As competition in the semiconductor industry intensifies, countries worldwide are implementing industrial policies to attract domestic and foreign investments. Japan, in particular, has introduced substantial subsidies to entice industry players to invest and establish facilities.

According to the report from South Korean “Dong-a Ilbo,” compared to other nations, South Korea’s semiconductor industry lacks sufficient subsidies, and there are concerns that Japan may surpass South Korea within the next decade.

Given the high cost of advanced semiconductor facility equipment and relatively higher local labor and other costs in Japan compared to other Asian countries, semiconductor companies are making substantial investments, often in the trillions of yen, to set up facilities in Japan.

In an effort to attract foreign companies to establish facilities in Japan, the Japanese government not only promotes the capabilities of numerous domestic semiconductor upstream suppliers to meet supply chain demands but also provides subsidies to alleviate the burden on industry players, thereby enhancing the competitiveness of products manufactured in Japan.

Taking memory giant Micron as an example, reportedly, Micron’s DRAM plant being constructed in Hiroshima, Japan, has received a 39% subsidy from the Japanese government for the construction cost. This subsidy has enhanced its cost competitiveness by 5% to 7%.

With substantial assistance from the Japanese government, there is a potential for Micron to narrow the market share gap with Samsung Electronics and SK Hynix in the future.

In recent years, TSMC has also chosen to establish a plant in Kumamoto, Japan, under the active solicitation of the Japanese government. In June of the previous year, the Japanese Ministry of Economy, Trade, and Industry announced that TSMC, along with Sony and Denso, jointly investing in Kumamoto Fab 1, could receive a maximum subsidy of JPY 476 billion (approximately USD 3.34 billion), equivalent to half of the construction cost.

The head of the Japanese Semiconductor Strategic Promotion Council, Akira Amari, previously mentioned that the Japanese government would provide one-third of the construction cost as a subsidy for TSMC’s Kumamoto Fab 2.

However, in November of this year, the Japanese Cabinet approved a semiconductor subsidy plan of nearly JPY 2 trillion, deciding to grant a subsidy of JPY 900 billion to TSMC’s Kumamoto Fab 2, exceeding one-third of the construction cost.

As per TrendForce’s report, Japan is also actively supporting local company Rapidus with a goal of reaching the most advanced 2 nm process. They aim to create a semiconductor cluster in Hokkaido and are offering subsidies to foreign companies, including Japan Advanced Semiconductor Manufacturing (JASM) and PSMC’s Sendai plant (JSMC).

This dual-pronged approach by the Japanese government aims to attract both domestic and foreign semiconductor industry investments in Japan.

While the South Korean parliament expanded tax incentives for semiconductor facility investment in the chip law passed in March of this year, it did not provide direct cash subsidies, raising concerns among industry professionals about the potential overtaking of the South Korean semiconductor industry by Japan.

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• [News] Japanese Gov’t Grants TSMC 900B Yen, Kumamoto Fab 2 Announcement Soon
• Japan Flexes Its Advantages in Semiconductor Upstream Equipment and Raw Materials, and Unveils Strategic Progress of Key Players in Kyushu, Tohoku, and Hokkaido, Says TrendForce

(Photo credit: TSMC)

On December 13th, the Ministry of Trade, Industry, and Energy (MOTIE) of South Korea held a ceremony to celebrate the establishment of the public-private Mobility Charging Industry Convergence Alliance. During the ceremony, the South Korean government announced measures aimed at promoting the electric vehicle (EV) charging industry and providing support to charging station operators.

According to a news report from Businesskorea, the South Korean government revealed a target of capturing a 10% global market share for chargers made by Korean companies by 2030, a significant leap from the current 1%.

The South Korean government aims to acquire five key technologies by 2030 in the field of EV charging market. These include ultra-fast charging, wireless charging, charging robots, intelligent charging, and cybersecurity software for charging stations.

The ultimate objective is to foster the growth of at least five domestic charging pile manufacturers with a combined annual revenue exceeding KRW 50 billion (approximately USD 38.66 million). Additionally, the government wants to significantly increase South Korea’s global market share in the EV charging market from 1.2% last year to 10% by 2030.

To achieve this policy objective, MOTIE has established the public-private Mobility Charging Industry Convergence Alliance. This alliance consists of more than 40 companies and 20 organizations, encompassing charging pile manufacturers, component suppliers, charging service operators, as well as testing and certification organizations.

TrendForce anticipates that by 2026, the global tally of public charging stations will soar to 16 million, marking an impressive threefold increase from 2023 figure. Alongside this growth, the global ownership of new energy vehicles (NEVs), which include plug-in hybrid vehicles (PHEVs) and battery-electric vehicles (BEVs), is projected to surge to 96 million. This will result in a vehicle-to-charger ratio of 6:1, a significant decrease from the 10:1 ratio observed in 2021.

(Photo credit: Pixabay)

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• Driven by Global Government Initiatives: A Surge in Public Charging Piles Expected—16 Million by 2026, Tripling 2023 Figures, Says TrendForce

South Korean President Yoon Suk Yeol concluded his visit to the Netherlands, announcing the establishment of a “Semiconductor Alliance” between South Korea and the Netherlands. The alliance involves collaboration between Dutch semiconductor equipment giant ASML and South Korean companies Samsung and SK Hynix. This marks South Korea’s first alliance announcement with a specific country.

According to the Korea Times and South Korean President Office’s press release on December 13th, President Yoon Suk Yeol’s held a dialogue with Dutch Prime Minister Mark Rutte during the state visit to the Netherlands. They issued a joint statement formalizing the “Semiconductor Alliance” and establishing bilateral mechanisms for economic, security, and industrial consultations.

On December 12th, President Yoon Suk Yeol led a delegation to ASML’s headquarters in the Netherlands, including representatives from South Korean semiconductor giants Samsung and SK Hynix, as reported by the Korea Times. During the visit, Samsung and ASML signed an MOU, jointly investing approximately KRW 1 trillion (about USD 7.6 billion) to establish a research fab in South Korea.

Bloomberg also reports that the new fab will expand ASML’s market in South Korea, where it already operates four fabs, servicing clients including Samsung. ASML’s exclusive EUV technology is crucial amid the US-China tech trade tensions, making regional diversification increasingly important for the company.

ASML is a leading global player of semiconductor EUV lithography systems, which is crucial for processing semiconductor manufacturing’s most vital steps. EUV equipment are a pivotal part of chip manufacturing, and ASML can produce only around 60 EUV devices annually. Currently, 70% of ASML’s EUV equipment are purchased by market leader TSMC.

Previous reports from South Korean media highlighted Samsung’s substantial EUV equipment purchases from ASML, totaling 50 units. Samsung is the world’s first company to produce 3nm chips, commencing production of the first-generation 3nm chips in the latter half of 2022. It aims to start mass production of the second-generation 3nm chips in the first half of the next year and targets producing 2nm chips by 2025 and 1.4nm chips by 2027.

(Image: 대한민국 대통령실)

On December 1, the Ministry of Trade, Industry, and Energy (MOTIE) of South Korea disclosed that Korea’s export value in November experienced a notable YoY increase of 7.8 %, reaching a monthly peak for this year at USD 55.8 billion. Concurrently, imports contracted by 11.6 % to USD 52.0 billion, resulting in a trade surplus of USD 3.8 billion.

Semiconductors, ending a 15-month decline, exhibited growth of 12.9 %, attributed to the escalating fixed prices of memory chips. Anticipated releases of new smartphone models and AI server products are expected to fuel demand, sustaining the positive trend in exports.

The export value of automobiles surged by 21.5 % to USD 6.5 billion, marking the 17th consecutive month of growth. This was fueled by robust demand for high value-added vehicles, such as SUVs and eco-friendly cars, particularly in the U.S. market. On the other hand, Electric Vehicles (EVs), constituting 23.8 % of the total automobile export value, experienced a remarkable 69.4 % increase, reaching USD 1.6 billion.

In terms of regional performance, exports to six out of Korea’s nine major destinations achieved growth, with notable increases in exports to the U.S., ASEAN, Japan, Latin America, India, and the EU.

Exports to China, despite a marginal decrease of 0.2 % to USD 11.4 billion, reached unprecedented highs, surpassing USD 10 billion for the fourth consecutive month. For the U.S., the exports recorded double-digit growth for the second consecutive month, reaching USD 11.0 billion, driven by strong demand for automobiles, machinery, semiconductors, wireless communication devices, home appliances, petrochemicals, and bio-related products.

In terms of Asia, ASEAN witnessed an 8.7 % increase in exports to USD 9.8 billion, achieving the second-highest November monthly exports of all time across various sectors. Exports to Japan increased by 11.5 % to USD 2.6 billion, driven by growth in petroleum products and bio health despite a decline in steel exports.

According to IJWEI’s report, Japanese companies heavily reliant on key battery and semiconductor materials manufactured in China are expanding their sources as China intensifies export controls.

On October 20th, China announced that certain graphite items, including high-purity, high-strength, and high-density synthetic graphite materials and their products, cannot be exported without permission.

This regulation officially takes effect on December 1st of this year. Graphite is crucial for manufacturing the negative electrode of lithium-ion batteries for electric vehicles. While the permit requirements do not constitute a ban, they may lead to a reduction in China’s graphite exports.

Over 80% of the natural graphite used in Japan comes from China. In case of a disruption in graphite imports, Mitsubishi Chemical Group in Japan is considering strengthening its production of electrode materials in Shandong. The company is also exploring partnerships in Australia and production in Mozambique and Norway to diversify the supply.

Representatives from Nissan Motor Company have stated that they will consider sourcing graphite and other key electric vehicle materials from alternative regions.

Panasonic’s battery subsidiary, Panasonic Energy, is collaborating with a Canadian graphite company on research for large-scale production of electrode materials. In September of this year, the Japanese Ministry of Economy, Trade, and Industry (METI) and the Canadian government signed an agreement to strengthen the battery supply chain.

According to data from the United States Geological Survey, the global graphite production reached 1.3 million tons in 2022, experiencing a 15% year-on-year growth due to the popularity of electric vehicles. China contributes to 70% of the graphite production and is a major producer of synthetic graphite. China serves as the primary low-cost exporter for both types of materials.

“The costs of procuring graphite will inevitably rise, the focus will be on how companies maintain their competitive advantage while bearing the costs.” as stated by Noboru Sato, visiting professor at Nagoya University.

Graphite is not the sole crucial mineral for China. In August of this year, China intensified export restrictions on gallium and germanium, vital rare metals used in the manufacturing of electronic components and semiconductors. Customs data indicates a significant decrease in the export of these two metals.

Japanese manufacturers are also exploring materials sources unaffected by China’s export controls. Kanto Denka Kogyo, a chemical producer, is testing lithium compounds from regions like South America to manufacture battery electrolytes. The company is also collaborating with Sumitomo Metal Mining to test technology for lithium recovery from discarded electric vehicle batteries.

At the same time, Japan is using diplomacy and foreign aid to ensure a stable supply of critical materials. Both China and Japan have confirmed the establishment of new bilateral export control dialogues. Senior trade officials from both sides will engage in regular consultations on export restriction issues.

The Japanese Ministry of Economy, Trade, and Industry is seeking JPY 260 billion (approximately USD 1.74 billion) in the supplementary budget proposal for this fiscal year to support Japan’s battery manufacturing. Some of the funds may be allocated for investing in companies producing synthetic graphite in Japan.

Last year, Japan’s additional budget provided approximately JPY 200 billion to support the extraction, refining, and processing of critical minerals. Companies investing overseas in the production of rare metals will receive subsidies of up to half.

Companies outside Japan are also taking action to mitigate the impact of Chinese supply restrictions. According to Business Korea’s report, South Korea’s company Posco Future M, which produces battery materials, has preemptively planned to manufacture synthetic graphite using coal tar, a byproduct that can be sourced domestically in Korea.

Read more

• [News] China Implements Export Restrictions on Graphite, Impacting Battery and Electric Vehicle Industries
• [News] China’s Export Control Measures and Their Impact on Electric Vehicle Battery Production

(Photo credit: Pixabay)