October 2, 2022

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Japan, Once the World Leader in Microchips, Now Races to Catch Up

2 min read

TOKYO — It was the spring of 2021, and demand for new cars was spiking. But, as consumers, flush with savings amassed during the pandemic, rushed to dealerships around the world, one Japanese automaker after another idled production as they waited for imports of a critical component: semiconductors.

Coronavirus outbreaks had shut down chip plants, and an unanticipated surge in demand for electronics from people riding out the pandemic at home had constrained supplies. Nissan alone predicted a cut in output of half a million vehicles.

The chip shortfall — a blow to “the head” of Japan’s economy, in the words of Yoshihiro Seki, a lawmaker who leads a study group on semiconductors — woke up the country to the fragility of the supply chains that undergird its most important industries.

That has driven a broad reconsideration of how Japan can protect its economy, the world’s third largest, against both unforeseen economic shocks like the pandemic and looming risks like the rising tensions between the United States and China. Those risks were highlighted this week as the House speaker, Nancy Pelosi, visited Taiwan, prompting an angry response from China.

The reconsideration covers an array of sectors, including energy, but semiconductors are among the top concerns. To increase production, the Japanese government is investing billions of dollars in its domestic chip industry and providing enormous subsidies for joint ventures with companies from Taiwan, a crucial semiconductor supplier, and from the United States.

In a break with its past economic nationalism, it is also seeking to form a coalition with allies like the United States and the European Union to build a semiconductor supply chain that is less geographically concentrated and so better insulated from disasters and geopolitical instability.

The latest move came on Friday, when Japan and the United States announced that they would create a joint research center for advanced semiconductors that would be…

Ben Dooley and Hisako Ueno

2022-08-07 22:39:51

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