According to a report from Nikkei on July 23rd, since 2021, the establishment of TSMC’s plants has potentially spurred over 100 semiconductor-related investment projects in Kyushu, known as Japan’s “Silicon Island.”

The disclosed investment amount by companies alone reaches JPY 4.74 trillion, and when including undisclosed investments, it is estimated to reach JPY 5 trillion. TSMC’s establishment in Kumamoto Prefecture has attracted investments from local material, logistics, and other companies.

Kyushu is a major hub for Japan’s semiconductor industry and is often referred to as “Silicon Island,” mirroring the name of Silicon Valley in the United States.

Reportedly, according to data compiled by the Kyushu Bureau of Economy, Trade, and Industry, there have been 100 semiconductor-related investment projects in Kyushu from April 2021 to June 2024, with 72 of these projects disclosing their investment amounts. Kumamoto Prefecture leads with 52 projects, followed by Fukuoka Prefecture with 15 projects. TSMC’s Kumamoto plants (Plant 1 and Plant 2) account for over 60% of the total investment amount.

The combined investment in TSMC’s Kumamoto Plant 1 and Plant 2 exceeds USD 20 billion, with the Japanese government providing up to JPY 1.2 trillion (roughly USD 7.7 billion) in subsidies for these two plants.

In addition, Sony began constructing a new image sensor plant in Koshi, Kumamoto Prefecture, in April. Rohm plans to invest JPY 300 billion in a new plant in Kunitomi, Miyazaki Prefecture, to produce power semiconductors and other products. SUMCO, a major silicon wafer manufacturer, will invest over JPY 400 billion in Kyushu to expand existing plant capacity and build a new factory in Yoshinogari, Saga Prefecture.

The report further highlights that future attention will be focused on whether Taiwanese companies with existing business relationships with TSMC will follow suit and invest in Kyushu.

TSMC’s plant in Kikuyo, Kumamoto Prefecture (Kumamoto Plant 1), is expected to begin mass production in Q4 (October-December) of this year, utilizing 28/22nm and 16/12nm process technologies with a monthly production capacity of 55,000 wafers. Kumamoto Plant 2 is scheduled to start construction at the end of 2024 and begin operations by the end of 2027, focusing on 6/7nm technology. The combined monthly production capacity of Kumamoto Plant 1 and Plant 2 is estimated to exceed 100,000 wafers.

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(Photo credit: TSMC)

As TSMC and other major chip manufacturers compete for AI business opportunities, chip production capacity is unable to keep up with demand. Industry sources cited in a report from NIKKEI claimed that the slow expansion of high-end chip production capacity is due to different packaging and testing technologies used by various companies and calls for the industry to standardize as soon as possible.

Jim Hamajima, President of the Japan office of the Semiconductor Equipment and Materials International (SEMI), recently stated in an interview with NIKKEI that leading chip manufacturers like Intel and TSMC should adopt international standards for back-end processes to effectively and quickly increase production capacity.

Hamajima further noted that each company is trying to apply unique solutions in back-end processes, with TSMC and Intel using different technical standards, which leads to inefficiencies.

Semiconductor manufacturing is divided into two major parts: front-end and back-end processes. While the photolithography technology used in front-end processes widely adopts international standards set by SEMI, packaging and testing in back-end processes vary among manufacturers. For example, TSMC uses CoWoS technology for advanced packaging, while Samsung Electronics uses I-Cube technology.

In recent years, chip manufacturers have actively invested in the development of advanced packaging technologies, primarily because front-end processes face technical bottlenecks, making back-end processes the key to gaining a competitive edge.

Hamajima believes that the current state of back-end processes in the semiconductor industry is “Balkanized,” with each company adhering to its own technologies, leading to a fragmented industry. He warns that this issue will start to impact profit margins as more powerful chips are produced in the future.

Hamajima stated that if semiconductor manufacturers adopt standardized automated production technologies and material specifications, it will be easier to acquire manufacturing equipment and upstream material supplies when expanding production capacity.

Hamajima is a director of a recently launched consortium led by Intel and 14 Japanese companies to jointly develop automated systems for back-end processes. The collaborating companies include Japanese companies such as Omron, Yamaha Motor, Resonac, and Shin-Etsu Polymer, a subsidiary of Shin-Etsu Chemical Industry.

Hamajima noted that Japan, with its numerous automation equipment and semiconductor material suppliers, is an ideal location to test international standards for back-end processes.

He also acknowledged that currently, Intel is the only multinational chip manufacturer in the alliance, which might lead to the development of technical standards that favor Intel. However, he emphasized that the alliance welcomes other chip manufacturers to join, and the research outcomes will serve as a reference for future industry standard-setting.

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(Photo credit: TSMC)

According to a report from Economic Daily News, amid U.S. presidential candidate Donald Trump’s remarks claiming that Taiwan is taking away chip business and should pay the U.S. for defense, geopolitical risks have become another focal point at TSMC’s July 18 earnings call.

TSMC stated that whether the tariffs may increase is a hypothetical issue; if new tariff issues do arise, TSMC will discuss with customers and share the corresponding costs. However, it is still too early to discuss this in detail. Thus, TSMC Chairman C.C. Wei emphasized that TSMC’s overseas expansion strategy remains unchanged, including ongoing fab construction in Arizona, USA, and Kumamoto, Japan, with plans for future facilities in Europe as well.

Sources cited by the report indicate that TSMC’s statement of sharing corresponding costs with customers may imply that if additional tariffs are imposed, TSMC will seek customer assistance in bearing these costs, effectively raising prices.

TSMC pointed out that in a fragmented globalization environment, the costs for everyone—including TSMC, customers, competitors, and the entire semiconductor industry—will be higher.

TSMC plans to manage and minimize cost disparities through three methods: implementing strategic pricing to reflect the value of regional flexibility; closely cooperating with local administrations to ensure their support; and leveraging fundamental advantages such as leading manufacturing technologies and large-scale production capabilities that competitors cannot match.

Regarding TSMC’s progress on overseas expansion, the Arizona plant in the USA is scheduled to begin mass production of the 4nm process in the first half of 2025 as planned. The second plant in Arizona, following recent announcements, will offer both 3nm and 2nm processes and is expected to start mass production in 2028. The third plant in Arizona is expected to provide 2nm or more advanced process technologies.

Regarding the Kumamoto plant in Japan, the target is to commence mass production in the fourth quarter of this year. Previously, TSMC and its joint venture partners announced plans to establish a second wafer plant in Japan specializing in 40nm, 12/16nm, and 6/7nm process technologies. This plant aims to support strategic customers in consumer, automotive, industrial, and high-performance computing (HPC) applications. Construction of the second wafer plant in Japan is planned to start in the second half of 2024, with production expected to begin by the end of 2027.

As for its European plant, TSMC plans to begin construction on the Dresden, Germany, facility in the fourth quarter of 2024. TSMC emphasizes that its overseas expansion depends on customer demand and government support, aiming to maximize shareholder value and ensure that its long-term gross margin target remains above 53%.

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(Photo credit: TSMC)

Masahiro Okitsu, President of Sharp, a subsidiary of Foxconn, announced in a joint interview with Japanese media that the Sakai Display Product (SDP) plant, which produces large-size LCD panels for TVs, will cease production earlier than planned. Initially scheduled for the end of September, the shutdown is now expected to occur in late August.

According to a report by Asahi Shimbun on July 16, Sharp President Masahiro Okitsu announced in a joint media interview that the SDP, which produces LCD panels for TVs, is expected to completely cease production after the Obon festival (late August). This interview marks Okitsu’s first media appearance since taking office as Sharp’s president on June 27.

Okitsu mentioned that around July 20, SDP will start put glass substrates into production, with the final batch of LCD panels produced a month later.

Sharp’s SDP land and plant will be transformed into an AI data center, and a collaboration with Softbank and KDDI has been announced. However, Masahiro Okitsu did not elaborate on this cooperation framework during the media interview on July 16th.

Regarding Foxconn Chairman Young Liu’s appointment as Chairman of Sharp, Okitsu stated that this makes the division of duties clearer. Foxconn will oversee and support Sharp, while the existing brand business operations will be managed by Sharp.

Okitsu also pointed out the goal of increasing the operating profit margin of the “brand business,” which includes products like white goods, to 7% by the 2027 fiscal year (compared to less than 5% in the 2023 fiscal year). He emphasized that achieving a return to profitability in the 2024 fiscal year is imperative.

Reportedly, with Foxconn’s technical assistance, Sharp also plans to enter the AI and electric vehicle (EV) businesses, with plans to launch in the 2026-2027 fiscal years.

On May 14, Sharp announced its financial report, indicating that due to impairment losses in its panel business, the net loss for the 2023 fiscal year (April 2023 – March 2024) reached JPY 149.9 billion, marking the second consecutive year with a net loss exceeding 100 billion yen. However, Sharp forecasts that for the 2024 fiscal year (April 2024 – March 2025), its consolidated operating profit will be JPY 10 billion, with a consolidated net profit estimated at JPY 5 billion.

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(Photo credit: Sharp)

The Japanese Ministry of Economy, Trade, and Industry’s 2024 White Paper on International Economy and Trade reveals that in its examination of imported goods sources, over half of the import value for 1,406 product categories (accounting for over 30% of the total) comes from China. This figure is 1.5 times higher than that of the United States, which relies on China for only 567 product categories. Thus, Japanese media Nikkei’s report has highlighted that this data underscores Japan’s significant dependence on China within its supply chain.

According to Nikkei, Japan’s trade statistics for 2022 covered approximately 4,300 types of goods. The report indicates that nearly 40% of these products are highly dependent on a single import source, with China being the predominant supplier.

Specific data further hints that Japan’s highly dependent imports from China include laptops, air conditioners, organic chemicals, and rare-earth metals. Additionally, over 90% of Japan’s imported household appliances originate from China. Moreover, China serves as Japan’s primary supplier of phosphorus, a key raw material for fertilizer production.

The data also indicates that Japan imports 252 and 151 types of goods that are “highly dependent” on the United States and South Korea, respectively, ranking these countries second and third in terms of Japan’s import dependency. In contrast, other G7 members exhibit lower levels of dependency on single import sources compared to Japan.

Per Nikkei’s report, essential minerals, semiconductors, and fertilizers have been designated as critical goods by the Japanese government. The data in the latest White Paper indicates that Japan’s supply chain is significantly dependent on China, highlighting the importance of diversifying procurement sources and conducting risk assessments. Japan has already started implementing measures to reduce reliance on China in cooperation with the United States and Europe.

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(Photo credit: Lenovo)