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Editorial: Move to revive chip industry must be based on sound strategy

  • June 5, 2021
  • , The Asahi Shimbun , 1:50 p.m.
  • English Press

Japan’s semiconductor industry, once supreme in the global marketplace, has been losing ground to foreign competitors for decades. In 1988, Japanese chip makers controlled more than half of the world market. By 2019, the share had plunged to 10 percent.

 

In an effort to reverse the decline, the economy and industry ministry on June 4 unveiled a strategy to revitalize the domestic chip industry.

 

The centerpiece of the ministry’s blueprint is to promote domestic production of programmable logic devices, or customizable computer chips.

 

It aims to lure investment in research and development facilities in Japan by leading global manufacturers of these devices, such as Taiwan Semiconductor Manufacturing Co. (TSMC). The goal is to construct a state-of-the art plant to mass-produce logic devices in this country.

 

More than 1 trillion yen ($9.13 billion) will be needed to build a new logic chip plant. Alarmed by actions taken by the United States, Europe and China to provide the equivalent of trillions of yen in state subsidies to their domestic chip industries, a group of lawmakers within the ruling Liberal Democratic Party called for more government spending to prop up the enfeebled industry.

 

The association of Diet members to push a new strategy to re-energize the semiconductor industry, for which former Prime Minister Shinzo Abe serves as a supreme adviser, passed a resolution urging the government to increase swiftly budget spending for the sector to the levels of subsidies provided by foreign governments.

 

There is no doubt that growth of the digital economy will accelerate further in coming years, increasing the importance of semiconductor devices, the core components of digital products.

 

With confrontation between the United States and China intensifying, it is an important policy challenge to deal with the risks stemming from the concentration of chip production in Taiwan. We can understand the need to map out a new chip strategy and provide appropriate policy support to the industry.

 

But these efforts should not be driven by arguments designed to whip up nationalistic sentiment, such as a full-throated call for “the revival of the domestic semiconductor industry,” or those that play on concerns about a possible security crisis in Taiwan. Plans to support the sector should make economic sense.

 

Many experts say it is no longer possible for Japanese chipmakers to catch up with leading logic device manufacturers in technological competitiveness. The United States, in contrast, has at least one leading logic chip maker, Intel Corp., and has successfully invited TSMC to build a plant.

 

If massive supplies of state subsidies to the sector lead to a global glut of factory capacity, all players would be hurt.

 

Even though its profile in the global semiconductor landscape has shrunk, Japan still has a solid competitive edge in technology for producing equipment to fabricate semiconductor devices as well as manufacturing chip materials and memory devices. The government should place its policy priority in supporting the sector on these areas.

 

It is unrealistic to try to secure domestic production of all strategically important products. A strategy to enhance the nation’s economic security should be based on carefully designed plans to build a production and supply network with allies and friendly nations through a reasonable division of roles to take advantage of the strengths and competitive edges of the countries and areas involved.

 

The World Trade Organization’s rules for global trade prohibit government subsidies that distort trade. As a self-appointed champion of free trade, Japan should call on major economic powers to restrain from providing massive state subsidies to domestic industries, instead of taking actions that heat up the subsidies race or the U.S.-China rivalry.

 

The history of national industry promotion projects led by the economy and industry ministry is littered with disastrous failures, including the campaign in recent years to promote exports of Japanese nuclear power technology.

 

A panel of experts that cobbled together the strategy for a revival of the Japanese chip industry was formed two months ago but has held only three meetings. The blueprint contains no specific goals, such as target products, capacity expansion targets or timeframes.

 

Any attempt to push slipshod, half-baked plans to help a domestic industry under the slogan of economic security could end up being another blot on the Japanese history of industries policies.

 

–The Asahi Shimbun, June 5

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