Photo/Illutration The planned site in Chitose, Hokkaido, where Rapidus Corp. will construct a seminconductor plant (Asahi Shimbun file photo)

Despite companies feeling hesitant over past failures, the government is providing massive financial backing to the semiconductor industry.

The supplementary budget now before the Diet includes about 2 trillion yen ($13.4 billion) to bolster it.

Of that, up to 677.3 billion yen will be added to the fund set up to support the startup Rapidus Corp. Combined with the amount already in the fund, the total government commitment will come to about 1 trillion yen.

Government subsidies will provide almost all the 2 trillion yen needed as an initial investment for Rapidus to develop technology.

Influential lawmakers with ties to the economy ministry are pushing the Rapidus project.

Koichi Hagiuda, the policy chief of the ruling Liberal Democratic Party, was economy minister in 2021 when it was decided to provide substantial government support to the semiconductor industry.

Moves led by the United States to reduce reliance on China for semiconductors spurred various nations to invest in their domestic entities.

LDP Secretary-General Toshimitsu Motegi also once served as economy minister, and the current office holder, Yasutoshi Nishimura, has also been enthusiastic about having Rapidus join the ranks of the world’s major chipmakers.

Rapidus was established in August 2022 through government initiative and capital contributions from eight major companies, such as Toyota Motor Corp., Sony Group Corp. and NTT Corp.

But total contributions from the eight companies only comes to 7.3 billion yen.

“We have no need, for the time being, of possessing the most advanced semiconductors,” said an executive at one of the companies. “We just went along with this because the government asked us to.”

The plan is for Rapidus to receive technological assistance from IBM Corp. to develop the world’s most advanced semiconductors.

Despite the strong government support, some economy ministry officials are well aware of past failures.

While Japan in the 1980s led the world in semiconductor production, it has increasingly fallen behind Taiwan, South Korea and China in recent years.

As a means of reviving the Japanese chip sector, Elpida Memory Inc. was established in 1999 by merging the semiconductor memory businesses of NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp.

But Elpida Memory went bankrupt in 2012 even after huge amounts of government funds were pumped into it.

Japan Display Inc., founded in 2012 by merging the small-sized liquid crystal display (LCD) panel businesses of Toshiba Corp., Sony Corp. and Hitachi in a government-led initiative for the realignment of the LCD industry, is still struggling.

And Rapidus is not the only company being supported.

The supplementary budget also includes several hundreds of billions of yen in subsidies to Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, so it can build a second facility in Kumamoto Prefecture.

The government had previously approved as much as 476 billion yen in subsidies for the construction of TSMC’s first Kumamoto plant.

(This article was written by Takashi Funakoshi and Takeshi Narabe.)

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