2024-02-29
Japan actively developed its semiconductor industry in the 1970s, creating a complete industrial chain with outstanding performance in manufacturing, materials, equipment, and terminal products. At one point, Japanese semiconductors exceeded 50% global market share. But since the U.S.-Japan Semiconductor Agreement of 1986, Japan's market position has gradually fallen behind Taiwan and South Korea, with the current global market share sitting at less than 10%.
In recent years however, Japan has been actively developing its semiconductor industry chain. Measures include encouraging foreign investments from companies like TSMC and Micron, as well as establishing Rapidus, which aims to mass-produce the most advanced logic chips smaller than 2 nanometers by 2027, to expand the global market share of Japanese chips to 20% by 2030. While Japan may still need to catch up in logic IC manufacturing, it is still the world leader in semiconductor materials and equipment, representing about 50% and 30% of the global market respectively.
The global semiconductor equipment market is primarily dominated by the United States, Japan, and the Netherlands. Among the top 10 equipment manufacturers, the United States accounts for about half of the market share, followed by Japan and the Netherlands, accounting for 30% and 20% respectively.
Japan exports most of the semiconductor equipment it manufactures. In 2022 alone, Japan had US$8.35 billion in domestic demand for equipment, accounting for 7.8% of the global market. However, equipment exports were significantly higher, amounting to 4.3 trillion JPY (approx. US$28.5 billion), with about 23.8% (approx. US$6.78 billion) exported to Taiwan.
Semiconductor production equipment constitutes the majority of Japan's semiconductor equipment exports, accounting for nearly 60% of total exports, followed by components at about 20%. In terms of manufacturers, Japan's largest semiconductor equipment manufacturer is TEL (Tokyo Electron), also the third-largest equipment manufacturer in the world. Other Japanese manufacturers in the top ten worldwide include Advantest, SCREEN, and Hitachi High-Tech.
In the equipment category, Japanese coating/developing equipment (mainly TEL) accounts for more than 80% of the global market. Additionally, Japanese DUV (deep ultraviolet) photolithography machines, vertical CVD (chemical vapor deposition) and oxidation diffusion equipment, sputtering equipment, CMP (chemical-mechanical polishing) equipment and factory handling equipment also occupy important position in the industry.
The COVID-19 pandemic has underscored the importance of digital transformation. Japan's Ministry of Economy, Trade and Industry released its first Strategy for Semiconductors and the Digital Industry in March 2021. This strategy highlights the urgent need for advancements in semiconductor technology, manufacturing, and digital infrastructure, aiming to address the technological requirements for future trade and economic security. It sets a goal for Japanese semiconductor companies to increase their revenue from 5 trillion JPY in 2020 to 15 trillion JPY by 2030, ensuring a stable domestic supply of semiconductors.
The strategy focuses on five areas: advanced logic ICs, advanced memory, industrial use semiconductors, advanced packaging, and manufacturing equipment and components/materials. It is estimated that by 2030, the public and private sector investments in advanced semiconductors and their supply chains will exceed 5 trillion JPY. Additionally, Japan aims to strengthen its domestic semiconductor equipment manufacturing supply chain and develop equipment for of next-generation technology, including advanced and green manufacturing equipment.
The Economic Security Promotion Act also guarantees subsidies for operators whose equipment investment exceeds 30 billion JPY, which will enhance supply chain resilience and domestic manufacturing capabilities.
To improve its self-sufficiency in advanced semiconductor manufacturing, Japan has initiated infrastructure projects in various prefectures, including a TSMC’s logic IC factory in Kumamoto, a Flash-3D NAND factory in Mie Prefecture (a joint venture between Kioxia and Western Digital), and a Micron’s 1β generation DRAM factory in Hiroshima Prefecture. Notably, TSMC’s Kumamoto fab, with an investment of US$8.6 billion, is a key development in advancing industrial-use semiconductors in the Kyushu region. This initiative is expected to generate 4.3 trillion JPY in economic benefits for the area over the next decade and has spurred other companies to establish factories in Kumamoto. Furthermore, since the establishment of JASM at the end of 2021, at least 46 semiconductor-related manufacturers to make new investments in the Kyushu region, promoting local economic development and enhancing Japan's competitive position in advanced semiconductor manufacturing.
In recent years, Japan has actively collaborated with governments and enterprises from various countries to enhance the resilience of its semiconductor supply chain and bridge the gap in advanced technology fields. The Japan-U.S. Summit Meeting of 2022 established the Basic Principles on Semiconductor Cooperation, wherein the two nations committed to jointly bolstering supply chain resilience within the free trade market and supporting each other in addressing shortfalls in semiconductor manufacturing, manpower, technology and semiconductors. Japan has also formed a semiconductor partnership with the United Kingdom and held an Exchange of Views with senior executives of global semiconductor companies. Additionally, Japan's Ministry of Economy, Trade and Industry announced the resumption of semiconductor material exports to South Korea, ending a trade dispute that lasted three years and nine months.
Despite these developments, Japanese semiconductor equipment manufacturers remain cautious above moving production capacity overseas, mainly due to considerations of geographical location and preventing technology outflow. In line with the New Export Controls on Semiconductor Equipment announced in March 2023, Japan, similar to the US, will impose controls on semiconductor equipment that may be diverted for military purposes. However, countries on Japan's list of friendly countries, including the United States, Taiwan, South Korea, and Singapore, are exempt from this restriction.
Post COVID-19, Japan and other countries around the world are actively developing their local supply chains. Although Japan's semiconductor production capacity may have decreased from its previous heights, the country still holds a leading position globally in terms of equipment and materials. In recent years, Japan has actively cooperated with overseas companies in the semiconductor industry. However, due to concerns of national security and potential technology outflow, Japan remains selective in its partnerships.
One such company, JASM, a joint venture with TSMC, which plays a crucial role in filling the gap in logic IC production capacity. From the outset of construction, it is evident that both Japan’s public and private sectors have provided full support, significantly impacting the Kumamoto region. This development has even been referred to as the “semiconductor bubble.”
Both Powerchip Semiconductor Manufacturing Corporation and United Microelectronics Corporation are keen on expanding their presence in Japan. In these expansions, Taiwan will contribute its semiconductor manufacturing experience and technology, while Japan will provide the manpower, subsidies, and local resources to increase semiconductor production capacity. This collabortion will also serve as a valuable foundation of experience for Taiwanese companies looking to establish factories in other countries.
Furthermore, Taiwan and Japan share some common issues, such as an aging population with a low birthrate, human resource shortages, and the goal of achieving net-zero carbon emissions in the semiconductor supply chain. Other areas, such as digital transformation, automation, and environmental protection, present opportunities for joint exploration and resolution. As a result, Taiwan and Japan can be expected to cooperate more closely in the semiconductor industry in the future.
Source： Eva Chen, Industrial Analyst, Industrial Research Section, Planning & Promotion Department, Metal Industry Research & Development Centre
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