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Japan Forward
01-05-2025
- Business
- Japan Forward
Japan's Semiconductor Renaissance – Is it for Real?
Back in the 1980s, Japan produced more than 50 percent of the world's semiconductors. But today, Japanese semiconductors account for less than 10% of the global semiconductor market. What happened? And can Japan regain its semiconductor mojo? In an article recently published by the National Bureau of Asian Research (NBR) titled "The Japanese Semiconductor Renaissance – Will It Be Successful?" Kazuto Suzuki confidently asserts, "Japan is in the midst of a semiconductor renaissance." Evidence of that seems to be everywhere these days. Take, for example, the February 2024 start of operations at the first Japan Advanced Semiconductor Manufacturing (JASM) plant in Kumamoto and the start of trial production of 2-nanometer logic semiconductors at a new Rapidus Corporation foundry in Chitose City, Hokkaido, in April. Suzuki, a professor of Science and Technology Policy at the University of Tokyo's Graduate School of Public Policy and director of the Institute of Geoeconomics, offers a word of caution. He says Japan will need to learn from past mistakes and overcome significant challenges if it hopes to become a major semiconductor powerhouse again. Many observers point to the 1986 US-Japan Semiconductor Agreement as the prime reason for the rapid decline of Japan's semiconductor sector. That agreement came about because of accusations that Japan had engaged in unfair trade practices, which allegedly devastated United States competitors. There was no denying that in the postwar years, the Ministry of International Trade and Industry (MITI) had fostered Japan's semiconductor sector through various incentives. For example, starting in 1978, the MITI led the very-large-scale integration (VLSI) project. Working with major tech firms like NEC, Toshiba, Hitachi, and Fujitsu, Japan surged ahead in developing cutting-edge technologies, particularly dynamic random-access memory (DRAM) chips. By 1983, Japan had surpassed the US in terms of DRAM production, and Japanese companies were not stinting on investment to boost production yields and reduce costs. Indeed, the semiconductor agreement certainly drained much of Japan's momentum. Contributing further to the decline in the 1990s was something more internal: the very corporate culture that had once powered Japan to become the world's second-largest economy by 1968 had begun to hold it back. Toshimitsu Motegi, the former Minister of Economy, Trade and Industry (second from right), visits the planned site for Rapidus' factory in Chitose, Hokkaido, on June 18, 2023. (© Kyodo) Dr Suzuki points out that one of the biggest reasons Japan's semiconductor strategy failed was its attachment to the integrated device manufacturer (IDM) model. Under this vertical system, each of the country's giant electronics makers handled everything — from design to manufacturing and packaging — within its own keiretsu group. Manufacturing semiconductors is a capital-intensive business that requires huge investments on an ongoing basis. In the 1990s, independent, dedicated fabrication plants (fabs) emerged, including foundries that supplied semiconductor companies that designed but did not produce their own chips. In fact, the "fabless" model pioneered by Taiwan's TSMC (Taiwan Semiconductor Manufacturing Company), established by Morris Chang in 1987, revolutionized the semiconductor industry. (TSMC held a roughly 65% share of the global semiconductor foundry market in 2024.) This new model wreaked havoc on Japanese firms that stuck to the IDM approach. Taiwan Semiconductor Manufacturing Company (TSMC) headquarters Suzuki adds that competing Japanese semiconductor makers only half-heartedly took part in a government-backed "all Japan" consolidation effort. As a result, none were left with the resources to make the massive, ongoing investments needed to stay competitive in cutting-edge chip production. In other words, the Japanese semiconductor industry fell victim to structural problems largely of its own making. Only belatedly did Japanese companies finally abandon their fixation on IDM and opt to become part of an international division of labor based on cooperation. Increasingly, having access to the most advanced semiconductors seems a national priority, especially with the enormous and ever-growing demands of artificial intelligence (AI). But the absence of a strong semiconductor manufacturing base leaves Japan vulnerable to supply disruption. Suzuki writes that the Japanese government now views its new semiconductor strategy as an effort to ensure "strategic autonomy" as part of its economic security policy. The government has provided ¥1.2 trillion JPY (approximately $7.74 billion USD) to JASM for its first and second factories in Kumamoto and ¥920 billion ($5.94 billion) to Rapidus. JASM is a majority-owned subsidiary of TSMC and Sony Semiconductor Solutions Corporation, from which it receives much of its funding. Rapidus, however, finds itself in a more precarious financial position. Eight companies have invested in it, but the total amount of investment to date is only ¥7.3 billion ($47.1 million). The Development Bank of Japan and three major banks intend to invest ¥25 billion ($161.29 million) into Rapidus. However, the question is whether that investment will be sufficient, considering the enormous amount of money needed to keep a foundry going even before it begins mass production. Much may depend on the amount of support the Japanese government is willing to offer. Mass production of 2-nanometer chips may require up to ¥5 trillion ($32.26 billion). Former Prime Minister Fumio Kishida's administration was eager to provide guarantees for investment in Rapidus with an eye to attracting more private investment as well as skilled labor. Legislation to enable the provision of such guarantees through revision of the Act on Facilitation of Information on Information Processing and other rules is now pending in the Diet. Suzuki warns, "The (Shigeru) Ishiba cabinet will need to commit with the same level of passion as the previous administration." Then, too, there is the question of how to recruit the human capital needed if Japan's semiconductor sector is to prosper once again. There is, in fact, a global shortage of qualified people with the necessary skills. The weak yen and relatively low salaries in Japan complicate efforts to recruit foreign talent. Meanwhile, there are already indications of softening demand for older chips, leading to underutilization of existing factories. And no one knows what effect tariffs, trade wars, and a possible recession might have on this already complicated situation. Author: John Carroll
Yahoo
09-02-2025
- Business
- Yahoo
Chinese construction risks turning the Yellow Sea into a flashpoint
China appears to be erecting structures in the Yellow Sea between China and the Korean peninsula. China's playbook for dominating neighbors includes island reclamation and maritime structures. The Yellow Sea is of historic importance to China, a former South Korea diplomat argues. With China's neighbors already nervous about its territorial ambitions, a new flashpoint has emerged between China and South Korea. China appears to be erecting structures in the Yellow Sea, located between China and the Korean peninsula. South Korea fears this could be a prelude to Beijing asserting sovereignty over the 150,000-square-mile body of water, which is rich in fish and has oil and gas deposits. This power play would have implications for the US. South Korean spy satellites detected the Chinese structure in December, according to the Chosun Daily, a South Korean newspaper. "The installation, a mobile steel framework exceeding 50 meters in diameter and height, was spotted in the disputed waters," the newspaper said. China erected two similar structures in 2024, eliciting South Korean protests. "China has reportedly described the structures as 'fishing support facilities,' dismissing concerns," the Chosun Daily noted. "South Korean officials believe China plans to install up to 12 such structures." To describe the situation as complicated would be an understatement. The Yellow Sea is in the exclusive economic zone, or EEZ, of both China and South Korea. Under international law, an EEZ allows nations to claim jurisdiction over economic resources out to 200 miles from their coastlines (at 4.3 million square miles, the US has the second-largest EEZ in the world after France). China has built islands to bolster its dubious claims to most of the South China Sea and challenged the EEZ rights of neighbors like the Philippines. Asked for comment on the sighted construction in the Yellow Sea, Liu Pengyu, a spokeman for the Chinese Embassy in the US, said "I am not aware of the specific situation, but as far as I know, China and the [Republic of Korea] are pushing forward negotiations on maritime delimitation and have established a dialogue and cooperation mechanism on maritime affairs. The two sides maintain sound communication on maritime issues." Not surprisingly, in a world where oceanic resources — such as oil and fish — are coveted like buried treasure, disputes over EEZs are not uncommon. In the Mediterranean, for example, Greece and Turkey are at odds over energy deposits. In this case, South Korea argues that the boundary between the conflicting EEZs should be drawn down the middle of the Yellow Sea. However, "China maintains that the maritime boundary should be proportional to its longer coastline and larger population," according to the National Bureau of Asian Research, a US think tank. In 2001, China and South Korea created the Provisional Measures Zone, or PMZ, which covers the area of their overlapping EEZs. In addition to delineating joint fishing rights and fisheries management, the PMZ also mandated that both nations would gradually restrict fishing to their respective EEZs. Instead, South Korea has long complained about Chinese vessels fishing in the Korean side, which has led to South Korean ships firing on Chinese fishermen. Were this simply a fishing dispute, the Yellow Sea might resemble the infamous "Cod Wars" between Britain and Iceland, which was an economic conflict rather than a shooting war. But Korea, and China's other neighbors, fear that Beijing is trawling for more than fish. Tensions between South Korea and China risk drawing in the US, which has a mutual defense pact with South Korea and bases 28,000 troops there. Erecting permanent maritime structures has become the calling card announcing Chinese claims to the Western Pacific. Most notorious are the artificial islands China has created in the South China Sea, which serve as air and naval bases to assert Beijing's claims to sovereignty over mineral-rich waters also claimed by Vietnam, Malaysia, the Philippines and other Southeast Asian nations. These Chinese outposts spread like inkspots. For example, Beijing recently declared the waters around Scarborough Shoal — disputed reefs claimed by China and the Philippines — as territorial waters. In effect, these installations serve as the maritime equivalent of boots on the ground to assert a physical presence in an area. The Yellow Sea hasn't received as much global attention as flashpoints in the South China Sea, or China's simmering dispute over Japanese-controlled islands in the East China Sea. But the Yellow Sea is quite crucial to China, which is sensitive about its coastal areas, Sang Hun Seok, a former South Korean diplomat, argued in an essay for the Royal United Services Institute, a British think tank. "From China's strategic point of view, solidifying its littoral defense and expanding the areas where it can enjoy freedom of action are critically important for its security," Sang Hun wrote. There is also a psychological sensitivity rooted in Chinese history over the last 200 years, in which China lost several wars and had its territory seized by colonial powers such as Great Britain, Japan and Russia. "Most critical battles in Northeast Asia since the 19th century — a period China sees as a brief deviation from its rightful historical trajectory — have been fought in the vicinity of the Yellow Sea," Sang Hun wrote. Unless South Korea and its allies can stop China from erecting outposts in the Yellow Sea, "the strategic balance in the region will ultimately shift in China's favor, leaving the allies' freedom of action restricted to a fraction of the Yellow Sea," Sang Hun warned. "This gradual shift would first weaken the defense posture for critical military assets along the west coast of the Korean Peninsula, gradually followed by Kyushu, Okinawa and ultimately Taiwan." Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds an MA in political science from Rutgers Univ. Follow him on Twitter and LinkedIn. Read the original article on Business Insider
Yahoo
09-02-2025
- Business
- Yahoo
Chinese construction risks turning the Yellow Sea into a flashpoint
China appears to be erecting structures in the Yellow Sea between China and the Korean peninsula. China's playbook for dominating neighbors includes island reclamation and maritime structures. The Yellow Sea is of historic importance to China, a former South Korea diplomat argues. With China's neighbors already nervous about its territorial ambitions, a new flashpoint has emerged between China and South Korea. China appears to be erecting structures in the Yellow Sea, located between China and the Korean peninsula. South Korea fears this could be a prelude to Beijing asserting sovereignty over the 150,000-square-mile body of water, which is rich in fish and has oil and gas deposits. This power play would have implications for the US. South Korean spy satellites detected the Chinese structure in December, according to the Chosun Daily, a South Korean newspaper. "The installation, a mobile steel framework exceeding 50 meters in diameter and height, was spotted in the disputed waters," the newspaper said. China erected two similar structures in 2024, eliciting South Korean protests. "China has reportedly described the structures as 'fishing support facilities,' dismissing concerns," the Chosun Daily noted. "South Korean officials believe China plans to install up to 12 such structures." To describe the situation as complicated would be an understatement. The Yellow Sea is in the exclusive economic zone, or EEZ, of both China and South Korea. Under international law, an EEZ allows nations to claim jurisdiction over economic resources out to 200 miles from their coastlines (at 4.3 million square miles, the US has the second-largest EEZ in the world after France). China has built islands to bolster its dubious claims to most of the South China Sea and challenged the EEZ rights of neighbors like the Philippines. Asked for comment on the sighted construction in the Yellow Sea, Liu Pengyu, a spokeman for the Chinese Embassy in the US, said "I am not aware of the specific situation, but as far as I know, China and the [Republic of Korea] are pushing forward negotiations on maritime delimitation and have established a dialogue and cooperation mechanism on maritime affairs. The two sides maintain sound communication on maritime issues." Not surprisingly, in a world where oceanic resources — such as oil and fish — are coveted like buried treasure, disputes over EEZs are not uncommon. In the Mediterranean, for example, Greece and Turkey are at odds over energy deposits. In this case, South Korea argues that the boundary between the conflicting EEZs should be drawn down the middle of the Yellow Sea. However, "China maintains that the maritime boundary should be proportional to its longer coastline and larger population," according to the National Bureau of Asian Research, a US think tank. In 2001, China and South Korea created the Provisional Measures Zone, or PMZ, which covers the area of their overlapping EEZs. In addition to delineating joint fishing rights and fisheries management, the PMZ also mandated that both nations would gradually restrict fishing to their respective EEZs. Instead, South Korea has long complained about Chinese vessels fishing in the Korean side, which has led to South Korean ships firing on Chinese fishermen. Were this simply a fishing dispute, the Yellow Sea might resemble the infamous "Cod Wars" between Britain and Iceland, which was an economic conflict rather than a shooting war. But Korea, and China's other neighbors, fear that Beijing is trawling for more than fish. Tensions between South Korea and China risk drawing in the US, which has a mutual defense pact with South Korea and bases 28,000 troops there. Erecting permanent maritime structures has become the calling card announcing Chinese claims to the Western Pacific. Most notorious are the artificial islands China has created in the South China Sea, which serve as air and naval bases to assert Beijing's claims to sovereignty over mineral-rich waters also claimed by Vietnam, Malaysia, the Philippines and other Southeast Asian nations. These Chinese outposts spread like inkspots. For example, Beijing recently declared the waters around Scarborough Shoal — disputed reefs claimed by China and the Philippines — as territorial waters. In effect, these installations serve as the maritime equivalent of boots on the ground to assert a physical presence in an area. The Yellow Sea hasn't received as much global attention as flashpoints in the South China Sea, or China's simmering dispute over Japanese-controlled islands in the East China Sea. But the Yellow Sea is quite crucial to China, which is sensitive about its coastal areas, Sang Hun Seok, a former South Korean diplomat, argued in an essay for the Royal United Services Institute, a British think tank. "From China's strategic point of view, solidifying its littoral defense and expanding the areas where it can enjoy freedom of action are critically important for its security," Sang Hun wrote. There is also a psychological sensitivity rooted in Chinese history over the last 200 years, in which China lost several wars and had its territory seized by colonial powers such as Great Britain, Japan and Russia. "Most critical battles in Northeast Asia since the 19th century — a period China sees as a brief deviation from its rightful historical trajectory — have been fought in the vicinity of the Yellow Sea," Sang Hun wrote. Unless South Korea and its allies can stop China from erecting outposts in the Yellow Sea, "the strategic balance in the region will ultimately shift in China's favor, leaving the allies' freedom of action restricted to a fraction of the Yellow Sea," Sang Hun warned. "This gradual shift would first weaken the defense posture for critical military assets along the west coast of the Korean Peninsula, gradually followed by Kyushu, Okinawa and ultimately Taiwan." Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds an MA in political science from Rutgers Univ. Follow him on Twitter and LinkedIn. Read the original article on Business Insider
