Japan Is Investing Over $5 billion to Solve the World's Chip Shortage

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The world’s biggest chip-making nation is getting serious.

Japan has committed $5.2 billion (roughly 600 billion yen) toward providing support for semiconductor manufacturers in a bid to help solve the world’s ongoing chip shortage.

While the funds will go to several chipmakers, the most notable among them is the largest one in the world, Taiwan Semiconductor Manufacturing Co (TSMC), according to an initial Tuesday report from Nikkei.

Japan invests $5.2 billion in Taiwan’s giant chip-making firm

TSMC also said that it would construct a new chip plant in Japan for $7 billion in a joint effort with Sony Group Corp. Understandably, the government of Japan was pleased. The remaining 200 billion yen of Japan’s new investment will be directed toward preparing other factories for multiple new projects, including one under development by the U.S. memory chipmaker Micron Technology Inc, and Japan’s Kioxia Holdings, according to the report. Japan has remained the largest chip-making industry in the world since the 1980s. But since then the nation has fought an uphill battle to maintain its competitive edge in an increasingly crowded industry, falling into a steady decline in the last three decades as economic rivals like manufacturers based in Taiwan continued to close the gap.

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The global semiconductor chip shortage has lasted years

And it couldn’t come at a more appropriate time. The chip shortage became apparent at roughly the same time that the COVID-19 coronavirus crisis made landfall in the United States. This timing was atrocious because, with billions of people worldwide facing months to years of lockdowns, the only viable way to interact with the outside world was via computers, laptops, cell phones, TVs, game consoles. Those of us who were lucky enough to work from home depended (and still depend) on the daily operation of machines based on semiconductors, and the computer chips they constitute.

While the largest computer chip manufacturer is TSMC, the biggest buyer of semiconductor chips is Apple Inc., with Samsung in close second place. Notably, Samsung was the second-largest producer, after TSMC, in terms of sales. Since Samsung occupies both the supply and demand sides of the computer chip industry, many would imagine it invulnerable to a shortage. But in March of 2020, Samsung said it was considering skipping the launch of its Galaxy Note smartphone. The reason? “[T]here’s a serious imbalance in supply and demand of chips in the IT sector globally,” said Mobile Chief and co-CEO Koh Dong-jin in a BBC report. Samsung still hasn’t released the new product, and experts think 2022 is the earliest it can happen. But with Japan leveraging its mighty economic arm to fuel some of the most powerful chip-makers in the world, the global shortage in machines that run on computer chips, including gaming platforms, cell phones, smartwatches, laptops, and even Ford’s nearly 70,000 chipless vehicles waiting in storage, may have finally entered a terminal phase. While we shouldn’t expect the world to return to normal by the holidays, it’s a fair bet that the end of next year might look very different, and for the best.

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This was a developing story and was regularly updated as new information became available.