Japan is preparing to allocate nearly ¥2 trillion ($13.3 billion) in an additional budget aimed at bolstering the country's semiconductor manufacturing and securing capabilities. According to government officials familiar with the matter, approximately ¥760 billion is earmarked for a fund that will support the mass production of chips, potentially facilitating the establishment of a second Taiwan Semiconductor Manufacturing Co. (TSMC) facility in Kumamoto, southwestern Japan. Another ¥640 billion will be allocated to a separate fund to advance research in cutting-edge chip technology, potentially benefiting Japan's domestic chip venture, Rapidus Corp. Additionally, about ¥570 billion will be assigned to a distinct fund focused on enhancing the stable supply of chips to Japan.

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These figures are subject to finalization upon the cabinet's approval of the extra budget, which is anticipated to take place on Friday. The extra budget, intended for the fiscal year ending in March, will contribute to covering expenses for the recent economic stimulus package. Prime Minister Fumio Kishida aims to alleviate the economic impact of inflation, as public support for his administration has declined amid escalating living costs.

Japan is currently in the process of substantially investing in its semiconductor industry with the objective of tripling the sales of domestically produced semiconductors to over ¥15 trillion by 2030. Semiconductor manufacturing has emerged as a critical aspect of economic security, particularly due to the role these devices will play in driving future growth through applications such as electric vehicles, artificial intelligence, and advancements in weapons technology. Against the backdrop of increasing geopolitical tensions, nations are actively competing to fortify and expand their supply chains, collaborating with allies to develop cutting-edge chips through export controls and subsidies.

Notable commitments made by Japan toward the semiconductor industry include ¥476 billion for the first TSMC plant in Kumamoto, slated to commence production in late 2024, and ¥330 billion for Rapidus, aiming to commence mass production of 2-nanometer logic chips by 2027 in northern Hokkaido.