"From 40nm to 2nm in One Leap? Is It Possible?"… Japan's Gamble to Catch Up with Samsung and TSMC

I am reporting from Tokyo. Today, I would like to talk about Japan's semiconductor industry. Following the announcement of a mega-project in South Korea, I visited Chitose in Hokkaido last week to see what Japan is doing and how they are approaching it. In fact, when people think of Japanese semiconductors, the TSMC factory in Kumamoto often comes to mind first. It has already garnered significant attention simply because TSMC, the world's number one foundry company from Taiwan, has established a plant in Japan. However, there are several reasons why I became interested in Chitose, where the Rapidus factory is located. First, it shares some similarities with the South Korean mega-project. It is not an "external transfusion" project that attracts foreign companies like TSMC or Micron, but rather a hub for "self-cultivation" to foster Japanese companies. It is also similar in that there has been significant government intervention and the facility was located in a regional area rather than the capital region. It is also worth noting in terms of the "speed war" emphasized by President Yoon Suk Yeol regarding the mega-project. Above all, I believed that Japan's true intentions and real gamble lie with Rapidus in Chitose. A technical adventure is underway there, attempting to jump from 40nm, the last process node Japan mass-produced, directly to 2nm to regain its past status as a leader in various cutting-edge technologies, including semiconductors. Today, we will consider what Japan aims to achieve through Rapidus, the likelihood of its success, and what we can learn from it.

1. How Did 'Rapidus' Begin?
Rapidus was established in 2022. The establishment of the TSMC Kumamoto plant corporation was one year prior. Yes, this overlaps with the COVID-19 pandemic. At the time, Japan was unable to secure a proper supply of semiconductors, to the point where its core national industries were shaken. In particular, the automotive industry, which can be called the backbone of the Japanese economy, was hit hard. At one point, eight major Japanese automakers, including Toyota and Nissan, cut production by 1.7 million vehicles annually and suffered losses exceeding 10 trillion KRW. It was not just automobiles. Essential daily items like air conditioners and boilers faced shortages, and even game consoles like the PlayStation, which represent Japan, could not be found. Although it happened a bit later, there were times when new issuance of transportation cards like Suica or Pasmo was suspended for a long period due to the lack of semiconductors. Experiencing such a situation, the Japanese government and industry had a wake-up call. They realized that relying solely on other countries for semiconductor factories could paralyze both national security and public livelihood. This led the Japanese government to set semiconductors as a national task and pursue two strategies simultaneously: "external transfusion" and "self-cultivation." Viewed this way, it can be seen as starting for somewhat more defensive reasons compared to our mega-project. While the mega-project started with an aggressive goal to increase global market share, the primary goal of Rapidus was to protect the domestic industry. This becomes clearer when looking at the equity structure. There are currently 32 private investors, including many major Japanese companies that need semiconductors, such as Toyota, NTT, and Sony. They have essentially prepared a domestic ecosystem that can purchase the products immediately upon successful mass production. This is also the reason why Rapidus has been able to move forward without hesitation.

[Hashimoto Kiyoshi / Public Relations Manager, Rapidus: There are semiconductor companies, automotive companies, and companies like NTT that are trying to pioneer new technologies in the communications field. The investing companies are likely thinking about various business synergies in the future.]

2. Even the Kumamoto TSMC Plant Is in the Red, What About Rapidus?
However, if you ask whether Rapidus will succeed in the future, it is true that it will be difficult with the domestic market alone. Due to the nature of semiconductor manufacturing, massive initial investment is required, so to turn a profit, they must secure large customers, such as NVIDIA, for example. Even though the Kumamoto TSMC plant started with major companies like Sony and Denso as customers from the time of its establishment, it could not avoid losses until last year. In fact, excluding TSMC, which holds a dominant position with a market share of over 60%, there are virtually no foundry companies that generate stable profits. Furthermore, succeeding in a 2nm semiconductor prototype is a completely different matter from succeeding in mass production. Also, although the Japanese government has provided research funding exceeding 20 trillion KRW and directly purchased over 2 trillion KRW in equity, it is far less than the 2,000 trillion KRW scale of the South Korean mega-project. In that respect, it is indeed a risky gamble, and it is true that there are concerns within Japan as well.

3. The Japanese Government Changed Laws to Provide Full Support
However, there is a reason why this company does not look like a pushover. Based on an interview with Rapidus, let's summarize it in terms of three aspects: funding, technology, and customers. First, the government's investment in Rapidus should not be measured solely by the amount. Last year, the Japanese government made it possible for the government to make long-term investments in private companies through the revision of the Act on Facilitation of Information Processing, known as the "Rapidus Support Act." And this year, it invested 250 billion JPY to become the largest shareholder. The fact that it became the largest shareholder is important. The government can now mobilize administrative power to provide tangible and intangible support. Regarding electricity alone, they decided to invest 1.8 trillion JPY to build an undersea transmission line connecting Hokkaido and the main island, and Sanae Takaichi, the Minister of Economic Security, pledged full support while on a tour of Europe.

[Sanae Takaichi / Minister of Economic Security of Japan (Last month, meeting with Rapidus management): I will certainly promote this to other countries as well, not just the UK and Italy, focusing on our allies.]

This means the government will directly engage in semiconductor sales, just like they do for nuclear power or the defense industry. As they are mobilizing Japan's economic and diplomatic power, there is an expectation that they will not leave it to fail.

4. What About the Talent Issue, Which Is Directly Linked to Technology?
Second, technology is a matter of talent. Regarding concerns that it might be difficult to secure professional talent because they have neglected cutting-edge semiconductors for 20 years, they answered as follows.

[Hashimoto Kiyoshi / Public Relations Manager, Rapidus: We are proceeding by receiving technology sharing from IBM. 160 engineers were sent to the IBM research lab in New York to conduct research together. More than 100 have already returned.]

Efforts to foster talent at the regional level have also begun.

[Mori Shuichi / Director of Next-Generation Semiconductor Hub Promotion Office, Chitose City: We are cooperating (with regional educational institutions) with the goal of fostering about 600 people per year for semiconductor-related employment and work at related companies, which is the number expected to be needed annually.]

I visited a science and technology university near the Rapidus factory, and the students were also full of expectations.

[Shima Keita / Freshman, Chitose Institute of Science and Technology: Rapidus is one of the quite major career options at our school. There aren't many semiconductor classes right now, but I heard that a semiconductor-related department will be established starting next year.]

5. Can They Catch Up with TSMC and Samsung?
Whether they can secure enough customers in a situation where TSMC or Samsung have already taken the lead is also an important point. Rapidus stated that it would be difficult for TSMC to handle all of the explosively increasing demand, and that they would aim for that niche.

[Hashimoto Kiyoshi / Public Relations Manager, Rapidus: Looking at the supply and demand balance for the next three years or so, demand is very strong. There may be cases where companies want to order (cutting-edge semiconductors) from TSMC, but orders cannot be placed immediately due to business reasons or other factors.]

The goal is not to become the world's number one immediately. The point is that Japan will possess cutting-edge semiconductor technology, and Rapidus's calculation is that customers will naturally follow once that happens. Whether Rapidus will ultimately succeed remains to be seen until the mass production stage next year. What is more worth noting is the process that has led to this point. The fact that the Japanese government, starting from Prime Minister Kishida, and going back to former Prime Minister Abe, has drawn a big picture including the semiconductor industry and has consistently supported it even when the Prime Minister changes, is something that our country, where the mega-project has begun, might find worth referencing.

[Park Sang-jun / Professor of Economics, Waseda University: Since it is something we can see only after waiting at least 10 years, or even 20 years, it is also an achievement to improve step by step rather than the government trying to produce results quickly or make announcements just to show off.]

Reported by Mun Junmo | Produced by Shin Hee-sook | Video by Han Cheol-min and Mun Hyun-jin | Video Editing by Ahn Jun-hyeok | Graphics by Yang Hye-min | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.