Foreign investment in Japan's semiconductor industry has reached $37 billion, marking a sharp shift in the nation's industrial policy. The capital targets logic chips, memory chips and image sensors, drawing major global manufacturers back to a country that once dominated the sector.
Japan's semiconductor industry held over 50 percent of world production at the end of the 1980s. That share fell to 9 percent by 2022, with the industry trailing global technological leaders by an estimated 10 years, according to a report by Sujai Shivakumar, Charles Wessner and Thomas Howell.
Policymakers in Tokyo responded with new industrial policies that allow major foreign-owned manufacturing facilities and emphasize collaboration with international partners—a departure from postwar practices that restricted foreign investment.
Japan enacted the Economic Security Promotion Act in May 2022. The legislation bundled four separate laws and directed Japanese companies to weigh economic security in their decision-making, providing a legal framework for reducing strategic risk in critical supply chains.
The United States and Japan established the Japan-U.S. Commercial and Industrial Partnership on May 4, 2022, agreeing on basic principles for semiconductor cooperation to build a more resilient supply chain. A joint task force for developing next-generation semiconductors launched at a U.S.-Japan summit on May 23, 2022. The U.S.-Japan Economic Policy Committee agreed in July 2022 to pursue joint research and development in key technologies, and Japan announced the Leading-Edge Semiconductor Technology Center, a public research organization modeled after the U.S. National Semiconductor Technology Center.
Taiwan Semiconductor Manufacturing Co. leads the foreign investment with a planned $23 billion logic chip fab campus in Kumamoto. TSMC started production at its first Kumamoto fab in December 2024; a second fab is scheduled to come online in the second half of 2025.
Micron Technology received a $3.63 billion subsidy for expanding its Hiroshima facilities. Samsung is constructing an R&D center in Yokohama. Sony also participates in the investment push, which includes image sensor production.
The Japanese government has backed these projects with substantial subsidies. It provided 476 billion yen, or $3.5 billion, to one foreign manufacturer, according to Nikkei, representing one of the largest subsidies Tokyo has extended to a foreign company.
The current agreements differ from U.S.-Japan accords of previous decades that produced little practical impact. Both governments now treat semiconductor vulnerabilities as an urgent priority, driven by China's growing assertiveness and supply chain disruptions exposed during the Covid-19 pandemic.
Policymakers in both countries have concluded that neither can pursue advanced chipmaking alone. The goal is to reduce strategic risk and ensure supply chain stability for critical components.
The capital commitments by these foreign companies reflect long-term strategic positioning. Building fabs and R&D centers requires heavy upfront investment, with companies seeking both diversified supply chains and access to government incentives.
