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Japan does not stand to gain much from the GOJ’s 500-billion-yen support for TSMC

Taipei – Nakamura Yu, Ryugen Hideaki, Tokyo – Eguchi Ryosuke

 

On June 24, semiconductor giant Taiwan Semiconductor Manufacturing Company (TSMC) launched its full-scale research and development center in Tsukuba City, Ibaraki Prefecture. The Japanese government invited TSMC to Tsukuba with a subsidy of about 19 billion yen, aiming to secure technology to manufacture next-generation semiconductors. Japan recently decided to subsidize a new TSMC factory to be built in Kumamoto Prefecture. The government takes the position that it is necessary to provide support of about 500 billion yen to TSMC from the perspective of economic security. Nikkei conducted an assessment on whether the return on the government’s huge subsidy of TSMC would be sufficient to justify it. 

 

In February 2021, TSMC announced that it would establish its first full-scale research and development (R&D) facility in Tsukuba. In October 2021, TSMC announced that it would build its first factory in Japan in Kikuyo Town, Kumamoto Prefecture. Both facilities were realized by the Ministry of Economy, Trade and Industry (METI) which pushed hard to invite TSMC on the premise that a huge subsidy would be provided.

 

TSMC’s research and development facility at Tsukuba will receive a subsidy of about 19 billion yen through the New Energy and Industrial Technology Development Organization (NEDO), which is under METI’s jurisdiction.

 

METI has not explained why it is supporting the R&D of a foreign semiconductor manufacturer with Japanese government funds and investing a large amount only in TSMC and in no other companies. The crucial issue of Japan’s return on its investment is murky.

 

When Nikkei contacted NEDO on this issue, NEDO responded that the results of the subsidized project “belong to TSMC Japan 3DIC R&D Center (a subsidiary of TSMC).” NEDO will not able to access the results or intellectual property from TSMC’s work, even though they are the fruits of a NEDO subsidy.

 

Under the current system, TSMC is to use Japanese government funds to conduct R&D and achieve results, but it can monopolize the technology and transfer the technology to Taiwan without Japan gaining from the results.

 

In documents detailing the reasons TSMC was awarded a subsidy of about 19 billion yen, METI described over 20 leading Japanese materials and manufacturing companies such as Asahi Kasei, Ibiden, and Keyence as “partner companies and organizations.”

 

When Nikkei interviewed officials at companies listed in the documents, a different story emerges. Officials seemed to be confused, making such comments as “I was surprised that our company’s name was listed,” “METI did not contact us beforehand,” “I’m not sure what our role is,” and “I don’t see a reason to do this in Tsukuba.” It is possible that METI included the names of more than 20 companies in documents without sufficient discussion.

 

What Japan stands to gain from TSMC’s Kumamoto factory, which METI lured through the offer of huge funds, is also unclear. METI justifies TSMC’s invitation to Kumamoto in terms of stable procurement of semiconductors, economic security, and resurrecting the semiconductor industry.

 

The new factory to start operations at the end of 2024 basically makes semiconductors for the Sony Group. The semiconductors that will be produced are a special type installed in smartphone cameras. The main supply destinations are expected to be Chinese manufacturers and Apple in the U.S. It is unclear how this situation will contribute to Japan’s economic security. (Abridged)

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