Japan pledges $4.86 billion to support TSMC's expansion plans

TSMC expansion plans: Japan has announced a significant financial commitment to Taiwan Semiconductor Manufacturing Co Ltd (TSMC), pledging up to 732 billion yen ($4.86 billion) in subsidies to support the construction of a second chip fabrication plant. This move comes as TSMC inaugurated its first Japanese factory on Saturday, marking a pivotal moment in Japan's efforts to revitalize advanced semiconductor manufacturing and bolster industrial supply chains amid escalating tensions with neighboring China.

The decision by TSMC to establish chip production facilities in Japan aligns with Tokyo's strategic objective of fortifying its semiconductor capabilities and reducing reliance on external sources, especially in light of geopolitical uncertainties.

Speaking to reporters following the opening ceremony of TSMC's inaugural factory in Kumamoto on Japan's Kyushu island, Minister of Economy, Trade and Industry Ken Saito emphasized the significance of the investment. He highlighted that the chips produced at the new facility would be more advanced, catering to emerging technologies such as artificial intelligence and autonomous driving, while also ensuring a stable supply of semiconductors within Japan.

The additional financial support provided by Japan represents a substantial commitment, supplementing the funding allocated to TSMC for its initial factory. With this new pledge, taxpayer-funded subsidies for TSMC could exceed 1 trillion yen, underscoring the government's determination to cultivate a robust semiconductor ecosystem domestically.

TSMC's expansion plans in Japan, alongside its ventures in the United States and Germany, signify a significant step towards diversifying its global manufacturing footprint. The company aims to commence mass production at the Japanese facility before the end of the year, with total investment in the venture, including the second plant, expected to surpass $20 billion.

Upon completion, the combined monthly capacity of the two factories is projected to exceed 100,000 12-inch wafers. These wafers will supply leading technology firms and automotive manufacturers, including Sony and Toyota Motor, contributing to Japan's efforts to bolster its technological competitiveness and ensure self-sufficiency in critical supply chains.

In parallel to supporting TSMC's expansion, Japan is also investing in domestic semiconductor initiatives. The country is backing Rapidus, a homegrown chip venture, which aims to collaborate with IBM and Imec, a European chip research organization, to mass-produce cutting-edge chips in Hokkaido starting from 2027.

(With Reuters inputs.)