How and Why Japan is Focusing on Chips
The Resurgence of Japan in the Semiconductor Industry
Japan was once the world’s leading producer of chips.
However, since the late 1990s, the country’s major companies have redirected their investments and interests elsewhere, leaving the semiconductor industry to its own fate and in the hands of other countries, primarily Taiwan and South Korea.
With the changing winds and international tensions jeopardizing global supply chains, Tokyo has shifted its focus.
It comes as no surprise that the government led by Fumio Kishida has increased its support for the semiconductor industry.
Between 2021 and 2023, Japan invested approximately $23.17 billion to revive the entire sector, surpassing the contributions of the United States, Germany, France, and the United Kingdom in terms of GDP share.
The Rise of Disco Corporation in the World of Chips
Under the leadership of CEO Kazuma Sekiya, grandson of founder Mitsuo Sekiya, who established the company in 1937 as Daiichi-Seitosho, the company’s net profit rose to nearly $550 million for the fiscal year ending in March 2024.
Sales increased by over 8%, reaching almost $2 billion.
Forbes attributed the company’s success to the weak yen, as it generates almost 90% of its revenue from overseas.
Disco Corporation specializes in producing equipment for cutting, grinding, and polishing chips.
They manufacture laser saws for cutting semiconductor silicon wafers and other strategic materials, grinders for processing silicon wafers and ultra-thin compound semiconductors, and polishing machines to increase chip resilience.
Investing in Advanced Facilities
To meet the growing demands of customers in the semiconductor industry, Disco has announced plans to build a state-of-the-art facility in the Hiroshima region.
This facility in Kure City aims to produce a critical component used in wafer processing, positioning the company to satisfy market needs effectively.
The upcoming plant, with an estimated investment exceeding $200 million, will focus on manufacturing essential cutting tools for dicing, grinding, and polishing chips.
This development is expected to increase Disco’s production capacity by 14 times.
Construction of the site is set to commence in 2025.
Currently, Disco holds the dominant market share worldwide in machines dedicated to dicing, grinding, and polishing chips.
The Return of Japan
Japan has been compelled to re-enter the semiconductor arena due to significant geopolitical shifts in technology in recent years and the lessons learned during the Covid-19 pandemic’s impact on global supply chains.
In the 1990s, Japan produced about 50% of all chips; today, this percentage has dwindled to a mere 9%.
Government funds invested in the semiconductor sector represented 0.71% of the GDP between 2021 and 2023, surpassing the corresponding figures of countries like Germany, the United States, and France.
Foreign companies are also eager to invest in Japan, with Taiwan Semiconductor Manufacturing Company (TSMC) completing a manufacturing plant in Kumamoto and Kioxia and Western Digital jointly constructing a facility in Yokkaichi.
The Ministry of Trade and Industry is supporting the national chip company Rapidus with a substantial amount to establish a production plant in Hokkaido in partnership with IBM.
The plant is set to commence production in 2027, signaling Japan’s readiness to make a strong comeback in the semiconductor industry.
For further insights, read about Objective Asean: Why Companies are Focusing on Southeast Asia.
