Could a little league baseball team win the World Series in five years? Japan’s state-backed chip start-up Rapidus has a similarly long-shot ambition. In a country that currently produces 40-nanometer semiconductors, the two-year-old venture has the goal of leapfrogging generations of innovation and producing bleeding-edge 2-nanometer chips in 2027.
It would be easy to use a collection of data points to string together an argument that its efforts are preposterous. However, in shooting for the moon, Rapidus has reinvigorated Japan’s public and private sectors to cooperate in a way not seen for generations — and over a strategically critical national security goal. This makes the start-up’s success a matter of collective national pride and a reason to be bullish that it can pull it off.
A shortage of these crucial components during the COVID-19 pandemic highlighted the importance of semiconductor manufacturing to the global economy. Rising geopolitical tensions, particularly China’s posturing toward chip-producing powerhouse Taiwan, has made onshoring a national security imperative from Washington to Tokyo. This led to a coalition of eight Japanese firms, with government support, to launch Rapidus in 2022 with the goal of restoring the country’s tech glory.
Once home to more than 50 percent of the global semiconductor manufacturing industry in the 1980s, Japan now accounts for 10 percent. It did not pivot to more-advanced production during the PC era in the 1990s, putting its current outputs technologically behind rivals by roughly one decade. More recently, the explosive growth of the artificial intelligence sector and the ensuing data center boom has driven an insatiable demand for the most-advanced chips.
This all propels a new sense of urgency for Rapidus to meet the moment. The phrase “last chance” has been tossed around by many stakeholders — including company chairman Tetsuro Higashi, the Japanese government and even the general manager from Kajima Corp who is overseeing the construction of its Hokkaido factory.
Kajima is one of Rapidus’ secret weapons. It did not pause work for a single day through the brutal winter in Japan’s snowy northern island and has contingency plans for virtually every scenario to ensure construction meets deadlines. Kajima has quietly lead the development of at least 10 chip plants over the past decade, including the high-profile Taiwan Semiconductor Manufacturing Co fab in Kyushu that stands in stark contrast with the company’s delayed factory being constructed in the US.
A significant question looming over Rapidus’ ambitions is if it can attract customers. Firms might be hesitant to place orders with an unproven start-up. However, the coalition of companies behind its launch — including Sony Group Corp and Toyota Motor Corp — could also be its first clients. Moreover, revenue from semiconductors for data centers is projected to grow 12 percent per year through 2030. Some of the world’s biggest data center providers, such as Japan titan KDDI Corp and US-based Amazon Web Services, are expanding in Japan. Rapidus set up a sales outpost in the Silicon Valley area earlier this year, and a weak yen has made doing business in Japan more attractive for potential customers.
Still, the start-up would need to be able to mass produce the state-of-the-art chips it is promising, a major feat in itself. However, it is partnering with IBM Corp, which was the first company in the world to develop 2-nanometer semiconductor technology. It also has research-and-development support from Belgium’s Interuniversity Microelectronics Centre.
Perhaps the biggest anticipated hurdle for Rapidus is a talent shortage in Japan that developed as chipmaking moved away from the country. This issue is expected to be exacerbated by a broader shrinking workforce. Some government estimates put the shortfall of semiconductor engineers to be as high as 40,000 over the next decade. Policymakers should help by attracting foreign workers to the sector, and streamlining the visa and immigration process for this critical talent.
Rapidus is collaborating with higher education institutes, such as Hokkaido University, on training. However, the government should expand these efforts to start recruiting even younger students and encourage high schools to include lessons on the importance of domestic chip development for national security reasons.
Japanese have shown a tendency to pull together in times of crisis. If students can be attracted to careers in this industry by recognizing the high stakes, this can help provide more skilled workers in the long-run.
It is also making up for a lack of people in its semiconductor ecosystem with a raft of other critical components. Japanese firms hold a remarkable market share on many of the materials required for chip production — another factor that gives the nation an advantage compared with efforts to onshore manufacturing in Europe or the US.
Taiwan, the global leader, was able to achieve this through decades of cooperation between government, companies, research institutions and universities. Together, they mastered technological knowledge and dispersed it throughout the supply chain. Japan should learn from its neighbor’s success.
Rapidus’ efforts are a moonshot, but just because something looks incredibly hard does not mean it is not worth trying, and by aiming high, it at least ensures Japan would not fall further behind. For this young start-up, even being able to compete globally with big league players would be a win.
Catherine Thorbecke is a Bloomberg Opinion columnist covering Asia tech. Previously, she was a tech reporter at CNN and ABC News.
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