As projected, Rapidus Corp, Japan’s state-backed semiconductor chip maker, has started test production of advanced chips on Tuesday, April 1, signifying a major step in the country’s push to reclaim its top spot in global semiconductor chip production. The East Asian country also plans to reduce its reliance on foreign chips as it goes all out on artificial intelligence.
Japan has invested heavily in Rapidus as the company prepares to mass-produce semiconductors in 2027 using 2-nanometer (nm) processes. It would take it to the level of the current world leader in semiconductor chips, Taiwan Semiconductor Manufacturing Company (TSMC).
Japan announced on March 31, 2025, that it would earmark ¥802.5 billion ($5.4 billion) in additional aid for chip startup Rapidus Corp, taking the public funds set aside for the business to ¥1.72 trillion ($11.5 billion). The country is reportedly doing this in a bid to support the push to help the Japanese tech sector gain more ground that it has lost in recent years to other nations such as China, South Korea, and the US.
The step-by-step journey to mass production
Speaking on the work ahead, Atsuyoshi Koike, CEO of Rapidus, said, “It was extraordinarily difficult to develop 2nm technology and the know-how for mass production,” adding that there will be more experimentation in the future as it needs to take things step by step to lower the rates of errors and also secure customer confidence.
Koike mentioned that Rapidus conducted extreme ultraviolet lithography leveraging ASML Holding NV equipment for the first time on April 1, 2025. According to him, the first batch of the test chips should be ready in July, and the company is still on schedule to deliver on its mandate to mass-produce advanced chips.
Geopolitical risks, economic and national security considerations
Increasing fears over the state of Taiwan, the home country of the TSMC, continue to brew with new provocation from China’s claims that Taiwan is part of its territory.
The US administration under Donald Trump has signaled a more isolationist “America First” stance, raising doubts about the extent of US intervention should China escalate its actions against Taiwan.
So, for Japan, finding sustainable domestic alternatives has become an existential concern bordering on economic growth and national security. It’s also a move to avoid being left behind in a market it used to dominate.
Government and private sector backing
In response to the developing situation, the Economy Ministry has pushed for debt guarantees to sweeten the deal so that private sector investors can back Rapidus. The company is also backed by Toyota Motor, Sony Group and Softbank.
In the 1980s through the early 90s, Japan controlled over 50% of the world’s market for microchips with local companies such as Toshiba and NEC taking the lead. Today, it accounts for roughly 10% of the market for semiconductor chip design and production with Taiwan and China taking the lead.
While it’s currently playing catch-up in the advanced chip-making industry, Japan is still the market leader in terms of chip-making equipment and materials, such as silicon wafers, which are essential for manufacturing semiconductors, integrated circuits, and microchips.
Rapidus Chairman Tetsuro Higashi has described the company’s mission as Japan’s “last opportunity” to restore its semiconductor industry to global prominence.
Opportunities and challenges ahead
Semiconductors are at the heart of modern electronics, powering everything from mobile phones to cars. With new applications in the AI space, chip makers have become the jewel of the industry, with makers such as TSMC and GPU makers such as NVIDIA making enormous amounts of revenue and a glaring potential for more. As global demand surges, securing a competitive foothold in the chip-making industry has become an economic imperative.
Leading the global market also means being watched and converted by powerful nations, and that’s where TSMC finds itself, given its location in Taiwan. The company is now hedging its bets by diversifying production beyond Taiwan.
It opened a new chip-making factory valued at $8.6 billion in southern Japan last year and is reportedly planning to open a second one to develop more advanced chips in the country, a move others have pointed out as a bit to diversify its production away from Taiwan in consideration for the possibility of a Chinese invasion. This move also aligns with Japan’s strategic ambitions in the semiconductor sector.
However, some experts believe that despite the billions of dollars pouring into the sector, especially towards Rapidus’ direction, a large-scale launch of 2nm chip production in 2027 may be a long shot. For one, there’s no urgent need for engineers to overcome the steep learning curve of the latest ASML machines before skipping to making state-of-the-art semiconductors, as most engineers are just learning to use these machines for the first time.
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