Japan Was the Dominant Force in the Chip Industry in the 1980s. This Is How It Plans to Reclaim Its Former Glory

In the late 1980s, Japan dominated the semiconductor industry with overwhelming force. Companies like NEC, Toshiba, Hitachi, Fujitsu, Mitsubishi, and Matsushita, among others, accounted for no less than 50% of the chip industry in 1988. Today, however, none of these companies are among the leaders in a sector dominated by Taiwanese, American, South Korean, and German companies.

The Japanese government is determined to regain its former glory and reclaim the preeminent position it held in the semiconductor industry three decades ago. Its economy is at stake, and it has a plan that’s already underway. In fact, the Japanese government began rolling out its strategy to strengthen its integrated circuit industry more than a year ago, so the first results are beginning to show.

Japan Invests 0.71% of Its Gross Domestic Product in Its Semiconductor Sector

Japan is currently investing a larger percentage of its gross domestic product (GDP) in its integrated circuits sector compared to the U.S., Germany, France, and the UK. According to Nikkei Asia, the U.S. devotes 0.21% of its GDP to its semiconductor industry; Germany, 0.41%; France, 0.2%; and the UK, 0.04%. In contrast, Japan’s effort is notably higher, with 0.71% of its GDP dedicated to the semiconductor industry.

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Furthermore, Taiwan’s TSMC is playing a crucial role in Japan’s efforts to strengthen its semiconductor industry. The Japanese government has recently formed an alliance with TSMC, which leads the integrated circuit industry, proving Japan’s ambition in the sector. The Japanese government has also provided TSMC with substantial subsidies to support the construction of advanced chip manufacturing plants on the country’s island of Kyushu. The first of these plants is scheduled to commence production later this year.

As expected, Japanese companies play a significant role in the rebuilding of Japan’s chip industry. “We are working with our customers to develop technology four generations into the future,” Nobuto Doi, vice president of Tokyo Electron, stated in what it clearly is a declaration of intent.

The Dutch company ASML is renowned in the photolithography equipment industry for its development of extreme ultraviolet (EUV) lithography machines and, more recently, for its high-numerical aperture EUV devices. However, several Japanese companies also have a substantial presence in the market.

Nikon as well as Canon (and its nanoimprint lithography) are among them, with Tokyo Electron being the biggest player. It’s worth noting that Tokyo Electron is receiving support from the Japanese government and is currently constructing multiple buildings in Miyagi Prefecture, in northeastern Japan, with an expected completion date of 2025.

The facility’s most ambitious project involves designing and manufacturing highly advanced plasma wafer etching equipment, which is the technology Doi mentioned in his statement. These machines are used to define patterns that will later be transferred to the wafer. While Japan’s Hitachi also produces plasma wafer etching machines, Tokyo Electron holds the leading position in this particular market.

Canon, Nikon, and Tokyo Electron are currently Japan’s top assets in the lithography equipment market. However, we should also consider Rapidus Corporation’s efforts to establish itself as “the Japanese TSMC.” The young company is currently constructing an integrated circuit fab in northern Japan, with plans to produce 2 nm semiconductors. According to Nikkei Asia, the first prototypes of these integrated circuits will be ready in 2025, but large-scale manufacturing isn’t expected until 2027 at the earliest.

Rapidus’ new fab is attracting attention in the semiconductor industry because, according to Rapidus president Atsuyoshi Koike, it’ll be fully automated. The purpose of this fab is to use robots and artificial intelligence to optimize an automated production line that specializes in manufacturing 2 nm chips for AI applications. The goal is to produce integrated circuits faster, at a lower cost, and with higher quality.

To manufacture these semiconductors, companies are using ASML’s EUV lithography equipment, and almost all manufacturing processes are automated. However, most manufacturing plants still carry out the test and validation, interconnect, and chip packaging phases manually. Rapidus claims that its technology to automate all these processes will reduce the lead time of its chips by 66% compared to the times TSMC and Samsung usually offer.

All in all, Japan’s plan to strengthen its presence in the chip industry is ambitious but, above all, reasonable. History reminds us that this Asian country became a world power by starting from nothing and developing slowly over time. In other countries, this strategy might not be as effective, but Japanese idiosyncrasies are unique, and it works for them. We’ll very likely soon be discussing Japan as frequently as we currently discuss Taiwan, China, or South Korea when we talk about the chip industry. There’s no doubt about that.

This article was written by Juan Carlos López and originally published in Spanish on Xataka.

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