In a bold move to reclaim its former leadership in the global semiconductor industry, Japan has earmarked an additional ¥802.5 billion (roughly $5.4 billion) to support its ambitious chip startup, Rapidus. This substantial financial injection highlights Japan’s strategic commitment to re-establishing a secure, domestic semiconductor supply chain in the face of rising geopolitical tensions and technological competition.
Reviving a Lost Edge
Japan was once a semiconductor powerhouse, dominating global markets in the 1980s. However, over the past few decades, the country’s share in chip manufacturing has dramatically declined. Countries like Taiwan and South Korea, home to titans such as TSMC and Samsung, have taken the lead in advanced chip fabrication. With semiconductors becoming the backbone of modern economies—powering everything from smartphones to AI, EVs, and defense systems—Japan’s renewed interest in reviving its chip sector comes as no surprise.
This renewed focus is materializing through Rapidus, a government-backed chipmaker founded in 2022. The startup is a collaboration among eight major Japanese corporations: Denso, Kioxia, MUFG Bank, NEC, NTT, SoftBank, Sony, and Toyota. Their shared goal is to build a cutting-edge domestic chip ecosystem, starting with the ambitious target of producing 2-nanometer (nm) chips by 2027.
Funding Breakdown
The latest tranche of government support comprises ¥675.5 billion for “front-end” processes—like wafer fabrication—and an additional ¥127 billion for “back-end” activities such as packaging and testing. This brings the total government investment in Rapidus close to $10 billion, making it one of the largest national semiconductor bets in recent history.
Earlier, in April 2024, the Ministry of Economy, Trade and Industry (METI) approved a ¥590 billion ($3.9 billion) subsidy for Rapidus. The funding was specifically targeted at acquiring next-gen chipmaking equipment and developing capabilities for advanced chip packaging. That investment came on the heels of Japan’s comprehensive $65 billion tech initiative announced in November 2024, aimed at nurturing its semiconductor and AI industries.
Strategic Collaborations with Global Giants
To accelerate its technological roadmap, Rapidus isn’t going it alone. One of the company’s most significant moves was signing a partnership with IBM in late 2022. The collaboration focuses on developing 2-nanometer process technology using IBM’s advanced nanosheet GAA FET (Gate-All-Around Field Effect Transistor) architecture.
Additionally, Rapidus joined hands with Imec, a leading Belgian nanoelectronics research hub, in April 2023. This partnership allows Rapidus to tap into Imec’s world-class R&D ecosystem, positioning it better against more seasoned competitors like TSMC and Intel.
A Fab in Hokkaido, A Talent Hub in Silicon Valley
One of the critical milestones in Rapidus’s journey was the groundbreaking ceremony of its fabrication plant on September 1, 2023, in Chitose City, Hokkaido. The facility is strategically located near New Chitose Airport, providing logistics advantages for importing equipment and exporting finished chips. The site is expected to become Japan’s most advanced semiconductor fab, designed specifically for 2-nm production.
However, hardware alone isn’t enough. Rapidus is also making aggressive moves to acquire global talent. In April 2024, it launched a Silicon Valley-based subsidiary—Rapidus Design Solutions. This move aims to attract top-tier semiconductor design engineers who can tailor chips for diverse industry needs, including automotive, telecommunications, AI, and defense applications.
Government-Backed Ecosystem and International Outreach
Japan’s vision isn’t just about building fabs—it’s about creating a full-stack semiconductor ecosystem. That includes materials, equipment, talent, and intellectual property. To this end, Japan is also working with foreign startups and educational institutions. Notably, the government tapped U.S.-based chip startup Tenstorrent to help train Japan’s next generation of chip engineers, ensuring a skilled workforce capable of sustaining long-term innovation.
Moreover, the Japanese government is expected to allocate another $1.3 billion to Rapidus for FY2025, reinforcing its financial commitment over the long haul.
Challenges on the Horizon
Despite the encouraging momentum, challenges remain. The semiconductor industry is notorious for its high entry barriers. Producing 2-nm chips is not just a technical feat; it’s a logistical and economic challenge. Established players like TSMC, Intel, and Samsung have decades of experience, robust customer pipelines, and economies of scale that newcomers like Rapidus must catch up to.
Experts caution that while the goal of producing 2-nm chips by 2027 is ambitious and inspirational, it may be overly optimistic. Success will depend not just on capital and partnerships, but also on building a sustainable customer base willing to pay premium prices for locally made, cutting-edge chips. Moreover, competition in this space is heating up globally, with the U.S., China, South Korea, and the EU all ramping up their own semiconductor investments.
Japan’s Broader Tech Strategy
The story of Rapidus is part of a larger geopolitical narrative. As the world decouples from China’s manufacturing dominance and navigates technological nationalism, Japan’s semiconductor push is as much about economic survival as it is about national security. Chips are now seen as strategic assets, crucial for defense systems, space exploration, and economic sovereignty.
Japan’s government, therefore, is looking to ensure that the country doesn’t find itself at the mercy of foreign chip suppliers in times of crisis. By fostering homegrown capabilities, Tokyo aims to make Japan a resilient player in the global semiconductor supply chain.
Final Thoughts
Japan’s latest $5.4 billion commitment to Rapidus is more than just a financial investment—it’s a high-stakes bet on the future. If successful, Rapidus could mark Japan’s return to the semiconductor big leagues, providing a blueprint for other nations looking to reduce reliance on dominant chipmakers.
The path ahead is full of uncertainties, but with strong government backing, deep-pocketed industry partners, and international collaborations, Rapidus is certainly one of the world’s most-watched semiconductor ventures. As the company accelerates toward its 2027 goal, it will be a crucial barometer of Japan’s ability to blend industrial policy, innovation, and global cooperation to achieve tech sovereignty.
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