Refusing to offer any assistance is no longer an option, as the government has committed to covering half of the expenses for the initial Kumamoto facility. Akira Amari and Yoshihiro Seki, who respectively serve as chairman and secretary general for the Liberal Democratic Party's semiconductor group, made this announcement. Amari further noted that typically, these kinds of projects receive approximately one third of the funding, making the level of support for the first plant unusually generous.
Japan is set to provide financial support, or subsidies, as an integral measure to rejuvenate its own chip manufacturing sector. This industry is seen as vital for both progress and the stability of the country's economy, according to Amari.
"This represents a plan at a nationwide level," Amari expressed during an interview conducted in Tokyo on Wednesday. "We are confronted with a pivotal decision that will shape our path for the upcoming years. Will we be a recipient or a supplier of chips? Which option holds greater advantages? We are compelled to embrace this endeavor, irrespective of its outcome."
The possibility of the government covering half the cost of the second TSMC facility will hinge on the nature of the chips being produced and the extent of its economic influence in the area, as per Seki's statement. To elucidate further, he mentioned that if TSMC intends to equip numerous Japanese engineers through its highly skilled personnel, the government would be more inclined to provide assistance.
"The establishment of the plant is definitely going to enhance the economy and we will support it," Seki expressed in a separate conversation on Wednesday in Tokyo. "Across the world, governments are providing considerable support. If Japan solely remains inactive, we will fail to entice leading semiconductor companies from other parts of the globe."
The legislators additionally expressed their desire to witness a minimum of 1 trillion yen ($7 billion) of assistance targeted towards chip manufacturing in a supplementary budget for this year, which is expected to be formulated towards the conclusion of the current year.
"Chips demand investments worth trillions of yen on a global level," stated Amari. "We will ensure a significant allocation of funds."
According to Seki, even though the company hasn't made an official announcement about the second TSMC plant, it is possible that the budget will include financial assistance for it. Additionally, the funds may also be allocated towards supporting the production of legacy and power semiconductors that are in need of help.
In June, Mark Liu, the Chairman of TSMC, mentioned that talks are underway with Japan regarding financial support for a new site. This potential facility could be established near their existing plant in Kumamoto.
If the added assistance in the supplementary budget becomes a reality, Japan will be well on its way to fulfilling its goal of allocating approximately 10 trillion yen towards semiconductor investments over the course of ten years. Prime Minister Fumio Kishida explicitly expressed this desire in the previous year.
According to the economy ministry, around 1.76 trillion yen has been allocated for Japan's chip and digital strategy, which was established in 2021 and updated this year. Out of this amount, 1.2 trillion yen will be dedicated to semiconductors, 500 billion yen to storage batteries, and 60 billion yen to software-related projects. Japan's goal is to increase the sales of domestically made semiconductors to over 15 trillion yen by 2030, attempting to triple the current sales.
Seki added that the government is expected to seek financial assistance for chips through supplementary budgets, rather than including them in the typical annual budgets. This approach is chosen due to the substantial size and uncertain nature of these investments.
Up until now, the authorities have increased financial assistance for supporting the industry, but there might be a need for the government's strategy to change in the future, according to him. Additional possible actions include providing tax exemptions to assist businesses facing significant expenses related to operations, particularly in terms of water and electricity bills.
The initial assistance that has been promised includes 476 billion yen for the inaugural TSMC factory, which is scheduled to commence operations in late 2024. Additionally, there is a commitment of 330 billion yen for Rapidus Corp., a domestic chip enterprise situated in northern Hokkaido. While the TSMC endeavor can be defended as it attracts the top chip manufacturer globally to Japan, Seki stated that the Rapidus case poses a greater level of risk.
The latter is a fresh and innovative startup striving to manufacture cutting-edge chips on a large scale, which is an unexplored domain for Japan. The government intends to extend additional aid in this endeavor.
Seki acknowledged that the Rapidus case presented significant challenges. He emphasized that the key to success lies in adopting a mindset that leaves no room for options other than achieving our goals.
--With the help of Peter Elstrom and Mayumi Negishi.
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