Japanese task force to bolster nation's chip supply

Control semiconductors, control the world

Japan's ruling Liberal Democratic Party (LDP) is launching a new chip task force, aiming to secure the nation's semiconductor supply and strengthen the domestic chip industry, amid the global chip shortage.

Nikkei says Akira Amari, the head of LDP's tax commission and a former minister of economic policy, will chair the new group. Former Prime Minister Shinzo Abe and current Finance Minister Taro Aso will also act as senior advisers.

The task force's main responsibility will be to work with the USA and other allies to build stronger chip supply chains. The group will also discuss establishing a new fund to foster domestic talent and promote semiconductor research in Japan.

The group is expected to submit recommendations this autumn for the fiscal 2022 draft budget.

"It is not an exaggeration to say that those who control semiconductors will control the world," Amari said last week.

Local reports indicate that the Japanese government plans to raise spending as part of this year's draft growth blueprint, in an effort to boost production of advanced chips and batteries in the country.

Under the draft strategy, which is set to be approved as early as June, the government will likely expand the existing ¥200 billion (about £1.3 billion) fund to support the local chipmaking industry, and to boost advanced semiconductor production.

The growth blueprint calls for the government to hold a 40 per cent global stake in next-gen power semiconductors by the end of the decade.

Local reaction to a global problem

Many industries are now suffering from the global chip shortage, which analysts believe could last until next year - or longer.

A variety of factors have affected chip supply, including the Covid-19 pandemic, a drought in Taiwan and a blaze at a semiconductor factory in Japan.

Japanese automakers have been especially hard-hit. Toyota said this week that it is suspending production at two of its factories in Japan because of shortage of an essential component. The shutdown is expected to affect the production of nearly 20,000 vehicles.

According to media reports, Nissan is also expected to lower output targets by about 250,000 units for the current fiscal year, and Subaru has been forced to stop production at a plant in Gunma Prefecture, as well as another in the USA.

The Japanese government's plan to establish a chip task force comes about a week after South Korea said that it would offer tax incentives and loans to local chipmakers, in an effort to boost the country's non-memory chip industry and to tackle the global shortage of automotive chips.

South Korea is a home to Samsung Electronics and SK Hynix, the largest memory chipmakers in the world, which account for around 20 per cent of the country's outbound shipments.

According to the South Korea's Ministry of Trade, Industry and Energy, the government is planning to increase tax incentives from the current 3 per cent (or lower) to 6 per cent for capital expenditures between the second half of 2021 and 2024.

The aim is to encourage local semiconductor industry to invest a total of ₩510 trillion (£320 billion) in research and facilities by 2030. The benefits will be offered to companies developing 'key strategic technology', including semiconductors.

The government is also planning to offer ₩1 trillion (£630 million) in loans to local chip firms.