“Fate is so strange!” When the United States and Japan, which used to be rivals in the field of semiconductors, are now working together to develop the next generation of chips, the Japanese Minister of Economy, Trade and Industry Koichi Hagiyota was overwhelmed with emotion. According to foreign media reports, on July 29, the U.S. and Japan foreign minister-level and business ministerial official talks, the United States and Japan announced a new generation of semiconductor research, the establishment of “new research and development institutions” will be launched.
This is the first time the U.S. and Japan have held an “economic” version of the 2+2 talks. The two sides involved in the talks included U.S. Secretary of State John Blinken, Commerce Secretary Raimondo, Japanese Foreign Minister Yoshimasa Hayashi and Koichi Hagiyota.
Although the two sides did not reveal too many details of this “new R&D institute” in the semiconductor field through an official statement after the talks, Japanese media reported that the institute will be established in Japan at the end of this year to research 2nm semiconductor chips; the institute will also include a prototype production line, and will start mass production in 2025. At the same time, Japan’s Industrial Technology Research Institute, RIKEN, the University of Tokyo and others will cooperate to set up research bases.
Currently, the vast majority of sub-10nm semiconductor wafers for smartphones are produced in Taiwan, China.
The latest forecast data released by the World Semiconductor Trade Statistics (WSTS) shows that in 2022, the global semiconductor market is expected to grow by 16.3% to reach a size of $646 billion; by 2023, despite a slowdown in growth, but will maintain a positive growth of 5.1%. 2023, the logic chip market is expected to reach $200 billion, accounting for about 30% of the total market size.
Japan has a “glorious” history in the global semiconductor industry. World Semiconductor Trade Statistics Organization data show that in the 1980s, Japan’s share of the global semiconductor industry chain is about 50%, but then Japan’s influence has declined year by year, in recent years by China, South Korea, the United States, etc., the global market share has slipped to about 10% before the epidemic. 2021, U.S. companies have the largest share of the global semiconductor market, reaching 46%.
There is no shortage of semiconductor-related companies in Japan. According to rough statistics from the Japanese media, there are 84 semiconductor-related companies throughout Japan, the largest number in the world. However, Japanese companies are only responsible for the production of low-value-added products in the semiconductor industry chain, 64% of semiconductor products need to rely on imports.
Tian Zheng, an associate researcher at the Japan Research Institute of the Chinese Academy of Social Sciences, told the first financial reporter that as early as the mid to late 1970s, Japan’s high-tech industry, especially the semiconductor industry, has shown the momentum of rapid development, Japanese semiconductor products began to crowd the U.S. market, resulting in the increasing U.S. trade deficit with Japan, the development of high-tech industries between Japan and the United States around the intense friction, highlighted in the semiconductor industry, “the U.S. media at the time even to ‘Japan-U.S. semiconductor war’ to describe.”
“Despite some de-escalation measures taken by the Japanese government, the friction between Japan and the U.S. in the semiconductor field did not improve significantly and was eventually resolved with the signing of the Japan-U.S. Semiconductor Agreement (hereinafter referred to as the ‘Agreement’) through negotiations between the two countries,” Tianzheng said.
The agreement puts forward a number of restrictive “conditions” on Japan’s development in the field of semiconductors: for example, Japan is required to increase imports of semiconductor products from the United States; Japan is required to reduce exports of semiconductor products to the United States; Japan is required to strengthen the protection of intellectual property rights.
“Despite the negative impact of the Japan-U.S. Semiconductor Agreement, Japanese companies maintained an advantage in the world market in the late 1980s.” Tian Zheng said, “In fact, Japanese companies in the field of semiconductor industry lost their dominant position mainly occurred after the mid-1990s when South Korea and China and Taiwan’s semiconductor companies ‘later to take over the dominant position of Japanese semiconductor companies. “
Tian Zheng believes that it was the signing and implementation of the agreement that had a profound impact on the development of the Japanese semiconductor industry, resulting in the Japanese semiconductor industry in the late 1990s from boom to bust.
He cited examples, such as the numerical targets specified in the agreement affected the fair competition in the market and inhibited the development of Japanese high-tech enterprises. According to the requirements of the agreement, the U.S. semiconductor products at the time to the share of the Japanese market must reach 20%. “In order to reach this target, Japanese high-tech companies continued to increase the use of U.S. semiconductor products in the production process, and there was even a situation that encouraged the use of semiconductor products produced by the United States, a competitor, in preference.” He said.
In addition, the agreement also impacted the Japanese high-tech companies’ investment in equipment, affecting the continuity of their equipment investment, which in turn affected the upgrading of semiconductor products, resulting in Japanese high-tech companies missed the window of the world’s semiconductor market demand shift, resulting in product development lagging behind competitors.
What is the calculation of the United States and Japan each play?
Recently, in the global semiconductor development boom, the Japanese government is also accelerating the layout to catch up in the semiconductor field “lost thirty years”.
In early June last year, the Japanese government announced a new strategy to strengthen semiconductor design, research and development and production, will cooperate with overseas foundries to build new plants to revive the Japanese semiconductor industry. The new strategy also covers the data pooling center, and wants to make Japan the “core base of the semiconductor industry in Asia”.
First financial reporter in Japan’s Ministry of Economy, Trade and Industry (METI) website to see, that the Japanese government will be the future of semiconductor development and ensure food, and water security as important as the “national project” (national project). The then Minister of Economy, Trade and Industry, Hiroshi Kajiyama, said that the technology industry, including semiconductors, is closely related to people’s livelihoods and is not just a private enterprise or a single industry, but a project that must be promoted with national efforts. The Japanese government will seek to “substantially renovate” chip factories that are considered strategically important to support the global supply chain.
For this cooperation, Tianzheng told Firstrade, that Japan has doubts about the current cooperation between Japan and the United States, “the two sides can cooperate, on the one hand, because Japan now in the field of semiconductors can no longer pose a threat to the United States, on the other hand, it also proves that the United States is limited by the international division of labor and national capacity, can not independently complete the semiconductor research and development and production. It remains to be seen whether Japan and the United States will be able to turn the agreement into a win-win, productive outcome for both sides.”
Ensuring a strong U.S. position in the semiconductor sector has been at the heart of the current U.S. Biden administration’s policy agenda. Since taking office as president last January, Biden has prioritized U.S. competitiveness and security in the semiconductor industry. A comprehensive supply chain assessment released last June set out a vision for U.S. “leadership” and “resilience” in the global semiconductor value chain.
In terms of leadership, Tian Zheng explained that, due to the international division of labor, the United States has always monopolized the semiconductor R & D, design and process technology, that is, to occupy the high-end of the value chain; for the low end of the value chain, in recent years, the U.S. government has also increased its efforts to attract investment to attract semiconductor companies to the United States to put into production. So far, TSMC, Intel, Samsung, Ge-core and Texas Instruments have committed to the United States (new) set up factories. For example, in May 2020, TSMC announced an investment of $12 billion to build a 12-inch fab in the U.S., which is expected to go into production in 2024 with a monthly capacity of 20,000 chips, and the plan is underway. in September 2021, Intel announced a $20 billion investment in the U.S. to break ground on two wafer fabrication plants in Arizona. Intel’s latest investment plan may be as high as $100 billion to build a total of eight manufacturing plants in the United States.
Just on July 28, the U.S. Congress after several games passed the “Chip and Science Act” aimed at providing $ 52 billion in subsidies for the U.S. chip manufacturing industry. Previously, a number of U.S. domestic semiconductor companies to pressure Biden, Intel, TSMC and Samsung are investing in the United States to build factories are lobbying hard to pass the bill as soon as possible, looking forward to providing partial funding for new plants. These chip makers have “threatened” that failure to pass the bill will lead to delays in the opening of factories.
In response, a spokesman for the Chinese Ministry of Commerce said at a regular press conference that the bill provides huge subsidies to the U.S. domestic chip industry, which is a typical differential industrial support policy. Some of the provisions restrict the normal economic, trade and investment activities of the enterprises concerned in China, will cause distortion to the global semiconductor supply chain, causing disruption to international trade. China is highly concerned about this. The implementation of the U.S. bill should be consistent with the relevant WTO rules, in line with the principles of openness, transparency and non-discrimination, and conducive to maintaining the security and stability of the global supply chain and avoiding fragmentation. China will continue to pay attention to the progress and implementation of the bill, and take strong measures to safeguard its legitimate rights and interests when necessary.
Data from the World Semiconductor Trade Statistics Organization shows that, by region, the semiconductor market in the Asia-Pacific region (excluding Japan) is expected to grow by 13.9% this year; the Americas are expected to grow by 22.6%; Europe by 20.8%; and Japan by 12.6%.
