Inside Japan's strategy to boost its once-dominant chip industry; Japan has 84 chip factories, more than any other country, but they are mostly small and old
After decades of decline, Tokyo wants to boost the country's once-dominant chip industry — This article is an on-site version of our Trade Secrets newsletter. Tweets: @alanbeattie and @chadbown Tweets: Alan Beattie / @alanbeattie : Today's Trade Secrets. Japan's version of an 80s revival is trying to get its semiconductor industry back to its former glory, this time to avoid being caught in US-China trade wars. It's not going to be easy. By the great @RobinBHarding in Tokyo. https://www.ft.com/... Chad P. Bown / @chadbown : Japan and Semiconductors: @RobinBHarding provides a REALLY nice analysis of the state of Japan's semiconductor industry (data!), potential government strategy (policy!), and how that ties into the global supply chain https://www.ft.com/...
Context & Ripple Effects
This FT Trade Secrets piece was the early framing for an arc the coverage has since filled in: after decades of decline, Tokyo set out to rebuild a fab base that is large in count but thin in capability — 84 plants, more than any other country, yet mostly small and old. The stated motive was geopolitical as much as economic: avoiding being squeezed by US-China trade wars.
What followed shows the strategy moving from newsletter sketch to budget line. Japan committed to a $67B revival program targeting advanced nodes, including Rapidus's 2nm effort, layered on top of earlier $14B+ in subsidies that landed TSMC's Kumamoto plant on Japanese soil. The bet leans on assets competitors cannot easily copy: Omdia puts Japanese firms at nearly half the world's supply of six crucial semiconductor materials (the materials chokehold), alongside government support efficiency and low-cost workforce advantages.
First-order effects
- Tokyo's subsidy machinery now directly picks capacity winners: state money flows to TSMC's Kumamoto fab and to Rapidus's 2nm push, converting a legacy-fab country into a sponsor of leading-edge construction.
Second-order effects
- Japan's near-monopoly on critical semiconductor materials gives its revival leverage beyond its own borders — whoever builds fabs anywhere still buys inputs where Japanese firms hold nearly half the supply of six key materials.
Third-order effects
- If the pattern holds, chips become a domain where allied governments coordinate industrial policy rather than leave it to markets — Japan explicitly sought a coalition with the US and EU on supply chain resilience, pointing toward bloc-based capacity building instead of globally optimized fab location.
The trend: Governments are re-entering semiconductor economics through subsidies and coalitions, treating domestic fab capacity as geopolitical insurance against US-China decoupling.