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Japan should be wary in chip cooperation with hegemonic US: analysts

A chip manufacture machine Photo: VCG

Japan should be wary in its semiconductor cooperation with the US, which is seeking hegemony, Chinese observers said on Wednesday. If it tries to hit China at the bidding of the US, Japan’s industries risk being victimized, analysts noted.

The remarks came as Japanese Prime Minister Fumio Kishida said on Tuesday (US time) that he saw opportunities for more collaboration with the US in next-generation computer chips. Kishida and US President Joe Biden are scheduled to meet on Wednesday.

Major agreements expected to come out of the meeting include a $2.9 billion deal by US tech giant Microsoft to expand its cloud and artificial intelligence infrastructure in Japan, and a partnership between Japanese chip foundry venture Rapidus with a US company in the research and development of next-generation chips, according to Reuters.

Although not mentioning China directly, Kishida said on Tuesday that “it is increasingly important for our two countries to build resilience in our economies and together drive growth for the global economy.”

Japan’s pledge for closer semiconductor cooperation with the US was coupled with its push to produce chips domestically and Washington’s escalating crackdown and containment strategy against China in the field of semiconductors by pushing its allies.

In a recent move, the US is reportedly pushing Netherlands-based chipmaking giant ASML to stop servicing some equipment it has sold to Chinese customers, in blatant violation of business contracts.

However, Chinese observers said Japan needs to be careful in its chip cooperation with the US or risk facing consequences.

Ma Jihua, a veteran telecom observer, told the Global Times on Wednesday that the US has been trying to woo its allies including South Korea and Japan to join its crackdown on the Chinese semiconductor sector.

South Korean chip companies have become victims of the US containment of China, seeing a sharp drop in the export value of semiconductor tooling machines while Japanese and Dutch exports to China rose in 2023, according to South Korean newspaper Dong-a Ilbo.

Chinese analysts said that any cooperation between Japan and the US should not target any third party, and efforts in strengthening high-tech industry supply chain resilience should not become a disguise for technology containment against China.

Da Zhigang, director of the Institute of Northeast Asian Studies at Heilongjiang Provincial Academy of Social Sciences, told the Global Times on Wednesday that it seems apparent that Japan’s partnership with the US in the high-tech field has a target in mind, which is regrettable.

Da said that if detailed curbs or export technology bans emerge from its partnership with the US, Japan will face mounting risks in its trade with China, which totaled $317.99 billion in 2023 per customs data.

“For Japan, its interests lie in enhancing mutually beneficial trade and economic ties with its Asian neighbors, rather than colluding with external forces to crack down on its major trading partner,” Da said.

Japanese semiconductor companies at the upstream of the industrial chain may suffer if the Japanese government chooses to work with the US to disrupt global semiconductor industrial and supply chains, noted Da.

Semiconductor industry booms in E China’s Shandong province

A staff member works on the production line of a semiconductor production company in Yangxin county, Binzhou city, East China’s Shandong province on April 1, 2024. [Photo/VCG]

The semiconductor industry booms with increasing number of orders from home and abroad in Binzhou city, East China’s Shandong province.

Staff members of a local semiconductor company are geared up to manufacture products in order to meet the market demand.

Since the beginning of this year, Binzhou city of Shandong province has been focusing on strengthening industrial chains, filling gaps and extending chains to accelerate the cultivation and development of new quality productive forces.

The city is striving to build a semiconductor industry ecosystem and enhance the cluster of advanced manufacturing industries by providing precise services through policy support, resource integration and talent attraction.

Currently, the annual production capacity of automotive components in the city exceeds 6 billion units, with a product failure rate reaching part per hundred million level.

The products of the company are exported to more than 30 countries and regions including the European Union, the United States and Japan.

TSMC’s Japan project should avoid wrong US direction of ‘decoupling’

Illustration: Chen Xia/Global Times

Taiwan Semiconductor Manufacturing Co (TSMC)’s chip plant in Kumamoto Prefecture in Japan expects to reach 60 percent local procurement by 2030, TSMC Chief Executive Officer C.C. Wei said during a meeting with Japanese Prime Minister Fumio Kishida on Saturday, Bloomberg reported.

TSMC’s ambition of localizing procurement in Japan bears a strong imprint of the geopolitical drive by the US to divide the Asian and global semiconductor industry chains. If TSMC’s Japanese factory keeps moving in this wrong direction of “decoupling,” its sustainability will be in question.

TSMC’s production complex in Kumamoto, which became operational in February, is the first plant in Japan for the world’s top contract chip manufacturer. According to Japanese media outlet Nikkei, Japan plans to provide subsidies of more than 1.2 trillion yen ($7.9 billion) for this project. Additionally, TSMC is planning to launch a second plant in Japan that will produce advanced 6-nanometer chips by the end of 2027.

TSMC’s plan to build plants in Japan is only part of a broader global strategy. The company has been building a plant in the US state of Arizona, and it is also reportedly planning to build its first European plant in Germany. Compared with its plans in the US and Europe, its progress in Japan has been relatively smooth due to fewer problems such as a lack of specialized labor.

TSMC’s production layout in Japan, Europe and other places is actually very costly. Although the US, Europe and Japan all seem willing to subsidize and attract TSMC to build chip factories in order to revitalize their domestic chip manufacturing industries, considering the current lag in chip manufacturing in these economies, it will be difficult to boost chip manufacturing by solely depending on a single company like TSMC.

Moreover, there is an even bigger problem in all the chip manufacturing ambitions of the US, Europe and Japan – political interference by the US to divide the global and Asian semiconductor industrial chains.

For example, TSMC’s ambition for localization in Japan seems to be seriously affected by the political interference of the US in the global semiconductor supply chain, and is sliding toward “decoupling.” This is an extremely dangerous trend.

From coercing other countries to impose restrictions on the export of high-end chips and production equipment to China to pressuring other countries to cut off their semiconductor supply chain cooperation with China, the blatant US chip war against China has already caused too much damage to cooperation and development in the global chip industry.

If TSMC’s and Japan’s cooperation continues to succumb to US political pressure, blindly emphasizing the “geopolitical” and “economic security” factors of the projects, and further cooperating with the US semiconductor “decoupling” plan against China, then the sustainability of the projects will face great uncertainty.

If TSMC’s Japanese factory achieves 60 percent local procurement, coupled with the use of US machinery and equipment, it will significantly deviate from the efficient and cost-effective supply chains of the Taiwan island and the Chinese mainland, which will greatly increase TSMC’s Japanese production costs and reduce its competitiveness.

Even if TSMC’s Japanese factories can significantly increase output, they will still face challenges in finding markets under the pressure of the US chip war against China.

It is a reasonable concern that when the originally mutually beneficial semiconductor supply chain in Asia is artificially divided into two by the US – that is, separated from the industrial chain and market in the Chinese mainland – even if TSMC’s performance improves in the short term, this growth is bound to be unsustainable, because the share of the mainland chip market in the global semiconductor sector can’t be – and shouldn’t be – ignored.

Due to China’s strong advantages in emerging industries – artificial intelligence, autonomous driving, and electric vehicles, among others – and innovative technology applications, the demand for chips in the vast Chinese mainland market will continue to grow. If TSMC and Japan’s chip-related industries are swayed by the misguided US “decoupling” push, they will definitely miss out on the opportunities in the Chinese mainland market.

Can TSMC’s projects in Japan eliminate the pressure of “decoupling” from the US, achieve a win-win and multi-win situation, and deepen semiconductor industry chain cooperation in Asia? If so, both the Japanese chip industry and TSMC will face bright prospects. It is hoped that Japan’s chip ambitions and the establishment of TSMC’s factory in Japan will not go in the wrong direction of “decoupling.” For the chip sectors in Japan and China’s Taiwan region, depoliticization is the only correct strategy.

The author is a reporter with the Global Times. [email protected]