Why Kumamoto in Kyushu?
TSMC’s Japanese subsidiary, JASM, has built a semiconductor manufacturing plant in Kikuyo Town, Kumamoto Prefecture, which began operations in December 2024. This development has sparked increased investments in semiconductor-related infrastructure not only in Kumamoto but throughout Kyushu, fueling expectations for industry growth.
TSMC chose Kumamoto due to several key factors: lower electricity costs, abundant groundwater, and the existing semiconductor supply chain, including Sony Semiconductor Manufacturing and Tokyo Electron. Sony’s strong presence in CMOS image sensor design, development, and production provided a significant advantage for JASM, which manufactures logic semiconductors, enabling synergies within the supply chain.
Historically, Kyushu was known as "Silicon Island" due to its advanced semiconductor industry, but it experienced a decline along with Japan’s broader semiconductor downturn. However, recent successes in CMOS sensors, driven by Sony, and the increasing demand for power semiconductors for electric vehicles (EVs) and industrial robots have revived interest in Kyushu’s semiconductor industry.
To maximize the impact of TSMC’s investment, Kyushu needs to strengthen its semiconductor component, material, and manufacturing equipment industries. Currently, JASM follows the "Copy Exactly" principle, which limits local procurement. Without policy support, the regional economic benefits may remain limited. Therefore, fostering a local supply chain that can provide raw materials and components essential to JASM’s operations is critical.
In response, semiconductor equipment manufacturers in Kumamoto are expanding production lines, while component and material suppliers are setting up logistics hubs. These developments encourage greater industrial clustering, enhancing the regional economic cycle. To support this, local governments and financial institutions should collaborate to strengthen existing companies and attract new businesses.
With TSMC’s announcement of a second plant, further investments in semiconductor supply chains are expected. In the long run, component and material suppliers may evolve from logistics hubs to manufacturing bases. To prepare for this shift, infrastructure improvements—including expanding industrial zones, upgrading transportation networks, and managing groundwater resources—must be addressed.
Lessons from Taiwan: Building a Semiconductor Ecosystem
Kyushu should look to Taiwan as a model for developing its semiconductor ecosystem. Since the 1980s, Taiwan has fostered its semiconductor industry through institutions like ITRI and the Hsinchu Science Park. Government support helped companies like TSMC and UMC grow by establishing research institutions, attracting global talent, and creating industrial clusters.
To replicate this success, Kyushu needs to:
- Develop semiconductor manufacturing equipment, materials, and back-end processing technologies.
- Promote startup creation based on R&D outcomes.
- Establish an industrial cluster similar to Hsinchu Science Park to provide a structured growth platform.
- Leverage the capabilities of local universities, research institutions, and companies to build a robust ecosystem.
By following this approach, Kyushu can revitalize its semiconductor industry and achieve sustainable industrial growth.
Japan’s Rapid Push: Reviving the Semiconductor Industry
At the end of January 2025, JASM President Yuichi Horita reported to the Japanese Prime Minister that the production yield at TSMC’s Kumamoto plant was on par with Taiwan’s facilities. This suggests that Japan’s semiconductor manufacturing capabilities are now operating at a competitive level.
JASM aims to increase its local procurement rate in Japan to over 60% by 2030. As of February 2024, it had already established partnerships with more than 140 Japanese companies. The company plans to further expand local sourcing to strengthen Japan’s semiconductor ecosystem.
The Japanese government is also actively supporting semiconductor investments. The Kyushu Economic Federation has called for infrastructure improvements (roads and railways) and workforce development to support the industry. In response, the government is set to propose legislation facilitating a ¥50 trillion ($340 billion) public-private investment initiative in AI and semiconductors.
The Story Behind TSMC’s Kumamoto Plant Construction: Delta Electronics’ Key Role
TSMC’s Kumamoto plant held its opening ceremony in December 2024 and has begun mass production. Construction of a second plant on an adjacent site has also commenced, with operations expected to begin in 2027. TSMC’s entry into Kumamoto has spurred investments in semiconductor-related industries across the Kyushu region.
Differences in Project Execution Between Japan and Taiwan
Building a semiconductor plant involves multiple stakeholders, including semiconductor firms, general contractors, and subcontractors. When a Taiwanese company like TSMC is the lead developer, Taiwanese construction firms often participate in the overseas project, requiring close collaboration between different business cultures.
Japan typically follows a highly structured approach to project management, emphasizing detailed planning and strict adherence to schedules. In contrast, Taiwan’s approach is more flexible, with adaptability playing a key role in execution. Successful coordination of these differing management styles requires a "conductor" to harmonize the process, a role played by Taiwan’s Delta Electronics in the Kumamoto project.
Delta Electronics’ Role in Coordination
Founded in 1971, Delta Electronics is a power electronics manufacturer that expanded into Japan in 1991. Beyond component manufacturing, it provides solutions in industrial and building automation, ICT equipment, and more. For the Kyushu semiconductor project, Delta handled electrical and piping work for production lines, supplied UPS systems, and installed security and monitoring equipment, while also serving as the primary coordinator.
Delta’s extensive experience in Japan allowed it to bridge the gap between Japanese and Taiwanese project management styles. Its deep understanding of both business cultures made it uniquely suited for this role, as few companies possess the expertise to seamlessly navigate the differences.
Semiconductor Industry and AI Infrastructure
At SEMICON JAPAN 2024 in Tokyo, Delta Electronics presented the Kumamoto project as a case study in project management differences between Japan and Taiwan. Shigeyoshi Hiramatsu, Vice President of Delta’s Japan operations, noted that "Japanese firms typically allocate 80% of their efforts to planning and 20% to adjustments, whereas Taiwanese firms reverse this ratio, focusing 20% on planning and 80% on flexibility." Delta combines the strengths of both approaches to deliver optimal solutions.
In the AI era, Delta is also expanding into data center (DC) infrastructure, which is critical for supporting AI deployment. The company specializes in containerized data centers, a modular approach that significantly reduces construction time compared to traditional data centers.
Delta’s containerized data centers integrate key equipment into a 20-foot container, allowing transport by standard trucks. Traditional data center construction takes at least 18 months, whereas Delta’s solution can be deployed within weeks or months. With over 200 global installations, this approach offers superior scalability and flexibility.
What is Rapidus Doing?
Rapidus is a government-backed semiconductor venture established to rebuild Japan’s advanced semiconductor manufacturing capabilities. The Ministry of Economy, Trade, and Industry (METI) initiated the project to strengthen Japan’s semiconductor industry beyond foreign investments, emphasizing domestic manufacturing capabilities.
Founded in 2022, Rapidus is backed by Toyota, Denso, Sony Group, Kioxia, NEC, NTT, SoftBank, and Mitsubishi UFJ Bank, which collectively invested ¥7.3 billion ($50 million). However, constructing an advanced semiconductor plant requires substantial funding—over ¥500 billion ($3.4 billion) per production line. The Japanese government has been supporting Rapidus through subsidies rather than direct investment.
Government Support and Funding Challenges
In 2022, Rapidus secured ¥70 billion ($470 million) in subsidies under NEDO’s Post-5G ICT Infrastructure Enhancement Project. In subsequent years, the company received additional funding: ¥330 billion ($2.2 billion) in 2023 and ¥590 billion ($4 billion) in 2024, totaling ¥920 billion ($6.2 billion). However, the cost of completing a cutting-edge 2nm semiconductor fab is estimated at ¥5 trillion ($34 billion), necessitating further capital infusions.
Critics have questioned the effectiveness of Japan’s strategy, noting that while semiconductor firms worldwide receive government support, few are entirely government-led. For Rapidus to be competitive, it must attract private investment and develop proprietary technologies.
Despite challenges, Rapidus has rekindled interest in Japan’s semiconductor industry and encouraged domestic firms to expand production. However, the venture faces an uphill battle in securing long-term sustainability and establishing itself as a global semiconductor leader. Its success will depend on sustained support, innovation, and strategic partnerships in the years ahead.
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