Japan’s chip industry is an essential piece of the world’s most important industry. But while Japan has enjoyed success in postwar decades, China and South Korea have overtaken it in recent years, threatening its grip on global technology leadership—Asia now makes more than four fifths of the world’s semiconductors and Japan just 20%.
To help fight back, Japan last year created an alliance with SoftBank, NEC, Sony (NYSE: SNE), Toyota (NYSE: TM) and six other Japanese firms to create a new company for manufacturing semiconductors that can be used to power mobile phones or cars. This new firm, Rapidus, is based in Tokyo, and will be responsible for a factory that SoftBank Group will open next month at a research park in Kumamoto, Japan. The facility is said to be worth $10B and will focus on chips for self-driving vehicles.
In addition to the eight founding firms, seven other Japanese corporations including Nissan Motor (OTCPK: NSANY), Toho Titanium Co. (2379) and Nippon Steel & Sumitomo Metal Corp have joined Rapidus since its inception last April. The government-backed New Energy and Industrial Technology Development Organization (NEDO) has also agreed to support the project through investments totaling 200 billion yen ($1.96B). The reach of the new company is already a sign of how far Japan’s leading electronics manufacturers have fallen; its president, Shigeru Kimoto, has said that he hopes to eventually recruit about 100 semiconductor firms and government entities.
But there are still doubts about whether the project will be successful. At the opening ceremony of Rapidus’s new factory, Prime Minister Shinzo Abe focused on finding solutions for the global energy crisis, saying that “the impact of electric vehicles is still insufficient because they don’t use enough batteries and they take time to charge. We should aim to commercialize major technologies by 2020.” However, even the government of Japan—one of the world’s most active and advanced investors in electric vehicles—hasn’t decided which country to back in making that happen.
