Japanese and South Korean governments move to bolster local chipmakersJapanese and South Korean governments move to bolster local chipmakers

The Japanese government is proposing a new plan as part of ongoing efforts to revive its chip industry, while its counterpart in South Korea is considering the creation of its own domestic CHIPS Act to protect local chipmakers from the potential economic impact of high US import tariffs threatened by US President-elect Donald Trump.

The two East Asian countries have been expanding their chip production capabilities as current economic and geopolitical tensions between China and the US threaten the stability of the global semiconductor supply chain.

Over the past three years, Japan has injected some 4 trillion Japanese yen (US$25.49 billion) into the sector, which has been neglected for decades, while South Korea in May earmarked 26 trillion Korean won ($19 billion) in government funds for the growth of the local industry.

The battle for supremacy in chip manufacturing is being fought as sophisticated microprocessors are used in today's smartphones, advanced data centers, robots and self-driving cars. In particular, these high-performance processors are needed to power servers that can handle the growing AI workload.

A $65 billion plan

Japanese Prime Minister Shigeru Ishiba on Monday announced a JPY10 trillion ($65 billion) plan to support the mass production of next-generation chips, especially AI chips.

Related:South Korea joins global chip battle with $19B war chest

According to Reuters (paywall applies), the new plan also calls for a total of JPY50 trillion ($320 billion) public and private sectors investment in chips over the next ten years

The plan, part of a comprehensive economic package to be finalized in November, will be financed through subsidies and other financial incentives.

State-backed chip foundry venture Rapidus will be one of the likely beneficiaries of the latest plan to revitalize the country's semiconductor industry, the report said.

Established in 2022, Rapidus is currently working with IBM and Belgium-based research organization Imec to mass produce cutting-edge chips on the northern island of Hokkaido. Using IBM technology, Rapidus hopes to begin pilot production of two-nanometer chips in April 2025, with mass production beginning in 2027.

The government expects a total economic impact of about JPY160 trillion ($1 trillion) from its latest plan to boost domestic chip manufacturing.

Protecting South Korea chipmakers

The South Korean government on Monday unveiled a bill that would shield local chipmakers such as Samsung and SK Hynix from the economic fallout of potential US tariffs on imports by the incoming Trump administration, Reuters reported.

Related:China sets up $47.5B chip fund as other Asian countries bolster local chip production

The proposed law came on the heels of South Korean President Yoon Suk Yeol's warning last week that – prompted by high tariffs on Chinese imports – Chinese chipmakers could slash export prices and undercut South Korean firms abroad.

The semiconductor industry has a critical role in the South Korean economy, with chips making up 16% of total exports last year.

If passed, the bill would provide subsidies to local chip manufacturers – similar to the US CHIPS Act – enabling them to compete with rivals from China, the US, Taiwan, Japan and other Asian countries such as Malaysia and Vietnam for a slice of an increasingly crowded market.

Citing Greg Noh, an analyst at Hyundai Motor, Reuters reported that the proposed legislation is likely to face an uphill battle to gain approval from the liberal opposition party, which controls a majority in parliament.

One sticking point is a provision in the bill that would exempt employees involved in research and development from the national 52-hour working week limit, allowing them to work longer hours

Samsung's labor union reportedly opposed such a move last month, saying the company was trying to blame the law for its "management failure."