US and Japan may collaborate on advanced chips larger than 2nm

Why is it important: Relations between the US and China have continued to deteriorate over the past two years as both countries seek to create a stronger domestic supply chain for cutting-edge chips. Japan has a unique opportunity to accelerate its semiconductor industry and wants to work more closely with the US.

We learned last year that Japan wants to revive its once-dominant semiconductor industry, which produced less than 50 percent of the world’s chips in 1990 and is less than 10 percent today. There are 84 chip factories in Japan, but many of them use outdated manufacturing processes and need costly retooling.

The Japanese government has made it a priority to encourage private investment in this area. Like others, his efforts are born out of fears that the fragile supply chain, which is mainly centered around China, Taiwan and Southeast Asia, poses a threat to his national security. As a result, Japanese regulators are working to subsidize the construction of new factories, provide tax incentives, and develop a new framework to encourage technology transfer.

According to the Nikkei reportJapan is also seeking a closer partnership with the US in building a more resilient supply chain for advanced chips. This week, Japan’s Economy, Trade and Industry Minister Koichi Hagiuda met with Commerce Minister Gina Raimondo to discuss cooperation efforts that will involve chipsets and process technologies larger than 2nm. Intel plans to achieve this by the end of 2024, while Samsung and TSMC plan to begin mass production of 2nm chips in 2025.

As noted by the Japanese publication, Japan has much to offer partnerships, with the exception of advanced ASML lithographic machines. This includes a number of indispensable suppliers of essential materials and tools needed in the chip manufacturing process.

For example, Sumco Corp. and Disco Corp. specialize in silicon wafers, and Lasertec Corp. is the world’s only supplier of equipment for the verification of Extreme Ultraviolet (EUV) lithography masks and stencils for advanced chip designs. Ushio Inc. manufactures the powerful, ultra-precise light sources needed to inspect chipping tools and resulting chips for tiny flaws.

Few have heard of JSR Corp., Tokyo Ohka Kogyo Co. or Shin-Etsu Chemical Co., but they produce the necessary ingredients for the production of chips and displays, such as hydrogen fluoride, fluorinated polyamide and photoresists. Japanese companies supply about 50 percent materials for the production of microcircuits in the world and around 30 percent necessary production equipment.

The idea is that Japan can use this strength to build a strong supply chain with the US, which has more chip makers and an extensive portfolio of semiconductor-related intellectual property. It’s also worth noting that a consortium of mostly US companies is working on an important piece of the puzzle for the future of semiconductors, a standardized interconnect technology for chip designs called UCIe.

Meanwhile, Japanese companies such as Canon and Tokyo Electron are working on new chip manufacturing technologies at the National Institute of Advanced Industrial Science and Technology, along with American giants such as IBM.

Even companies like TSMC see value in a stronger Japanese semiconductor ecosystem, which is why it is building a 28nm factory on the southwestern island of Kyushu. It is expected that Sony will become one of the customers of the new plant. An official announcement of the US-Japan chip manufacturing alliance could be made in the coming weeks.

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