Japan still has more semiconductor factories than any other country in the world. Problem is, most of them are no longer cutting-edge.
That dreary self-assessment, along with a global chip shortage that could crimp Japanese auto production, is the reason the government is planning to ramp up research and development funding for the industry, according to a draft of the nation’s latest growth strategy released this week.
Japan in the 1980s was the world’s biggest maker of microchips but it’s ceded most of that business to South Korea and Taiwan. Only Sony remains as a leading maker of image sensors, although many less well-known firms are still key suppliers of the tools, chemicals and other components needed to make chips.
Read More: Korea Unveils $450 Billion Push for Global Chipmaking Crown
The latest growth plan, which follow similar moves to boost homegrown semiconductors in the U.S. and China, doesn’t say how much public money Japan will invest to reboot its chip industry, but it does make a powerful case that more spending might be needed. Here are the main points:
- Japan’s share of global semiconductor sales dwindled to just 10% in 2019, down from 50% in 1988
- The country still has 84 chip factories, the most in the world, but they’re not producing enough high-end products
- As a result, Japan now has to import 64% of its semiconductors
- The country makes no chips with the most sophisticated, sub-10-nanometer circuitry — Taiwan and South Korea dominate that market
So far, deft inventory management by Toyota in particular has helped Japan’s auto industry avoid the kind of factory stoppages seen at General Motors or Stellantis.
But economists Naohiko Baba, Tomohiro Ota and Yuriko Tanaka at Goldman Sachs see the potential for trouble in coming months, if delays in supplies of high-end semiconductors from Taiwan persist after stockpiles have rundown.
—Yoshiaki Nohara in Tokyo
Global trade indicators are soaring as supply rushes to keep up with demand, throwing some exporters a lifeline as they battle resurgences of the coronavirus. Eight of 10 indicators on the Bloomberg Trade Tracker are cruising above their long-run averages. Exports in most Asia-Pacific economies already far exceed pre-pandemic levels. A particular bright spot is South Korea, a bellwether for global goods trade, where another surge in shipments during May bodes well for ongoing strength.
Today’s Must Reads
- Green belt | The European Union is planning to slap an import levy on steel, cement and aluminum produced in countries with lower environmental standards. Separately, the bloc is set to roll out a first round of restrictions restrictions on Belarus this week that may include a ban on Belarusian carriers from flying over European airspace.
- Port congestion | The world’s shipping carriers are avoiding a key port in China hit by a Covid-19 outbreak, causing increased congestion at other seaports across the country that likely will delay the delivery of goods to the U.S. and Europe.
- Transatlantic tariffs | The U.S. imposed but immediately delayed the implementation of tariffs in retaliation for duties that six nations placed on internet companies, allowing time for broader international negotiations on taxes.
- Stephanomics podcast | On this week’s episode, host Stephanie Flanders talks with Canada Finance Minister Chrystia Freeland, a former trade negotiator and rising star in Canadian politics seen as a potential successor to Prime Minister Justin Trudeau.
- China strategy | President Joe Biden plans to amend a U.S. ban on investments in companies linked to China’s military this week, after the Trump-era policy was challenged in court and left investors confused about the extent of its reach to subsidiary firms.
- La La land | Ship congestion outside the busiest U.S. gateway for trade eased over the Memorial Day weekend, as the number of container vessels queuing off the coast of Los Angeles fell to the lowest level since November.
On the Bloomberg Terminal
- Rising tide | The Drewry Hong Kong-Los Angeles container-rate benchmark rose to $6,473 per 40-foot container in the week ended June 2. Rates will likely continue to find support from tight market conditions, recovering economies, U.S. stimulus measures, limited available containers and port congestion, according to Bloomberg Intelligence.
- U.S. shortages | The Fed’s Beige Book showed supply shortages failing to dent optimism on the outlook, according to Bloomberg Economics, which also modeled how the “inflation genie” could disrupt Bank of England policy.
- Use the AHOY function to track global commodities trade flows.
- Click HERE for automated stories about supply chains.
- See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
- Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.
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— With assistance by Zoe Schneeweiss