Japan is reportedly considering building its first chip factory in the country

Japan is reportedly considering building its first chip factory in the country

TSMC is reportedly considering building its plant on land adjacent to a Sony Group Corp. chip factory in Kikuyo, Kumamoto Prefecture, seen here Oct 14. The global chip manufacturer TSMC announced on Oct. 14 that it plans to build its first factory in Japan, a move seen as a boon for the country amid a Eiji Hori Global supply crunch.

The Japanese government welcomed the news in the hope it will strengthen the nation s economic security.

However, industry sources question the large sum put forward to lure TSMC, officially known as Taiwan Semiconductor Manufacturing Co. into setting up shop here. And it remains unclear whether the new factory is sufficient to guarantee a stable local supply of chips.

The rising sun flag won t be carved in those chips, said one person associated with semiconductor industry.

The source's opinion is that TSMC might not necessarily prioritize supplying Japan with chips if it gains a foothold from the factory operations here.

Still, some local companies are high hopes amongst whom the factory could be built.

The Ministry of Economy, Trade and Industry aggressively pursued TSMC to build the plant in Japan.

The Ministry is believed to have pulled out all the stops for protecting the investment, and then promised the chipmaker hefty financial support in its negotiations with the company.

Some have raised concerns over whether the subsidy is a valid, justifiable use of taxpayer money.

But proponents point out that if the TSMC factory were built in Taiwan, it would reduce the concentration of chip manufacturing sites in Japan. The hope is that it could help create a stable supply of chips for domestic companies and work more opportunities.

The investment for the new factory is expected to total 1 trillion yen $8.8 billion, while the Japanese government is planning to lend 500 billion yen to the project and plan to invest in 150 thousand of them. It plans to include related expenses in this fiscal year s supplementary budget bill.

It is rare for the government to give huge aid like this to a foreign company, so the investment may be a tough sell.

It could be difficult to obtain a consensus from the public for this amid the COVID 19 pandemic when expenditures are swelling, an economy ministry official said.

TSMC is expected to oppose the financial aid and claim that the government is giving preferential treatment to chipmakers.

The new plant would still be able to meet part of the domestic demand for chips.

Although the government is underscoring its message that the investment will bolster Japan s economic security, cost performance remains unpredictable.

Wei, the chief executive officer of TSMC, spoke at an Oct. 14 news conference announcing the factory, but did not reveal the location for its construction. According to a Japanese government official, Kumamoto Prefecture is where it will end in.

Some observers stated that TSMC will cooperate with Japanese companies, including Sony Group Corp.

Sony is making a proposal to the Municipal Government in Kumamoto Prefecture for some 21 hectares of land surrounding its factory there and plans to ink a purchasing contract within the year. Where will the TSMC factory be built?

Denso Corp., a major domestic auto parts maker and part of the Toyota group, is also considering joining the project.