The Dual-Track Game of Japan's Semiconductor Revival: The Strategic Logic of TSMC Kumamoto and Rapidus

Japan's semiconductor industry is standing at a critical historical juncture. Japan, which once dominated the global DRAM market in the 1980s, gradually lost its competitiveness in advanced process technologies after experiencing trade friction in the 1990s, the sharp appreciation of the yen, and misjudgments regarding technology paths, and even withdrew from the race at the 22/20nm node. Today, amid geopolitical tensions and supply chain restructuring, Japan has launched an unprecedented semiconductor revival plan in the name of "economic security." At a recent seminar held by Stanford University's APARC Japan Program, Chuo University professor and APARC visiting scholar Jun Akabane provided an in-depth analysis of this strategy, especially comparing the different paths and potential outcomes of TSMC's Kumamoto plant and Rapidus.

Historical Shadows and Strategic Anxiety

The decline of Japan's semiconductor industry was not caused by a single factor. In the 1980s, Japanese giants such as NEC and Hitachi held global dominance in DRAM, but subsequent Japan-U.S. trade friction, the sharp appreciation of the yen, and corporate misjudgments of market trends prevented Japan from shifting in time to higher-value-added logic chips. When the global industry advanced toward the 22/20nm and below nodes, Japanese companies chose to retreat. This history has become a lingering shadow over Japanese policymakers today and has shaped the underlying logic of the current revival strategy: no longer simply pursuing market share, but ensuring independent control of key technologies and supply chain resilience.

In 2021, the Kishida Fumio government elevated semiconductors to a core position in economic security. The Economic Security Promotion Act passed in 2022 set out four major goals: ensuring a stable supply of critical minerals, protecting critical infrastructure, supporting advanced technology development, and implementing a patent non-disclosure system. This legal framework provided an institutional foundation for Japan's semiconductor revival and also marked a significant shift in Japan's industrial policy from market-oriented to national-strategy-oriented.

Dual-Track Strategy: Two Logics Running in Parallel

Japan's current semiconductor revival plan consists of two seemingly contradictory yet complementary projects. One is TSMC's wafer fab under construction in Kumamoto Prefecture, supported by the Japanese government and domestic companies such as Sony and Denso. This project focuses on mature-process chips, mainly serving Japanese competitive industries such as automobiles, industrial equipment, and consumer electronics. The other is Rapidus, a domestic company founded in 2022, which has received government funding and investment from eight major Japanese companies including Toyota, Sony, and SoftBank, and is aiming directly at 2nm advanced logic chips, in cooperation with global partners such as IBM and Belgium's Interuniversity Microelectronics Centre (Imec).These two paths represent radically different strategic thinking. TSMC's Kumamoto plant aims to strengthen Japan's domestic supply chain by bringing mature-node production capacity into the country and creating synergies with Japan's strong semiconductor materials, equipment, automotive, and electronics industries, thereby enhancing Japan's resilience to future supply disruptions. Rapidus, by contrast, is a high-stakes gamble on the global cutting-edge logic chip market, seeking to return Japan to the advanced-node race dominated by the United States and China's Taiwan region.

TSMC Kumamoto: Pragmatic Integration and Supply Chain Resilience

From the perspective of industrial integration, the advantage of the TSMC Kumamoto project lies in its practical feasibility. TSMC directly provides advanced manufacturing processes, and the project's goal is clear: to meet Japan's domestic demand for mature-node chips, covering key areas such as data centers, mobile phones, and automobiles. More importantly, the project brings chip manufacturing back to Japan and complements Japan's traditional strengths in semiconductor materials (such as photoresists and silicon wafers) and manufacturing equipment (such as Tokyo Electron and Nikon). Akabane points out that this strengthened industrial chain linkage is improving Japan's ability to withstand future supply shocks.

However, critics ask: why should Japan heavily subsidize a foreign company? They argue that TSMC's Kumamoto plant cannot fundamentally enhance the technological capabilities of Japan's domestic semiconductor industry; instead, it may trap Japan in "manufacturing hollowing-out"—that is, possessing advanced production capacity while lacking core technology and intellectual property.

Rapidus: A High-Risk National Breakthrough

In sharp contrast to TSMC Kumamoto is Rapidus. This company, which carries Japan's dream of cutting-edge chips, aims to mass-produce 2-nanometer logic chips in the late 2020s. But the real-world challenges are extremely severe. According to Akabane's analysis, Rapidus's current technology level remains at the 14-nanometer stage, and it lacks the extreme ultraviolet lithography (EUV) equipment needed to manufacture 2-nanometer chips. Global supply of EUV lithography machines is almost monopolized by the Netherlands' ASML, leaving Rapidus facing fierce competition in acquiring equipment.

In addition, Rapidus relies heavily on technical support from foreign partners such as IBM and Imec, which has raised concerns about its technological autonomy. Critics also point out that pouring substantial resources into high-risk, high-end logic chips may divert attention from Japan's core semiconductor industry, which is where Japan's real strengths lie.

The Boundaries of Government Intervention and the Risk of Resource Misallocation

The Japanese government's deep involvement in the semiconductor industry has sparked discussion about the effectiveness of its policies. Historically, industrial policies led by Japan's Ministry of International Trade and Industry (MITI) have seen both successes and failures. Some experts worry that excessive government intervention may lead to inefficiency and resource misallocation. Whether Rapidus can survive in a competitive landscape dominated by TSMC, Samsung, and Nvidia remains a huge question mark. At the same time, subsidies for the TSMC Kumamoto project also face scrutiny: should taxpayers' money be used to support foreign companies?At the heart of these disputes is the question: should Japan’s semiconductor revival prioritize “supply chain security” or “technological leadership”? How should resources be balanced between the two? This is not only a problem facing Japan, but also a common dilemma in the semiconductor strategies of many countries around the world.

The Art of Balance in the Cracks of Geopolitics

Japan’s semiconductor strategy is inevitably embedded in the broader context of U.S.-China technological competition. On the one hand, Japan seeks to reduce its dependence on overseas suppliers and strengthen alliances with the United States and China’s Taiwan region; on the other hand, critics warn that this strategy of choosing sides may create new vulnerabilities when geopolitical tensions escalate. In particular, if a contingency occurs in the Taiwan Strait, global supply chains will suffer a severe shock—and can Japan remain insulated from it?

From a geoeconomic perspective, Japan’s dual-track strategy is in fact a hedge: ensuring supply security for mature nodes through TSMC Kumamoto, while seeking a voice in future technologies through Rapidus. But this hedge also entails enormous fiscal outlays and strategic risks.

Long-Term Impact on Japan’s Technological Competitiveness and the Global Landscape

Looking ahead, the success or failure of TSMC Kumamoto and Rapidus will have a profound impact on Japan’s economic security. If TSMC Kumamoto succeeds, Japan will have a more resilient domestic semiconductor supply chain and will occupy an important position in the global mature-node market. If Rapidus fails, Japan’s effort to return to the global cutting-edge semiconductor race will suffer a heavy blow, potentially further entrenching its marginal position in the field of advanced logic chips.

More fundamentally, this dual-track strategy reflects both the predicament and the ambition of Japan’s industrial upgrading. Japan still holds a globally leading position in semiconductor materials and equipment, but in chip design and manufacturing, its influence is no longer what it once was. Whether the revival plan succeeds depends not only on government support, but also on the innovative vitality of the private sector, and on whether Japan can find its own ecological niche amid complex geopolitical and technological challenges.

For the global semiconductor landscape, Japan’s attempt provides an important case: how a former technological power is trying to rise again in a highly competitive industry through national strategy and international cooperation. Whatever the outcome, this process will profoundly affect the future distribution of the global chip supply chain and the structure of power.

Conclusion: Can the Dual Track Lead to Revival?

The proposition of Japan’s semiconductor revival is far more than building a few factories. It concerns how a country finds a balance between technological sovereignty and the global division of labor, and how it opens a path between historical baggage and future ambitions. TSMC Kumamoto and Rapidus—one pragmatic, one radical; one focused on the present, one betting on the future. Running in parallel, they represent both strategic wisdom and risk diversification. But in the end, Japan’s semiconductor fate will still depend on whether it can transform external cooperation into endogenous capabilities and remain agile in a rapidly evolving global technological competition.

(This article is based on the content of a seminar of the Stanford University APARC Japan Program, original source: https://aparc.fsi.stanford.edu/news/tale-two-approaches-revitalize-japans-semiconductor-industry）