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The Taiwan Semiconductor Manufacturing Company logo is pictured at the company’s headquarters in Hsinchu, Taiwan. (EPA/Yonhap News)

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest foundry semiconductor maker, is considering broadening its production base into Japan.

Analysts read this move as reflecting a confluence of interests between TSMC, which needs Japan’s world-leading materials and equipment technology to produce state-of-the-art semiconductors, and Japan, which aspires to rebuild a semiconductor industry that has become crucial for technological dominance.

The Nikkei newspaper recently reported that TSMC was considering plans to build a new semiconductor plant in Kumamoto Prefecture on the Japanese island of Kyushu.

The plant would reportedly be responsible for 16-nanometer and 28-nanometer processes, with the apparent aim of mainly producing image sensors and vehicle semiconductors, which have recently been in short supply.

Kumamoto Prefecture is also home to a factory operated by Sony, one of TSMC’s biggest customers.

This would not be the first time TSMC joined forces with Japan. In February, the company announced that it was building a semiconductor technology development institute in Tsukuba, a city in Japan’s Ibaraki Prefecture. The Japanese government plans to provide around 19 billion yen in subsidies for the facility.

TSMC has also maintained cooperative relationships with Japan, including ongoing joint semiconductor research with the University of Tokyo.

As recently as the late 1980s, Japan’s semiconductor industry accounted for a share of over 50 percent of the global market. Since the 1990s, however, it has been steadily declining.

Now the Japanese government is pursuing policies aimed at shielding its industries from the “weaponization of semiconductors.” This included the May 4 announcement of a “new strategy for strengthening the base for semiconductors and other digital industries.”

The latest announcement similarly included content related to semiconductor industry support, with the aim of attracting overseas foundry businesses.

TSMC had previously focused more on packaging process development through local institutes than on building new factories — an approach that is unlikely to be profitable in the short term. Analysts suggested that it may have revised its strategy in response to the aggressive support from the Japanese government.

Park Jeong-kyu, an adjunct professor of mechanical engineering at Hanyang University, said, “While there will also be assistance in terms of subsidies, it’s a win-win for both TSMC and Japan [which wants to attract foundry businesses] if TSMC can produce the semiconductors it wants using technology from Sony, which ranks first in the image sensor market. So I gather there were proposals to that effect.”

Image sensors have been an area of growing importance recently, with applications in around view monitoring and the digital side mirrors used in certain electric vehicle models.

TSMC’s swift overseas investment plans stand to create headaches for its rival Samsung Electronics.

In the wake of a South Korea-US summit last month, Samsung Electronics announced plans for US$17 billion in foundry investment in the US, although the specifics in terms of the timeline and regions have yet to be decided.

From Samsung Electronics’ standpoint, the new US foundry investment has the advantage of strengthening relationships with major customers. But it also carries the risk of saddling the company with three to four years of losses if it can’t secure timely orders once the factory construction is completed.

The states of Texas, Arizona, and New York are currently being mentioned as prospective sites, but the company is obliged to remain cautious in its negotiations with the state governments in the hopes of gaining as much in subsidies as possible.

“There’s said to be a foundry shortage right now [due to semiconductor supply issues], but once the foundry investment plans that countries have recently been announcing come to fruition and the factories have all been built, there’s clearly going to be a glut,” said Kim Yang-paeng, a researcher at the Korea Institute for Industrial Economics and Trade.

“It’s been reported that Samsung has already acquired a site near its factory in Austin, but it appears to be coordinating in terms of the region, with an eye toward the amount of subsidy support from the state government,” he added.

By Sun Dam-eun, staff reporter

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