Japan's Semiconductor Comeback: The ¥10 Trillion "Crisis Management Investment" Strategy
🏭 Japan's semiconductor industry once commanded over 50% of the global market. Now, the government has unveiled an unprecedented ¥10 trillion ($65 billion) public support package aimed at reclaiming that dominance. As semiconductors become the cornerstone of economic security in the AI era, Japan embraces a new concept called "Crisis Management Investment" to pursue domestic production of cutting-edge 2-nanometer chips. Will this massive project become the catalyst for Japan's industrial revival?
Overview of the 14th Semiconductor and Digital Industry Strategy Review Meeting
On December 23, 2025, Japan's Ministry of Economy, Trade and Industry (METI) held the 14th Semiconductor and Digital Industry Strategy Review Meeting, releasing "Future Directions for Semiconductor and Digital Industry Strategy." The meeting outlined plans to provide over ¥10 trillion ($65 billion) in public support by fiscal 2030 and attract combined public-private investment exceeding ¥50 trillion ($325 billion), as the semiconductor market enters a new growth phase driven by generative AI proliferation.
The government aims to achieve approximately ¥160 trillion ($1.04 trillion) in economic ripple effects over the next decade—an ambitious target equivalent to about 3.8% of Japan's current annual nominal GDP.
"Crisis Management Investment": A New Paradigm
At the heart of this strategy lies the concept of "Crisis Management Investment," championed by the Takaichi administration. Rather than responding after risks and societal challenges materialize, this approach focuses on proactive investment to strengthen domestic supply capabilities.
The global semiconductor shortage during the COVID-19 pandemic severely impacted Japan's core industries, particularly automotive manufacturing. Learning from this experience, the government has positioned semiconductors as strategic assets for economic security, demonstrating long-term national commitment to encourage private sector investment.
Breakdown of the ¥10 Trillion Support Package
The support package is structured as follows: approximately ¥6 trillion ($39 billion) for subsidies and commissioned projects, covering next-generation semiconductor R&D and power semiconductor mass production investments; over ¥4 trillion ($26 billion) for financial support, including equity investments and debt guarantees for next-generation semiconductor production and AI infrastructure development.
Funding sources include the Energy Special Account, GX (Green Transformation) bonds, and a newly established "Advanced Semiconductor and AI Technology Account." Prime Minister Ishiba has stated that "deficit bonds will not be issued," signaling commitment to fiscal discipline while pursuing massive investment.
Rapidus and the 2nm Challenge
The symbolic centerpiece of Japan's semiconductor revival strategy is Rapidus, established in 2022. The company is building a factory in Chitose, Hokkaido, targeting mass production of 2-nanometer generation semiconductors by 2027.
In July 2025, Rapidus unveiled prototype 2nm transistors manufactured at the Chitose facility to customers and partners. Jim Keller, the legendary semiconductor engineer and CEO of Tenstorrent, praised the results, stating that the "prototype data was excellent."
Government support for Rapidus has reached approximately ¥2.9 trillion ($19 billion) cumulatively, with additional support planned for the 2027 production target. Total funding of approximately ¥5 trillion ($32.5 billion) is estimated to be necessary for mass production, and additional private sector investment is being secured.
Japan's Strengths: Equipment and Materials
Parallel to the pursuit of cutting-edge processes, the strategy emphasizes strengthening Japan's globally dominant "manufacturing equipment" and "materials" sectors.
Japan maintains strong competitiveness in coating/developing equipment, cleaning equipment, silicon wafers, and photoresists. Japanese companies including Tokyo Electron, SCREEN, Shin-Etsu Chemical, and JSR occupy critical positions in the global semiconductor supply chain, providing essential equipment and materials.
The strategy includes R&D and capital investment support for these sectors, aiming to maintain control over supply chain chokepoints.
Turbulent International Landscape and Global Competition
Competition in the semiconductor industry continues to intensify globally.
The United States is driving massive domestic semiconductor manufacturing investment through the CHIPS Act, promoting onshoring through tariff policies and tax incentives. The EU's "European Chips Act" aims to double market share to 20% by 2030 with enhanced public support.
China continues massive investment through its "National Integrated Circuit Industry Investment Fund" (Big Fund), mobilizing approximately 344 billion yuan (about ¥7 trillion / $45.5 billion) in the third phase alone, focusing on equipment, materials, and legacy semiconductor self-sufficiency.
Taiwan's TSMC plans to begin 2nm mass production within 2025, with Samsung pursuing similar goals. By the time Rapidus ships 2nm chips in 2027, leading competitors may have already established advantages in yield improvement and price competitiveness.
Challenges and Concerns
Japan's semiconductor revival faces numerous challenges.
The "triple challenges" of technology, talent, and capital are severe. Domestic semiconductor engineers have declined dramatically over the past 20 years, making the recruitment of next-generation manufacturing engineers an urgent priority.
Past failures of "Japanese national semiconductor" initiatives remain a concern. Elpida Memory went bankrupt in 2012, with analysts pointing to slow decision-making and unclear responsibility typical of corporate consortiums. Rapidus shareholders include Toyota, Denso, NTT, NEC, and SoftBank, potentially facing similar risks.
Some experts question: "¥3 trillion ($19.5 billion) for Rapidus, nothing for other capable companies—will this really strengthen Japan's semiconductor industry?"
Future Outlook
From 2026 onward, Japan's semiconductor industry enters the "execution" phase. The ¥10 trillion ($65 billion) support package is merely a catalyst. The critical question is whether this investment can be transformed into sustainable business operations.
METI's strategy aims to build a "Digital Ecosystem" that simultaneously nurtures demand-side industries like physical AI and autonomous driving, rather than simply building factories. If semiconductor mass production achieves momentum, domestic AI services and robotics industries utilizing these chips are expected to accelerate concurrently.
Rapidus Chairman Tetsuro Higashi has expressed strong urgency: "If we miss this opportunity, there won't be another chance." The decade that will test Japan's industrial capabilities has begun.
In Japan, reactions to this massive investment are a mix of hope and concern. What discussions are happening in your country about government support for the semiconductor industry?
References
- https://www.meti.go.jp/policy/mono_info_service/joho/conference/semicon_digital/0014/0014.html
- https://www.meti.go.jp/policy/mono_info_service/ai_semiconductor_frame/ai_semiconductor_frame.html
- https://www.jetro.go.jp/world/gtir/2025/ch2/sec2/sub2.html
- https://www.cnbc.com/2024/11/13/japan-is-ramping-up-efforts-to-revive-its-once-dominant-chip-industry-.html
Reactions in Japan
The ¥10 trillion support shows real commitment. But I worry about repeating Elpida's mistakes. I hope it succeeds this time.
If they're using ¥10 trillion of taxpayer money, we need more transparent explanations. Who takes responsibility if it fails?
Thanks to Rapidus, Chitose is thriving. Rent has gone up, but I hope it becomes a good example of regional revitalization.
TSMC starts 2nm mass production in 2025. By the time Rapidus ships in 2027, they'll be behind. Is there really a winning chance?
Engineer development is the biggest challenge. Money alone is meaningless without people. It takes time to recover talent lost over 20 years.
Considering Taiwan contingency risks, having domestic cutting-edge semiconductor production capability is absolutely necessary. It's not about cost.
Instead of concentrating only on Rapidus, I wish they'd support semiconductor design startups too. They should nurture the entire ecosystem.
Semiconductor stocks are booming. Equipment makers like Tokyo Electron and SCREEN should benefit.
They say no deficit bonds, but using GX bonds and energy accounts is essentially more debt, isn't it? The ¥160 trillion economic effect sounds dubious.
Rapidus is attractive as an employer. The chance to work on cutting-edge semiconductors in Japan is rare. I want to take on the challenge.
As someone who knew Japan's semiconductor heyday in the 80s, I sincerely hope for revival. But we mustn't forget the competitive landscape is completely different now.
We suffered from the semiconductor shortage during COVID. Having domestic procurement capability is truly appreciated. I understand why Toyota is investing.
I'm not reassured just because Jim Keller praised it. Prototyping and mass production are different. Improving yield and securing customers is the real challenge ahead.
As long as US-China tensions continue, Japan's semiconductors are geopolitically important. Their value as a Plan B is high.
Japan's strengths are equipment and materials. We're world leaders in photoresist and wafers. A strategy leveraging these strengths is correct.
Demand for AI semiconductors is exploding. There's a chance to win if we catch this wave. But it's a race against time.
Japan was the semiconductor kingdom in the 80s. Interesting to see if ¥10 trillion investment can bring a comeback. However, closing the gap with TSMC and Samsung won't be easy.
Considering geopolitical risks, having alternative manufacturing in Japan is a plus for the world. It can reduce excessive dependence on TSMC.
The EU is also pursuing a similar Chips Act. Japan's ¥10 trillion support makes them a good competitor for us. Multipolarization of the semiconductor industry is healthy.
For Korea's semiconductor industry, Japan is both a competitor and a partner. The reality is we can't produce without Japanese materials and equipment.
The US CHIPS Act and Japan's ¥10 trillion support are complementary. Strengthening semiconductor supply chains among allies is part of the China strategy.
Japan's move is part of countermeasures against China. We are also accelerating building our own semiconductor ecosystem. Competition will intensify.
Rapidus's 2nm prototype success is impressive, but mass production is a completely different story. Yield improvement and customer acquisition are key.
From emerging countries' perspective, diversification of semiconductor suppliers is welcome. Dependence on one country or company is too risky.
Japanese semiconductor stocks are worth watching. Equipment makers especially are positioned to directly benefit from government support.
Japan's approach with the concept of 'Crisis Management Investment' is interesting. France might need similar discussions.
¥10 trillion is about $65 billion. Even with this much public funding, success isn't guaranteed. Government-led high-tech industry development is difficult.
TSMC's advantage won't collapse easily. We have customer relationships and know-how built over 20+ years. I respect Japan's challenge, but it's a tough road.
From the Middle East's perspective, diversification of semiconductor supply is welcome. More procurement options from Japan would expand our choices.
Japan's semiconductor strategy is instructive for the EU. The public-private partnership framework and long-term funding commitment structure have lessons for us.
Mexico is growing as a semiconductor supply chain hub. We'd welcome Japanese companies expanding here. Global cooperation is important.