japan's semiconductor strategy: can it sidestep us-china tensions?

2025-06-16 general

tokyo, Monday, 16 June 2025.
in 2022 japan introduced an economic security law to counter the global chip shortage and escalating us-china tensions. this law aims to fortify key sectors like industry and technology, ensuring access to crucial resources and competing in the ai race. china’s control over 90% of the world’s gallium production adds urgency. japan’s response includes backing rapidus, a domestic chip manufacturer, with significant government funding, totaling hundreds of billions of yen. tsmc’s kumamoto plant began mass production in december 2024, marking a crucial step in japan’s strategy.

Economic security law and ai development

Japan’s economic security law, enacted in 2022, highlights the nation’s focus on artificial intelligence [1]. Nishikawa Kazumi from the Ministry of Economy, Trade, and Industry (METI) emphasizes AI’s potential to revolutionize economic productivity and societal structures [1]. The united states and china are fiercely competing for technological dominance in ai, prompting the us to impose export and investment restrictions on china [1]. China has retaliated by regulating exports of critical minerals [1]. This complex dynamic underscores the importance of japan’s strategic response to ensure its economic security [1].

Japan’s rapidus project

Rapidus, a government-backed logic chip manufacturer, was established in 2022, with r&d commencing in 2023 [1]. The japanese government has committed substantial funding to rapidus, allocating ¥70 billion for the initial phase, ¥360 billion for the second, and planning an additional ¥590 billion for the third [1]. In february 2025, legislation was approved to allow the government to issue public bonds to further finance rapidus’ manufacturing operations [1]. Nishikawa kazumi noted that activity surrounding generative ai has significantly increased since rapidus’ inception [1].

Semiconductor landscape and market impact

The global semiconductor shortage continues to impact various industries, affecting the availability of products like the playstation 5 and nintendo switch [3]. A news report dated june 14, 2025, indicates that japan is currently facing a significant semiconductor shortage [3]. Despite these challenges, japanese companies remain vital as major suppliers of wafers for advanced chips, according to nishikawa kazumi [1]. The nikkei average rebounded, increasing by ¥477.08 (1.26%) to ¥38,311.33, driven by gains in semiconductor-related stocks [8].

fuji electric’s strategic investments

fuji electric, a major heavy electrical equipment manufacturer that celebrated its 100th anniversary in 2023, is strategically investing in semiconductors, energy, and industrial sectors [2]. the company aims to increase its net income by approximately 20%, targeting ¥90 billion by march 2027 [2]. fuji electric also plans to enhance productivity by about 20% through the use of digital and ai technologies [2]. these investments, spurred by the global decarbonization trend, are primarily focused on overseas operations, particularly in india [2].

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semiconductor shortage economic security