Taiwanese Powerchip Semiconductor Manufacturing Corp. intends to build a plant in the northeastern part of Japan.

The cost of this project is 800 billion yen ($5.3 billion). The Taiwanese manufacturer, as part of the implementation of the intention to build a plant, raises financing from the investment group SBI Holdings Inc. and the government of Japan. For Tokyo, this project is of particular importance as part of its desire to expand the production base for making chips.

The initial investment in the construction of the plant will amount to 420 billion yen. More than half of this amount will be provided by Powerchip and SBI. The remaining funds will come from investors and will be allocated as part of government loans and bank loans.

A foundry will be built in Miyagi Prefecture. The production of 40-nanometer and 55-nanometer semiconductors will be launched here. In this case, manufacturing efforts will focus on automotive chips and power controllers. The launch of the foundry is scheduled for 2027. The mentioned products are likely to be in demand in Japan, since large consumers of these chips, including Toyota and Honda, are based here.

SBI Chief Executive Officer Yoshitaka Kitao said at a press conference on Tuesday, October 31, that the companies participating in the plant building project have prepared for the creation of an unsurpassed foundry and semiconductor ecosystem. This investment group plans to provide about 100 billion yen of initial financing and raise about the same amount through a new fund, the creation of which is planned for the near future. Yoshitaka Kitao noted that ISB will not build a foundry without subsidies.

Against the background of news about the project, the value of the investment group’s shares increased by 2.7%. At the same time, Powerchip securities fell in price by 0.2%.

The administration of the current Prime Minister of Japan Fumio Kishida provides billions of dollars in subsidies to chip manufacturers who intend to establish production activities in this country. Powerchip’s competitor and industry leader Taiwan Semiconductor Manufacturing Co. has already received financial support. Currently, this company is building a plant in the south of Japan, which is planned to be launched next year.

American memory manufacturer Micron Technology Inc. and Japanese players Kioxia Holdings Corp. and Rapidus Corp are also expanding their activities in the world’s third-largest economy. This process is greatly facilitated by the financial support provided by the administration of Fumi Kishida.

Japanese Economy, Trade, and Industry Minister Yasutoshi Nishimura said that microcircuits for cars, which Powerchip will focus on, are currently in-demand products and will help provide a production base. He also said that the country’s leadership intends to allocate additional budgetary funds to strengthen the semiconductor supply chain.

Experts say that Japan, which is currently striving to regain its former greatness in the technology industry, can benefit from the current geopolitical situation. Against the background of tensions in relations between Beijing and Washington, which already has consequences in the form of restricting Chinese companies access to advanced chips and narrowing export opportunities from the Asian country of germanium, gallium, and graphite, many manufacturers are seeking the diversify and reduce the level of dependence on Taiwan. The United States is also proposing measures to stimulate American manufacturing of microcircuits, but so far these efforts have not led to significant progress.

Frank Huang, Chairman of Powerchip, said that Japan is the best place to invest in semiconductors. Experts say that in the case of this country, the development of the manufacturing sector may face the problem of a shortage of qualified personnel against the background of a weak yen.

Powerchip’s decision to establish operations in Japan is partly due to the global trend of the chip sector’s struggle to regain its position after a drop in demand during the coronavirus pandemic. The first half of 2023 was not favorable for this company. The manufacturer faced the problem of low sales. In July, the company informed investors of its intention to act within the framework of a conservative strategy when expanding its capacity.

As we have reported earlier, Mizuho to Create Fund to Support Japanese Tech Startups.