Japan chips in with $65bn AI-fuelled support package

• The Japanese government looks set to trump the $52.7bn Chips and Science Act investments in the US
• It is stumping up a massive $65bn over the next six years to boost Japan’s semiconductor and AI sectors
• It wants to support an important industry but also to shield it as much as possible from supply chain shocks

The Japanese government has earmarked ¥10tn ($65bn) of state funding by 2030 to strengthen Japan’s semiconductor and AI chip sector, partly to help secure the country’s supply chains and avoid future global disruptions, and partly to ensure sustainable growth within Japan’s critical semiconductor and technology sectors.

According to multiple reports, including this one from Reuters, it will use the funds to support the mass production of next-generation chips for AI workloads in particular. The government intends the funding, which was announced by Prime Minister Shigeru Ishiba, to be part of a total ¥50tn ($325bn) that will be invested in Japan’s semiconductor sector by public and private investors over the course of the next decade.

One strand of this support is set to be focused on further developing Japanese chip foundry Rapidus, in which the Japanese government has previously invested, alongside companies such as NTT, NEC and SoftBank, and which is collaborating with IBM and the Belgian researcher Imec. Rapidus aims to begin commercial operations on the northern island of Hokkaido in April 2025 and reach mass production by 2027.

The investment plan is part of a broad economic plan set to be approved by the Japanese cabinet on 22 November. 

So why is Japan planning this investment now? Partly because it’s now abundantly clear that putting the infrastructure in place to support AI developments is hugely important for the future economic health of major nations, and AI semiconductor investment is table stakes for any country that wants to play a role.

Anxiety, however, is rising with worsening high tech trade tensions between China and the US, and it may be no coincidence that the investment announcement was made in the immediate wake of the re-election to the White House of Donald Trump, who is poised to impose sweeping tariffs on goods imported into the US, where funds from the Chips and Science Act are set to bolster the country’s chip manufacturing capabilities. In these circumstances, strengthening your supply chains and ensuring at least some internal silicon supplies in the medium term is a prudent course of action. Of course it’s uncertain just how far Trump is prepared to go with his potentially disruptive tariff plans, but even minor disruption and a degree of uncertainty around AI component supply is a distinct possibility both short and longer term.

Japan has been on the wrong side of US trade sensitivities before and is no doubt anxious to avoid any sort of re-run. As recently as the 1980s, Japanese companies were accused of ‘dumping’ technology goods, such as printers and computers, by both US and European companies and politicians and, in an eerily familiar pre-run of today’s auto standoff with China, US auto workers then vented their anger over Japanese car imports, memorably attacking Japanese cars with sledgehammers for the TV cameras.

The dumping assertions are a stark reminder of how quickly trade alliances and sentiment can change – clearly the huge investment by the government is partly designed to head off or at least minimise any difficulties it might face in future.

– Ian Scales, Contributing Editor, TelecomTV