(Feb 6): Taiwan Semiconductor Manufacturing Co (TSMC) is expanding its output in Japan, with plans to build a second chip fabrication plant, a major victory for Prime Minister Fumio Kishida, as his government seeks to boost domestic chip production.

The world’s largest contract chipmaker said that Toyoto Motor Corp will also be joining as a new investor of Japan Advanced Semiconductor Manufacturing Inc (JASM), TSMC’s majority-owned manufacturing subsidiary in Kumamoto. The TSMC board approved an injection of no more than US$5.26 billion (RM25.07 billion) in JASM, though it was not immediately clear how those funds would be used.

The facility will be close to the first TSMC plant in Kumamoto in southwestern Japan. TSMC said in a statement on Tuesday that it would be adding six- to seven-nanometre (nm) process technology, advancing the technology produced on that campus.

The second chip factory, also known as a fab, is scheduled to begin operation by the end of the 2027. Together with JASM’s first fab, the overall investment will exceed US$20 billion with “strong support from the Japanese government”, the Hsinchu, Taiwan-based company said. TSMC is already considering a third Japanese factory using the even more advanced 3nm tech, Bloomberg has reported.

TSMC said the two factories in the Kumamoto site will have a total monthly production capacity of more than 100,000 12-inch wafers, and create over 3,400 high-tech jobs.

Major countries around the world, including the US, Japan and Germany, have been racing to build a comprehensive semiconductor supply chain at home following a chip shortage during the pandemic to avoid future disruptions to economy.

Japan’s Economy Ministry is preparing some ¥2 trillion (US$13 billion or RM64.15 billion) in subsidies to drive chip investments in a bid to regain its status as a major semiconductor power, with TSMC already having received some grants.

The Taiwanese chipmaker’s first plant in Kumamoto is partly funded by Sony Group Corp and Denso Corp. It uses technology as advanced as 12nm with mass production set to start in late 2024. With the latest investment, TSMC, Sony, Denso and Toyota will each hold about 86.5%, 6%, 5.5%, and 2% of JASM respectively.

TSMC is also building two advanced facilities in Arizona, but the US project has been delayed on labour and cost challenges. Meanwhile, TSMC and Taiwanese government officials have repeatedly said the Japan site is progressing smoothly. TSMC’s board on Tuesday also approved a capital injection of no more than US$5 billion in its wholly-owned subsidiary in Arizona.

The Taiwanese firm has also announced plans for a plant in Germany.