By Kentaro Okasaka and Tamiyuki Kihara
TOKYO, Oct 20 (Reuters) – Japan is in the midst of a major push to revive its chip sector, but its latest investments show how Tokyo is being pulled into helping the US build up its own semiconductor industry.
Japan will invest up to $21 billion to build two chip factories in New York state, under a deal announced last week by GlobalFoundries, which is majority-owned by Abu Dhabi’s sovereign wealth fund, Mubadala Investment Co.
It is part of a pledge to invest $550 billion in the US made with the Trump administration in return for lower tariffs. Under that deal, the US president – not Japan – gets to select the projects.
That shows the price Japan is paying to maintain trade relations with the US, the world’s largest economy and its closest security partner. But the pledge, agreed to in July 2025, will not do much to resurrect Japan’s chip industry and will have a limited impact on improving its supply chain resilience, experts said.
“Japan is funding US semiconductor capacity without necessarily gaining much of the advanced chip technology or domestic manufacturing capabilities it wants,” said Nori Chiou, investment director at White Oak Capital.
US President Donald Trump imposed tariffs on countries around the world last year to try to shrink the US trade deficit, with governments in South Korea and Taiwan also making investment pledges.
It is not the first time that Japan has been pushed around by the US over chips. In the 1980s, Japan – the globally dominant chipmaking centre – agreed to restrict semiconductor exports to the US, with memories of that period remaining a sore point for bureaucrats in Tokyo.
“Investment in the US is, ultimately, a measure for dealing with Trump. It is essentially about buying time in order to maintain the US-Japan relationship,” said a Japanese government source, who declined to be named as the issue is politically contentious.
INDISPENSABLE PARTNER
Earlier this month, Japanese industry minister Ryosei Akazawa, when asked if corporate investment in the US could weaken investment in Japan, said: “We believe that investment in the US and domestic growth investment are entirely compatible.”
“Japan is a partner the US cannot do without to maintain its supremacy as a hegemonic power in economic, security and technological terms,” Akazawa said last week. He negotiated the investment pledge in a previous role.
The investment will benefit Japanese equipment manufacturers like Tokyo Electron, whose earnings have swelled due to the AI boom, while customers will include Renesas Electronics, GlobalFoundries CEO Tim Breen has said.
Tokyo needs to arrange financing for the chip factories, with other previously announced projects including oil and natural gas-related investments and small nuclear reactors.
The state-backed Japan Bank for International Cooperation and commercial banks will provide loans, with guarantees from Nippon Export and Investment Insurance.
Japanese banks have been reluctant to participate due to the cost of acquiring the large amount of US dollars required, with Tokyo looking to JPMorgan and other US banks for help, Reuters has reported.
Japan is hardly flush with cash, with the highest debt-to-GDP ratio in the developed world and investor concerns about Prime Minister Sanae Takaichi’s fiscal expansion plans.
REGARD INVESTMENT AS A TAX
Takaichi has ambitions to pour public-private investment totalling some $2.3 trillion through fiscal 2040 across 17 strategic Japanese sectors, including AI and chips.
As economic security has become front of mind, the government’s thinking has shifted to the view that having a manufacturing base in Japan is extremely important, said a government source who declined to be named because the matter is politically contentious.
Japan’s flagship chip-sector project is Rapidus, which seeks to mass-produce cutting-edge chips starting next year but is widely viewed with scepticism by the industry.
Tokyo is also backing robot AI company Noetra and has provided subsidies to TSMC, Micron and Kioxia to locate chipmaking capacity in Japan.
If US-made chips can be integrated into Japan’s semiconductor supply chain, there is no need for everything to be produced domestically, the first government source said.
“Whether (the chip factory investment) works out or not, Japan will just have to regard it as a tax,” said Atsushi Osanai, a professor at Waseda University.
(Reporting by Kentaro Okasaka, Tamiyuki Kihara, Fanny Potkin, Makiko Yamazaki and Miho Uranaka; Writing by Sam Nussey; Editing by Thomas Derpinghaus)
Comments