In boost for semiconductor ambitions, Japan approves US$1.3 billion in subsidies for US chip firm Micron’s plant in Hiroshima

Japan’s government approved as much as ¥192 billion (US$1.3 billion) in subsidies for Micron Technology’s Hiroshima chip factory, part of Tokyo’s efforts to bolster next-generation semiconductor production at home.

The subsidies will help the Boise, Idaho-based company install Dutch firm ASML Holding’s extreme ultraviolet lithography equipment to make advanced chips, Economy, Trade and Industry Minister Yasutoshi Nishimura said on Tuesday.

Such chips will be essential to power generative artificial intelligence, data centres and self-driving technology, he said. The support covers almost 40 per cent of Micron’s investment plans in Japan.

“The market is rough now, but it’s essential that we invest in times like these,” Nishimura said at a regular news conference, referring to an industrywide slump that has weighed on Micron’s earnings. “This is to secure a supply of cutting-edge chips that Japan will need for its future economic security.”

Japan’s Minister of Economy, Trade and Industry Yasutoshi Nishimura speaks to the Centre of Strategic and International Studies, regarding Japan’s 2023 G7 priorities, on January 5, 2023, in Washington. Photo: AP

The approval marks a win for Micron as it grapples with uncertainty in China, one of its largest markets.

A bipartisan group of US senators hopes to meet Chinese President Xi Jinping next week in the country, where the company faces an ongoing inquiry by regulators. Micron has said the investigation put half of its China sales at risk.

Tokyo has set aside a maximum ¥167 billion to help cover Micron’s production costs and as much as ¥25 billion for development costs, Nishimura said. Micron has said it plans to spend about ¥500 billion and produce what it calls one-gamma technology in Japan.

The government was preparing subsidies of around ¥200 billion for Micron’s Hiroshima factory, Bloomberg previously reported.

A plant operated by Micron Memory Japan KK, a subsidiary of US memory chip maker Micron Technology, in Higashihiroshima, a city in Hiroshima Prefecture, is seen on May 22, 2023. Japan will subsidise Micron’s push to produce its new advanced chips in Hiroshima. Photo: Bloomberg

Tokyo’s support comes as similar efforts by the US to bolster domestic chip production are getting stymied by labour issues and slow delivery of promised funding.

The world’s biggest contract chip maker, Taiwan Semiconductor Manufacturing Co (TSMC) said in July that it was delaying the start of production at its planned Arizona factory to 2025.

Construction at a TSMC plant in southern Japan has been proceeding relatively smoothly through round-the-clock shifts and a government pledge to pay for almost half the cost.

Prime Minister Fumio Kishida’s administration has earmarked billions of dollars in subsidies in a bid to triple domestic production of chips by 2030 and help an ageing Japan regain some of its former leadership in technology.

TSMC puts hopes in Japan chip plant as US project disappoints

Tokyo is in talks about support for a second TSMC plant in Japan, and it is funding home-grown Rapidus Corp to make the country’s own cutting-edge chips.|

Micron, which bought former Japanese DRAM maker Elpida Memory’s operations in 2013, said it employs more than 4,000 engineers and technicians in Japan.

“If there are good jobs, young people will stay closer to home and create positive ripple effects for the regional economy,” Nishimura said. “We hope this will also help nurture chip-related talent.”