Supply Chains Latest: Japan’s Plan to Reboot Aging Chip Industry.

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.

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