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TSMC will build its first chip factory in Japan, Sony Denso may participate

According to foreign media reports, due to a global shortage of chips, TSMC and Sony Group, the world’s largest chip foundry, are considering a joint construction of a semiconductor factory in Kumamoto Prefecture, western Japan. This is TSMC’s first chip factory in Japan.

In order to ensure a stable supply of automotive chips, Toyota’s Denso hopes to join the project by placing equipment in the factory. It is reported that the total investment in the new factory is about 800 billion yen (about 7 billion US dollars), and the Japanese government is expected to provide half of the funds.

TSMC will build a new chip factory in Kumamoto Prefecture, which will use land held by Sony, adjacent to Sony’s image sensor factory. The new plant, which will make chips for cars, camera image sensors and other products, is expected to start production in 2024, the people said. Sony will also take a minority stake in the company that manages the plant, according to people familiar with the matter.

The announcement of the plant construction comes as the world faces unprecedented semiconductor shortages and supply chain disruptions. In July, TSMC confirmed that it was “considering” plans to build a factory in Japan. According to foreign media reports, TSMC is finalizing the construction plan and is open to cooperation with Sony.

Taking into account economic security, the Japanese government decided to establish advanced semiconductor production capacity in the country. It is reported that in the case of chip shortages, the Japanese government is increasingly worried about the stability of the supply chain, so it has decided to provide subsidies for TSMC’s plant construction project. The Japanese government plans to subsidize about half of the total cost of the project. The funds will be included in the fiscal 2021 supplemental budget determined after the House election on Oct. 31.

In exchange for the subsidy, the government will require the factory to make a commitment to give priority to supplying chips to the Japanese market. In June, Tokyo launched measures to attract foreign companies after Taiwan was Japan’s main semiconductor supplier.

Japanese chipmakers withdrew from the race to mass-produce chips in 2010, instead outsourcing the production of cutting-edge semiconductors to companies such as TSMC. This time, Japan hopes to resume chip production in Japan by accepting investment from TSMC.

Sony CEO Kenichiro Yoshida has previously said that the ability to procure stable semiconductors is critical to maintaining Japan’s international competitiveness.

At the same time, major economies such as the U.S. and Europe are racing to relocate semiconductor production domestically. Earlier this year, the United States passed a $52 billion bill to support research and development and manufacturing of semiconductors.

TSMC holds the largest share of the global chip foundry market. TSMC’s market share is rising as the global semiconductor shortage problem worsens. In 2020, at the request of the U.S. government, TSMC decided to invest $12 billion in a new chip factory in Arizona. In February this year, TSMC announced that it would build a research base in Tsukuba, Ibaraki Prefecture, Japan.

TSMC and Sony declined to comment.

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