CEAC Commentary

June 30, 2022 

Semiconductors and the Japan-US-Taiwan partnership

By SANADA Yukimitsu

 As you probably know, semiconductor manufacturers in Taiwan have revealed plans to build a series of new factories in the US and Japan. As the rivalry between the US and China over information dominance intensifies in the form of a “hard dispute over space development” and a “soft dispute over the development of semiconductor industry,” the US is beginning to fortify its position by attracting the semiconductor business, the heart of the global economy, to the US and its ally Japan. In my view, this is linked to the aforementioned series of new Taiwanese factories to be set up in the US and Japan.

 This move can be seen as a “love call” from the US and Japan, the two most powerful players in semiconductor materials and equipment, to Taiwan, the most powerful foundry (contract manufacturer). While staying alert to the threats of mainland China, Taiwan also looks ready to build a strong “semiconductor triple alliance” with Japan and the US that would not only make the semiconductor industry more competitive but also strengthen the country’s economic security.

 In this context, TSMC has invested 980 billion yen to construct a new semiconductor factory in Kumamoto prefecture. The Japanese government has also announced a subsidy of 400 billion yen, almost half of the capital invested, as a clear sign of its support for this type of initiative. Last December, the National Diet of Japan revised a law so that companies expanding or building new advanced semiconductor factories can receive subsidies covering up to half the costs incurred. Sony, which can now be considered an American company given its shareholder composition, and Denso, a global manufacturer of electrical components, have also made investments to secure a steady supply of semiconductors from 2024.

 The Japanese government sees “economic security” as one of the most important themes of the moment. To achieve self-sufficiency in semiconductors, which are severely in short supply, it has actively promoted the arrival of TSMC. However, according to what I have heard, as part of the dispute over information dominance mentioned above, the US government pressured the Japanese government and actively sought to build a Japan-US-Taiwan semiconductor partnership. Furthermore, United Microelectronics Corporation (UMC), the third-largest foundry in Taiwan, has also announced a partnership with Denso to build a new production line of power semiconductors that control electric power in the factory in Mie prefecture. With this new line, UMC is set to start mass-producing power semiconductors designed by Denso in 2023 and manufacture 10,000 units of 12-inch wafers per month by 2025. Although the magnitude of this investment was not disclosed, according to The Nihon Keizai Shimbun, UMC will also receive a subsidy from the Ministry of Economy, Trade and Industry of Japan. These movements involving information dominance may further strengthen the Japan-US-Taiwan axis; hence, it may be worthwhile to keep a close eye on how the situation unfolds in the coming months.

(This is an English translation of the article written by SANADA Yukimitsu, a university Professor, which originally appeared on the e-forum "Hyakka-Somei (Hundred Ducks in Full Voice)" of CEAC on June 10, 2022.)