Japan Set to Earmark $13bn for Chips in Extra Budget

(Bloomberg) -- Japan is set to allocate almost ¥2 trillion ($13.3 billion) in an extra budget to boost its capacity to make and secure semiconductors at home, according to government officials familiar with the matter. 

Of the total, about ¥760 billion will go into a fund to support the mass production of chips, money that could be used for supporting a second Taiwan Semiconductor Manufacturing Co. factory in Kumamoto, southwestern Japan, according to the people who spoke on condition of anonymity because the matter isn’t public yet. 

About ¥640 billion will be used for another fund to support research of cutting-edge chips, according to the people. That fund could be used for Japan’s homegrown chip venture Rapidus Corporation, they added. About ¥570 billion will be assigned to a separate fund to enhance the stable supply of chips to Japan, they said.

The figures won’t be finalized until the cabinet approves the extra budget on Friday, they added. NHK reported the budget allocation earlier Wednesday. 

The supplementary budget for the year through March will shoulder some of the cost for the new economic stimulus package announced last week as Prime Minister Fumio Kishida seeks to mitigate the drag on the economy from inflation. Support for his administration has fallen to record lows as families cope with rising costs of living.

Japan is in the midst of a spending spree to revive its chips industry with an aim to triple the sales of domestically produced semiconductors to more than ¥15 trillion by 2030. 

The nation has added semiconductors as a key item for economic security as the devices will play a major role in driving future growth via electric vehicles and AI as well as in creating opportunities to upgrade weapons technology. Amid rising geopolitcal tensions, nations are competing to rebuild and expand their supply lines and developing cutting-edge chips in cooperation with their allies by using export controls and subsidies.    

Aid that Japan has pledged so far for chips includes ¥476 billion for the first TSMC plant in Kumamoto, set to begin production in late 2024, and ¥330 billion for Rapidus, which aims to start mass-producing 2-nanometer logic chips by 2027 in northern Hokkaido.