Japan Proposes $65 Billion Boost to Revive Domestic Chip Industry

Japan is preparing a major industrial package that would commit roughly $65 billion in government support to revive domestic semiconductor production, a government draft reviewed by Reuters and carried by StreetInsider shows. The document, which outlines steps to be presented for cabinet approval, aims to strengthen advanced foundry capacity and shore up related supply chains that have eroded over decades of offshoring.

Central elements of the draft include targeted support for Rapidus and other domestic semiconductor ventures, measures to accelerate advanced foundry capacity, and plans for collaboration with global research institutions and private partners. The proposals form part of a wider economic blueprint that calls for about 50 trillion yen of combined public and private investment in chips over the next decade, according to the draft. Officials say the plan is intended to boost mass production of cutting edge chips in Japan and to spur domestic wage growth as part of a broader economic agenda.

The package represents an intensification of industrial policy that follows years of international competition to secure semiconductor supply chains. Governments around the world have in recent years welcomed semiconductor manufacturing investments as a matter of industrial competitiveness and national security. For Japan, the push reflects both economic and strategic calculations. Rebuilding a domestic ecosystem for advanced chips requires not only capital but also skilled engineers, extensive R and D, and long lead times for factory construction and process development.

Industry analysts caution that moving from financial commitments to commercial scale production will be challenging. Building foundries that can produce cutting edge chips demands vast upfront investment, reliable supplies of specialized materials, and stable electricity and water resources. It also requires sustained cooperation between government, universities, research institutes, and private firms to close gaps in tooling, design software, and workforce training. The draft’s emphasis on collaborations with global research bodies signals an awareness that domestic efforts will need international partners to accelerate technology transfer and innovation.

The economic rationale in the draft combines supply chain resilience with a goal of broader domestic revitalization. Officials frame semiconductor investment as a lever to stimulate high quality manufacturing jobs and higher wages, addressing long standing concerns about stagnating incomes. If private firms match government pledges, the combined investment envisioned over the coming decade could reshape Japan’s industrial landscape and revive related sectors such as equipment manufacturing and advanced materials.

Risks are substantial. Public subsidies can be costly if projects fail to reach commercial viability, and there is no guarantee that market demand will translate into profitable domestic production. Political scrutiny over allocation of funds and the need to ensure transparent, performance based support will be important as the plan moves toward formal approval. With the draft now public through Reuters and StreetInsider, attention will turn to how the cabinet refines the package and whether private industry will commit at the scale policymakers hope.