TSMC Opens Its First Production Facility in Kumamoto, Japan

TSMC Opens Its First Production Facility in Kumamoto, Japan

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TSMC Opens Its First Production Facility in Kumamoto, Japan

On February 24, Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司), opened its first semiconductor production plant in Kumamoto, Japan. The plant opening was the first of several major planned semiconductor manufacturing investments by TSMC in Japan as Tokyo seeks to bolster its domestic semiconductor industry. The plant’s inaugural ceremony included TSMC Chairman Mark Liu (劉德音), CEO C.C. Wei (魏哲家), founder Morris Chang (張忠謀), Japanese Minister of Economy, Trade, and Industry (METI) Ken Saito, and video remarks from Japanese Prime Minister Fumio Kishida.

In his remarks at the plant’s opening ceremony, Saito identified TSMC as the most important partner for Japan to realize its goal of digital transformation. He also called TSMC’s factory an important contributor in the production of cutting-edge logic chips that are essential for future Japanese industry. Japan’s lavish praise for TSMC and its willingness to spend billions of dollars to invest in companies like TSMC show how large of a role TSMC may play in Japan’s future semiconductor and leading-edge technological landscape.

Several TSMC Plants Possible for Kumamoto?

As a part of its strategy to enhance economic security, secure and stabilize domestic supply chains, revitalize domestic semiconductor capabilities, and pursue chip technologies that can be used for future applications such as artificial intelligence, the Japanese government has encouraged foreign companies like TSMC to invest in manufacturing facilities by approving billions of dollars in subsidies for new manufacturing facilities. TSMC was one of the first companies to win Japanese government subsidies, and the new Kumamoto plant represents the first of what the Japanese government hopes will be many new production facilities to bolster its national ambitions.

TSMC’s first plant in Kumamoto is led by TSMC-led joint venture Japan Advanced Semiconductor Manufacturing (JASM), and will produce chips that range in size from 12 nanometers to 28 nanometers for various applications. JASM’s facility is operated in conjunction with Japanese member companies Sony, Denso, and Toyota Motor Corporation, and is expected to produce chips that will be used across several important Japanese economic sectors, including consumer electronics and automobiles.

At the February 24 launch event, Japanese Prime Minister Kishida also announced that the Japanese government would provide an additional USD $4.86 billion to TSMC to build a second, more advanced plant in Kumamoto. If completed on time, this plant is expected to be operational by the end of 2027 and would be capable of producing more advanced chips ranging in size from six to seven nanometers for use in applications such as high-performance computing.

By the time both Kumamoto projects are completed, the Japanese government will be expected to have spent in excess of USD $8 billion to subsidize TMC’s facilities, with the aim of achieving a monthly production capacity of more than 10,000 12-inch wafers. In an important boost for the emerging high-technology economy in Kumamoto, other Taiwanese companies like Materials Analysis Technology (MA-tek) have also opened up offices in Japan to be a part of the supply chain, a move that could have further downstream impacts on Japan’s domestic semiconductor sector.

TSMC’s investments in Japan may not be limited to these two multi-billion-dollar manufacturing facilities. As of late February 2024, there are preliminary reports that TSMC is considering building a third plant in Japan. This facility could potentially cost more than USD $20 billion to build and would produce even more advanced three-nanometer chips, which would represent the most advanced semiconductors that TSMC can produce at the time of publication.

TSMC’s new facilities in Kumamoto are not the company’s first investments in Japan’s semiconductor industry, and for good reason. In 2019, TSMC launched the Japan Design Center in Ibaraki Prefecture, with the aim of supporting its advanced research and development (R&D) goals in Japan. Such ongoing investment in Japan also makes sense, as Japanese customers made up six percent of TSMC’s total revenue in 2023, and leading Japanese companies like Tokyo Electron and Shin-Etsu Chemicals supply TSMC with materials and other equipment that are used to produce its leading-edge chips in Taiwan.

TSMC’s Other Overseas Investments

While TSMC’s efforts to bolster its overseas production capabilities, strengthen its global supply chains, deepen technology relations with partners, and take advantage of semiconductor and technology-related subsidy and investment programs are most advanced in Japan, the company has engaged in similar initiatives elsewhere.

In 2020, TSMC originally announced that it would spend USD $12 billion to build a new five-nanometer semiconductor wafer fabrication facility in Arizona, marking the company’s second US-based manufacturing site. TSMC subsequently revised the plans for its first facility to produce more advanced, four-nanometer chips. In 2022, the company announced that it planned to build another facility in Arizona to produce three-nanometer chips—the most advanced capabilities available at the time of the announcement—by 2026. In 2023, TSMC also announced that it would use a TSMC-controlled joint venture with German auto parts manufacturer Bosch and semiconductor maker Infineon to build a fabrication plant near Dresden, Germany.

While news of TSMC’s investments in the United States were met with great fanfare, the opening of its first Arizona facility has been delayed until 2027 or 2028. This postponement was largely due to TSMC’s decision to switch production from five-nanometer chips to the more advanced four-nanometer chips—as well as the Biden Administration’s slow rollout of the CHIPS Act funding announcements, which has led other chipmakers (including Intel) to delay their multi-billion-dollar projects, as well.

In this context, Taiwan’s decision to continue to bolster bilateral ties with Japan makes sense, as TSMC seeks to continue to leverage its status as the world leader in semiconductor production, particularly as larger semiconductor policy efforts such as the Biden Administration’s “Chip 4 Group” have failed to materialize. This group was intended to facilitate semiconductor cooperation efforts between Washington, Taipei, Tokyo, and Seoul, but has been met resistance from some South Korean producers as they contend with broader economic concerns and geopolitical tensions with China.

The Future of Japan-Taiwan Semiconductor Cooperation

Japan is hopeful that TSMC-led investment will help it to revitalize its semiconductor industry, which once dominated global production, although at a lesser scale than today’s Taiwanese companies. Japanese semiconductor prowess intensified trade tensions between Washington and Tokyo in the late 1980s, ultimately leading the administration of US President Ronald Reagan to impose USD $300 million of tariffs on Japanese semiconductors in 1987. At Japan’s semiconductor production peak in 1989, Japanese companies produced more than half of all semiconductors, and Japanese chipmakers NEC, Toshiba, and Hitachi led global production. Since then, Japanese global market share of the semiconductor industry has fallen to less than 10 percent, and no Japanese companies rank in the top 10 of semiconductor revenue.

Japan’s investment in TSMC’s capabilities in Kumamoto is undoubtedly a key pillar in the country’s overall approach to developing Japan-based semiconductor capabilities. However, Tokyo has also explored other avenues to strengthen its position in the sector. For instance, it has committed billions of dollars to Rapidus, a government-backed joint venture project that is partnered with American firm IBM and European chip research group Imec, to build new production lines and facilities in Hokkaido—with grand ambitions of rivaling Silicon Valley. For TSMC, meanwhile, its efforts in Japan are a key part of its global plan to both build closer relations with important partner nations and expand commercial opportunities for the company as it seeks to remain on the cutting edge of semiconductor research, development, and manufacturing.

The main point: The opening of TSMC’s production facility in Japan is the first step in a series of plant openings that Japan hopes will revitalize its domestic chipmaking industry and spur innovation across the country. As additional TSMC plants come online and future investments are made, Taiwanese firms like TSMC will play a major role in how Japan’s future technology infrastructure looks as it pursues its goal of increasing its capabilities.