To encourage foreign semiconductor companies to make capital investments in Japan, Tokyo intends to launch a fund to provide financial support for purposes such as building factories, the Yomiuri Shimbun has learned.
The Cabinet of Prime Minister Fumio Kishida, who has touted a policy of strengthening economic security, aims to secure a stable supply of semiconductors.
Legal revisions will be required to establish the fund. The legislation for the amendments is expected to be submitted to the extraordinary Diet session to be convened on December 6, following Cabinet approval.
Under Tokyo’s plan, the fund would be established in the New Energy and Industrial Technology Development Organisation (Nedo) – an incorporated administrative body under the jurisdiction of the Ministry of Economy, Trade and Industry – as a source of subsidies for foreign business operators.
As related costs, 617 billion yen ($5.5 billion) has been earmarked in a supplementary budget for this fiscal year.
According to sources, the envisaged financial support will be limited to foreign businesses that manufacture semiconductors indispensable for building technology that utilises the 5G high-speed, high-capacity communication standard.
The provision of support will be based on five criteria: appropriateness of business plans; continuity of chip production; soundness of a plant’s location; contribution made to chip production stability in Japan; and appropriate management of technical information.
If a foreign company submits a plan to build a factory in Japan and it is granted approval, Tokyo will provide it with subsidies over several years. Companies will also be able to receive low-interest loans from financial institutions supported by Nedo. The ministry will require businesses that violate approved plans to return the subsidies.
Japan’s semiconductor industry accounted for half of the global market share in the second half of the 1980s. However, the current figure is about 10 per cent. Japan relies on imports from Taiwan, China and other countries and regions to cover more than 60 per cent of its domestic demand for chips.
Tokyo’s proposed legislation will state that stable domestic production must be ensured in order to respond to fluctuations in the supply and demand for specific semiconductors.
At present, Japan does not have a legal framework to support capital investment by foreign semiconductor companies with state funds.
If the legislation is enacted, Tokyo envisages that Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chipmaker, will be the first subsidy recipient under the framework.
TSMC has announced plans to construct a plant in Kumamoto prefecture on Kyushu, the southernmost of Japan’s four main islands.
Tokyo intends to pass the legislation in the Diet as soon as possible and use the legal framework as an incentive to attract more foreign chipmakers.
Kishida has expressed an intention to “explore various possibilities to attract not only TSMC but also other firms including US manufacturers”.
Source: THE YOMIURI SHIMBUN (JAPAN)/ASIA NEWS NETWORK