Taiwan Semiconductor Manufacturing Company (TSMC) has planned to build two fabs in Kumamoto Prefecture, Japan. Kumamoto’s newly appointed governor, Takashi Kimura, who took office in April, stated in an report from Bloomberg on May 11th that he would spare no effort to persuade TSMC to establish a third fab in the region. He has already proposed a visit to TSMC’s headquarters in Taiwan this summer to discuss related matters, aiming to transform Kumamoto into a semiconductor hub.

TSMC has not responded to this matter. While TSMC’s third fab in Kumamoto, as mentioned by Governor Kimura, has not materialized yet, and TSMC has not officially announced it, Bloomberg previously reported that TSMC is considering building a third fab in Japan, which would also be located in Kumamoto and produce more advanced chips.

Regarding the rumored TSMC Kumamoto Fab 3, Takashi Kimura stated, “We are prepared to give our full support.” He expressed his hope to attract numerous semiconductor-related enterprises and research institutions to Kumamoto, aiming to establish an industrial cluster similar to Taiwan’s Hsinchu Science Park. He also hopes Kumamoto will become a birthplace for various industries stemming from semiconductors, including AI, data centers, and autonomous driving technologies.

Kimura believes that during the preparations for TSMC’s first fab in Kumamoto, the region already possesses better-quality road and water infrastructure and an education system that better supports international school students, which could be advantageous.

TSMC’s Kumamoto Fab 1, a joint investment between TSMC, Sony Semiconductor Solutions Corporation, and Denso Corporation, was inaugurated in February. TSMC stated in an earlier press release that in response to customer demand, construction of the second JASM (TSMC’s majority-owned manufacturing subsidiary in Kumamoto Prefecture) fab is slated to begin by the end of 2024. The expansion of production capacity is also expected to optimize the overall cost structure and supply chain efficiency of JASM, with operations starting by the end of 2027.

In the future, the two fabs under JASM will enable a total monthly production capacity of over 100,000 12-inch wafers, providing 40-nanometer, 22/28-nanometer, 12/16-nanometer, and 6/7-nanometer processes for automotive, industrial, consumer, and high-performance computing (HPC) applications.

Capacity planning may be adjusted according to customer demand, with the Kumamoto fab directly creating a total of over 3,400 high-tech job opportunities. Through the investment, TSMC, Sony Semiconductor, Denso Corporation, and Toyota Motor Corporation hold approximately 86.5%, 6.0%, 5.5%, and 2.0% of the JASM shares, respectively.

The Kyushu Economic Research Association estimates that these fabs will contribute JPY 10.5 trillion (USD 67.4 billion) to the economy of Kumamoto Prefecture over the next decade.

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(Photo credit: TSMC)

The South Korean government is said to be planning to introduce a comprehensive chip investment and research support plan, surpassing KRW 10 trillion (roughly USD 7.3 billion) in scale, to enhance its position in the critical semiconductor industry, as per a report from Economic Daily News.

According to a statement released by the South Korean Ministry of Planning and Finance on May 12th, Minister Choi Sang-mok stated during a meeting with local chip material, component, and equipment manufacturers that Seoul authorities are preparing a support scheme exceeding KRW 10 trillion in scale to aid all areas of the chip industry, including fabless semiconductor companies, chip materials, manufacturing equipment, etc., with details of this plan set to be announced shortly.

This plan may involve policy financing from the Korea Development Bank and the establishment of new funds through collaboration between state-owned and private financial institutions.

Given that large corporations like Samsung Electronics and SK Hynix already possess substantial resources, the South Korean government’s plan aims to support investments in small and medium-sized enterprises and in the backend process sector. This support will extend to investments in materials, components, equipment, chip design, and packaging processes to nurture the semiconductor ecosystem evenly.

Previously, South Korea announced the development of a large-scale chip cluster in the southern city of Yongin, with a total investment of USD 470 billion, looking to become the world’s largest semiconductor high-tech park.

As the United States and Japan continue to launch subsidy battles to attract semiconductor manufacturers to their respective countries, South Korea is also preparing a response plan.

The US government previously approved subsidies of up to USD 8.5 billion for US chip giant Intel and USD 6.6 billion for TSMC from CHIPs Act to alleviate future semiconductor supply constraints. The US government also announced on April 15th that it will provide up to USD 6.4 billion in subsidies to South Korean semiconductor giant Samsung Electronics for expanding advanced chip production capacity at its Texas plant.

In comparison, figures submitted by a subcommittee under Japan’s Ministry of Finance’s Fiscal System Council show that Japan will invest JPY 3.9 trillion (approximately USD 25.7 billion) over the next three years, equivalent to 0.71% of its GDP.

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(Photo credit: Samsung)

According to a report from Nikkei News, US chip giant Intel will join forces with 14 Japanese companies to develop automation technology for “backend” semiconductor processes such as packaging. The aim is said to achieve automation by 2028, highlighting efforts by both the US and Japan to collaborate and reduce geopolitical risks in the semiconductor supply chain.

Intel’s collaborating partners include Japanese firms such as Omron, Yamaha Motor, Resonac, and Shin-Etsu Polymer, a subsidiary of Shin-Etsu Chemical Industry. The alliance, led by Intel Japan’s Managing Director Kunimasa Suzuki, plans to invest hundreds of billions of Japanese Yen in research and development, aiming to demonstrate technological achievements before 2028.

In the semiconductor field, as “frontend” process technologies such as circuit formation approach physical limits, the focus of technological competition is gradually shifting to “backend” processes such as chip stacking to enhance performance.

Most semiconductor backend processes are currently carried out through manual labor, leading to the concentration of factories in China and Southeast Asian countries with abundant labor force. However, to establish plants in countries like the US and Japan, where labor costs are higher, industry players consider automation technology as a crucial prerequisite.

Led by Intel, the alliance plans to establish backend production lines in Japan in the coming years, aiming for full automation. They also intend to standardize backend technologies to manage and control manufacturing, inspection, and equipment processing procedures under a single system.

According to data from the Japanese Ministry of Economy, Trade and Industry, Japanese companies currently hold a 30% share of the global semiconductor production equipment market and dominate approximately half of the semiconductor materials market.

It is widely expected that the Japanese Ministry of Economy, Trade and Industry will allocate hundreds of billions of Japanese Yen in subsidies for this project. The Japanese government has allocated approximately JPY 4 trillion (around USD 26 billion) from fiscal year 2021 to 2023 to support key industries contributing to economic security.

In April of this year, Japan approved a subsidy of JPY 53.5 billion to Rapidus to assist in backend technology development. Additionally, there are considerations to offer incentives to attract global backend capacity providers to establish operations in Japan.

Japanese and American policymakers are attempting to keep most of the chip manufacturing processes within their own territories, aiming to reduce risks in critical supply chains.

TrendForce has previously reported that Japan’s resurgence in the semiconductor arena is palpable, with the Ministry of Economy, Trade, and Industry fostering multi-faceted collaborations with the private sector. With a favorable exchange rate policy aiding factory construction and investments, the future looks bright for exports.

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(Photo credit: Intel)

Japan is reportedly planning to expand export restrictions on four technologies related to semiconductors or quantum computing, as per a report from Bloomberg. This move is said to represent the latest initiative in global efforts to control the transfer of strategic technologies.

The same report indicates that Japan’s new measures will affect the export of scanning electron microscopes used for analyzing nano-particle images, as well as the technology for improving semiconductor design known as Fully Depleted Silicon on Insulator (FD-SOI) technology. Japan will also require licenses for the low-temperature CMOS circuits used in quantum computers, as well as for the outputs of quantum computers themselves. These restrictions apply to Japan’s most significant trading partners, including South Korea, Singapore, and Taiwan.

The Japanese Ministry of Economy, Trade, and Industry recently stated that the purpose of this plan is to better regulate the export of components for military purposes and to align with similar initiatives around the world. Reportedly, the Ministry emphasized that after public consultations ending on May 25th, while this plan is expected to take effect as early as July.

In fact, in 2023, Japan expanded export restrictions on 23 types of cutting-edge semiconductor manufacturing technologies. The implementation of these controls followed after the United States restricted China’s access to crucial semiconductor fabrication technologies. At that time, reportedly, Washington officials lobbied international partners such as Japan and the Netherlands to impose trade sanctions on China, aligning with the U.S. view of China as a geopolitical and potential military competitor.

Export controls chief Alan Estevez, as reported by Reuters during an annual conference, emphasized the importance of discussions with allies regarding key component servicing. He mentioned ongoing efforts to assess which components require servicing, hinting at the US’s reluctance to impose restrictions on non-core components that Chinese firms can repair independently.

Since then, the US has reportedly been urging allies such as the Netherlands, Germany, South Korea, and Japan, urging them to further tighten restrictions on China’s access to advanced chip technology.

According to a previous report from Nikkei News, the U.S. government initiated semiconductor export controls in various fields, including manufacturing equipment, in October 2022. This decision stems from the belief that semiconductors, which play a crucial role in new-generation technologies such as AI and autonomous driving, are strategic commodities directly related to national power.

Consequently, the U.S. government requested further cooperation from Japan and the Netherlands, leading to both countries strengthening their controls in 2023. However, despite these measures, exports of related products, excluding those under control, to China are sharply increasing. Therefore, the U.S. government believes it is necessary to urge Japan and the Netherlands, which have advantages in semiconductor manufacturing equipment, to take further actions.

Currently, manufacturing equipment required for advanced semiconductors with range of 10 to 14 nanometers and below are subject to export control restrictions. The United States is pushing to expand regulations to include certain equipment for what are known as general-purpose semiconductors.

This request is believed to potentially encompass exposure equipment used on silicon wafers, as well as etching equipment for three-dimensional stacking in. Among Japanese companies, Nikon and Tokyo Electron possess advanced capabilities in this field.

The same report from Nikkei News further notes that the restrictions also extend to materials related to Shin-Etsu Chemical Industries, such as photosensitive materials, and demand restrictions on exports to China. Additionally, the United States is preparing to request that the Netherlands cease providing maintenance and services for manufacturing equipment sold to China before the 2023 regulations. The strengthened control will also have a certain impact on allied countries.

Currently, Dutch company ASML is believed to still be providing such services to Chinese buyers. Per ASML’s financial report, during Q1, machine revenue from the Chinese market increased significantly from the previous quarter’s 39% to 49%.

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(Photo credit: ASML)

As the global semiconductor landscape undergoes restructuring, major packaging and testing companies are actively establishing overseas advanced packaging capacities. According to a report from Commercial Times, semiconductor industry sources have indicated that, in terms of the clustering effect within the semiconductor industry, the primary targets currently include Japan, Malaysia, and Singapore.

Industry sources cited by the same report have pointed out that the global top ten packaging and testing companies are dominated by Taiwan, China, and the United States. Taiwan holds the lead with five industry giants including ASE Group, Powertech Technology, King Yuan Electronics CO. (KYEC), Chipbond Technology, ChipMos and Sigurd.

China boasts four key players such as Jiangsu Changjiang Electronics Technology Co., Tongfu Microelectronics, and Huatian Technology Co. Meanwhile, the United States is represented by Amkor, the world’s second-largest in scale. Japan’s pursuit of rebuilding the packaging and testing industry through a foundry model and seeking support from Taiwanese companies can be seen as a logical progression.

Given that nine out of the top ten packaging and testing companies are located in the Asia-Pacific region, the strategic positioning in Asia is particularly notable, with Japan, Malaysia, and Singapore all striving to make their mark.

Industry sources cited by the same report point out that Malaysia has been developing its semiconductor industry for decades, with Penang being a prominent semiconductor hub. Not only does Penang boast technological advantages, but it is also dubbed the “Silicon Valley of the East.”

As companies like TSMC, Samsung, and Intel expand their fabs to locations such as the United States and Europe, the downstream semiconductor testing and packaging activities are gradually forming clusters in Malaysia. This includes ASE Group’s significant investment in building a new testing and packaging facility in Penang, scheduled for completion in 2025.

Intel is also planning to establish advanced packaging facilities in both Penang and Kedah. Additionally, Texas Instruments from the United States has announced plans to build semiconductor testing and packaging facilities in Kuala Lumpur and Malacca.

While Malaysia’s testing and packaging sector has become a hub, industry sources cited by the report point out that despite many countries aggressively building their semiconductor industry chains, Japan is seen as the country, outside of Taiwan, with the most comprehensive semiconductor supply chain in the future, due to factors such as cultural traits, industrial development experience, geographical proximity to Taiwan, and long-standing close cooperation.

TrendForce has previously reported that Japan’s resurgence in the semiconductor arena is palpable, with the Ministry of Economy, Trade, and Industry fostering multi-faceted collaborations with the private sector. With a favorable exchange rate policy aiding factory construction and investments, the future looks bright for exports.

With Japan rapidly catching up in development, it becomes necessary for companies like ASE Group to strengthen their presence in Japan. The sources cited by the report are optimistic that Taiwanese-owned testing and packaging facilities may follow suit.

Recently, Powertech Technology Inc., Taiwan’s testing and packaging company, expressed openness to exploring opportunities in Japan, including seeking subsidies from the Japanese government, following the model set by TSMC.

Singapore is also actively strengthening its semiconductor industry chain. Per official Singaporean data, out of the 15 world-class chip design companies, 9 have established bases in Singapore. Additionally, there are 14 semiconductor fabs and 20 semiconductor assembly and testing facilities.

Coupled with the nearby established backend testing clusters in Malaysia, if Singapore constructs a more complete industry chain, it is poised to attract even more world-class testing and packaging companies to establish their presence there.

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