Japan’s semiconductor power play: what’s in it for UK manufacturers

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Japan’s semiconductor power play: what’s in it for UK manufacturers

In a transformative move poised to redefine global semiconductor dynamics, Japan has initiated a strategic partnership with leading chipmakers Rapidus, TSMC, and France's CEA-Leti. This groundbreaking alliance signals Japan's determined bid to reclaim its historical dominance in semiconductor innovation and manufacturing, catapulting itself back to the forefront of the industry.

Semiconductors, often called the "brains" of modern electronics, are indispensable components powering a myriad of technologies, ranging from smartphones and laptops to complex industrial machinery and advanced medical devices. The exponential surge in demand for semiconductors, fueled by burgeoning sectors like artificial intelligence, data analytics, and the Internet of Things, underscores their pivotal role in shaping the contemporary technological landscape.

However, Japan, once a juggernaut in semiconductor production, has gradually eroded its market share and technological prowess in recent decades. The emergence of formidable competitors, primarily in Taiwan (TSMC) and South Korea (Samsung), coupled with Japan's overreliance on imported semiconductor chips, has posed significant challenges to its economic resilience, national security, and technological sovereignty.

Against this backdrop, Japan's strategic collaboration with Rapidus, TSMC, and CEA-Leti represents a strategic pivot to revitalise its semiconductor ecosystem and reclaim its position as a global semiconductor powerhouse. Rapidus, a Japanese startup bolstered by government support and industry backing, is spearheading efforts to develop cutting-edge 2nm chips by 2027, challenging the dominance of industry incumbents.

Simultaneously, Japan is forging partnerships with established industry giants like TSMC, renowned for its advanced manufacturing capabilities, to explore the feasibility of producing semiconductor chips on Japanese soil, notably on Kyosho island. This multifaceted approach underscores Japan's commitment to fostering domestic semiconductor innovation while leveraging international expertise and resources to augment its technological capabilities.

The geopolitical backdrop against which Japan's semiconductor resurgence unfolds is marked by escalating tensions in the US-China chip war. Both superpowers are aggressively investing in bolstering domestic semiconductor production capacities and implementing stringent export controls and investment restrictions to safeguard their technological leadership and national security interests.

Despite the formidable challenges posed by entrenched competitors, significant capital investment requirements, and talent acquisition hurdles, Japan's strategic collaboration with Rapidus and TSMC heralds a bold leap toward technological self-reliance and global competitiveness. By harnessing the collective strengths of domestic innovation and international collaboration, Japan aims to secure its semiconductor supremacy and contribute to fostering a more resilient and dynamic global semiconductor ecosystem.

How this move affects the UK

The UK's semiconductor sector is valued at approximately $13 billion. With the value of the chip market project to grow to $57.3 billion by 2031, Japan’s latest move will significantly improve UK prospects to become a key player in chip manufacturing by opening the path for multinational research cooperation.

This will boost achieving the objectives set in the chip strategy that was launched in 2023 by the UK government and allocated 1 billion pounds ($1.2 billion) where the government set to incentivise research, development, design, and intellectual property for cutting-edge compound semiconductors in the country over the next decade.

Besides, as Japan becomes a reliable source of advanced chips, disruptions due to shortages or geopolitical tensions may be mitigated. The UK will indirectly benefit from this enhanced resilience by having multiple sources of chips thus averting possible disruption risks that most countries currently face.

Moreover, with Japan's resurgence in the chip industry, it is expected that competition in the global semiconductor market will intensify, driving down the cost of chips. With the already close UK-Japan trade relationship, the UK can leverage this relationship to get chip deals that are favourable thus impacting the country’s technology sector and overall economy positively.

Thus as Japan embarks on this ambitious journey, the semiconductor industry braces for a seismic shift in its geopolitical dynamics, with far-reaching implications for technological innovation, economic prosperity, and geopolitical stability. Stay tuned as the race for semiconductor supremacy unfolds, ushering in a new era of semiconductor excellence and innovation.