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

This is 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, 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 plant in Kumamoto often comes to mind first. It is already attracting significant attention simply because TSMC, the world's number one foundry based in Taiwan, has established a factory in Japan. However, there are several reasons why I became interested in Chitose, where the Rapidus plant is located. First, there are similarities to South Korea's mega project. It is not an "external transfusion" of attracting foreign companies like TSMC or Micron, but rather a base for "self-cultivation" to foster Japanese companies. It is also similar in that there was significant government intervention and the facility was located in a regional area rather than the metropolitan area. It is also worth noting in terms of the "speed war" emphasized by President Lee Jae-myung in the mega project. Above all, I believed that Japan's true intentions and real gamble lie in Rapidus in Chitose. A technical adventure is underway here to jump straight from 40nm, the last process Japan mass-produced to regain its past status as a leader in various cutting-edge technologies including semiconductors, to 2nm. Today, we will think about what goals Japan aims to achieve through Rapidus, what the chances of success are, and what points we can learn from them.

1. How Did 'Rapidus' Begin?
Rapidus was established in 2022. The establishment of the TSMC plant corporation in Kumamoto was one year earlier. Yes, it overlaps with the COVID-19 pandemic. At the time, Japan's core national industries were shaken because semiconductor supply and demand were not being met properly. 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 units annually and suffered losses exceeding 10 trillion won. It was not just automobiles. Air conditioners and boilers, which are essential in daily life, were in short supply, and even game consoles like the PlayStation, which represents Japan, could not be found. Although it happened a bit later, there were times when transportation cards like Suica or Pasmo could not be issued for a long time due to the lack of semiconductors. Experiencing such a situation, the Japanese government and industry awakened. They realized that if they relied solely on other countries for semiconductor factories, national security and public livelihood could be paralyzed simultaneously. With this as a turning point, the Japanese government set semiconductors as a national task and began to pursue two strategies simultaneously: "external transfusion" and "self-cultivation." In this light, it can be seen that it started for somewhat more defensive reasons compared to our mega project. While the mega project started with an aggressive goal of increasing global market share, the primary goal of Rapidus was to protect the domestic industry. If you look at the actual equity relationship, it is clearer. There are currently 32 private investors, including many large Japanese companies that need semiconductors, such as Toyota, NTT, and Sony. They have prepared a domestic ecosystem that can purchase products immediately if mass production succeeds. This is also the reason why Rapidus has been able to move forward without hesitation.

[Hashimoto Kiyoshi / General Manager of Public Relations, Rapidus : There are semiconductor companies, automobile 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 Operating at a Loss, What About Rapidus?
However, if you ask whether Rapidus will succeed in the future, it is true that it is difficult with only the domestic market. Due to the nature of the semiconductor process, massive initial investment is required, so to turn a profit, it is essential to secure large customers such as Nvidia. Even the Kumamoto TSMC plant started with large companies like Sony and Denso as customers from the time of its establishment, but it has not been able to avoid losses until last year. Excluding TSMC, which occupies an unrivaled position with a market share of over 60%, there are virtually no foundry companies that make stable profits. Also, succeeding in a 2nm semiconductor prototype and succeeding in mass production are completely different issues. Furthermore, although the Japanese government has provided research funding exceeding 20 trillion won and directly purchased over 2 trillion won in equity, it is far less than the 2,000 trillion won scale of the South Korean mega project. In that respect, it is indeed a gamble that takes risks, and it is true that there are concerns within Japan as well.

3. The Japanese Government That Even Changed Laws to Provide Full Support
However, there is a reason why this company does not look easy. Based on interviews with Rapidus, I will summarize it in three aspects: capital, technology, and customers. First, government investment in Rapidus should not be judged 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 yen to become the largest shareholder. The fact that it became the largest shareholder is important. The government has become able to mobilize administrative power to provide tangible and intangible support. Regarding the power issue alone, it has decided to invest 1.8 trillion yen to build an undersea power transmission line connecting Hokkaido and the main island, and Sanae Takaichi, as a cabinet minister, has pledged full support while visiting Europe.

[Sanae Takaichi / Minister of State for Economic Security (Last month, meeting with Rapidus management) : I will definitely promote it not only to the UK and Italy, but also to other countries, centering on our allies.]

It means that the government will directly engage in semiconductor sales, just like in the nuclear power or defense industries. As it mobilizes Japan's economic and diplomatic power, there is an expectation that it will not be left to fail.

4. What About the Talent Problem Directly Linked to Technology?
Second, technology is a matter of talent. Regarding the concern that it would be difficult to secure professional talent because they have not touched cutting-edge semiconductors for 20 years, they answered as follows.

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

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

[Mori Shuichi / Director of Next-Generation Semiconductor Base Promotion Office, Chitose City : We are cooperating (with regional educational institutions) with the goal of fostering about 600 people annually for semiconductor-related employment and related company positions that are expected to be needed annually.]

I visited the Chitose Institute of Science and Technology, which is close to the Rapidus factory, and the students also had high expectations.

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

5. Can They Catch Up with TSMC and Samsung?
Whether they can secure enough customers in a situation already occupied by TSMC and Samsung is also an important point. Rapidus officials said that it would be difficult for TSMC to handle all the explosively increasing demand, and that they would aim for that niche.

[Hashimoto Kiyoshi / General Manager of Public Relations, 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, etc.]

The goal is not to become number one in the world right away. The important thing is that Japan acquires cutting-edge semiconductor technology, and Rapidus's calculation is that customers will naturally emerge once that happens. Whether Rapidus will ultimately succeed seems to be something to watch until the mass production stage next year. What is more worth noting is the process that 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 prime ministers change, seems to be a point worth referring to in our country where the mega project has started.

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

Reported by Mun Junmo | Produced by Shin Heesook | Video by Han Cheolmin, Moon Hyunjin | Video Editing by Ahn Junhyeok | Graphics by Yang Hyemin | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.