Japan’s ruling Liberal Democratic Party plans to include 10 years of incentives for the semiconductor and other industries in a tax reform package that is likely to take effect next year.
In the meantime, the Ministry of Economy, Trade and Industry (METI) has decided to subsidize semiconductor makers Rohm and Toshiba’s collaborative investment in power devices for electric vehicles (EVs) and industrial use.
In addition to semiconductors, tax breaks are to be given to four other industries deemed to be strategic and/or eco-friendly: electric vehicles and batteries, sustainable aviation fuel made from biomass, steel produced with renewable energy, and chemical products made from biomass and recycled waste products.
These are industries with growth potential in which Japan has the technology required to be internationally competitive. In the case of semiconductors, the proliferation of government promotion schemes around the world makes it imperative for Japan to do the same.
Qualified semiconductor producers will reportedly be eligible for a reduction in corporate income tax of up to 20%, with the amount of reduction depending on the volume of production and sales. If a company makes a net loss, the tax break may be carried over to the next fiscal year for up to three years running.
Companies will have until the end of the fiscal year ending March 2026 to submit their business plans for qualification. Subsidies will run for 10 years following the acceptance of a company’s plan.
Prime Minister Fumio Kishida has said he favors a system that supports industries that require large initial investments and have high operating costs. To that end, on November 29, the Japanese Diet passed a supplementary budget that includes slightly more than 2 trillion yen (about US$14 billion) in subsidies for the semiconductor industry.
That was less than the 3.4 trillion yen METI had asked for, but more than the 1.3 trillion yen allocated to the semiconductor industry last fiscal year.
Where the money will go
Of the 2 trillion yen, about a third – 650 billion yen or more – will go to Rapidus, the startup integrated-circuit (IC) foundry formed by a consortium of Japanese companies that hopes to catch up with Taiwan Semiconductor Manufacturing Company’s advanced process technology. This will bring total government support for Rapidus’ new factory in Hokkaido to about 1 trillion yen.
In addition, several hundred billion yen will be provided for the construction of TSMC’s second factory in Kyushu, lifting total support for the top-ranked Taiwanese foundry’s operations in Japan toward 1 trillion yen as well.
Subsidies will also be provided to Powerchip, a smaller Taiwanese foundry that plans to build a factory in Miyagi prefecture, to Micron Technology for the upgrade of its DRAM (dynamic random access memory) factory in Hiroshima and to Intel for IC assembly and packaging research and development conducted in Japan.
Most recently, on December 8, Rohm and Toshiba announced that their plan to cooperate in the production of power semiconductors had been officially recognized by METI as a measure supporting the development a secure and stable supply of semiconductors in Japan.
The two companies will invest in silicon carbide (SiC) and silicon (Si) power devices respectively, to enhance their production and supply capacities in a complementary fashion, utilizing each other’s facilities when appropriate.
Rohm specializes in SiC power devices for EVs and industrial applications. Toshiba has expertise in Si power devices related to electric power, industrial and automotive applications. There is little overlap on the one hand and potential for collaboration in R&D and market development on the other. Rohm has invested 300 billion yen in the privatization of Toshiba, making it a partner rather than a competitor.
Rohm and its subsidiary Lapis Semiconductor plan to invest 289.2 billion yen while Toshiba Electronic Devices & Storage and Kaga Toshiba Electronics invest 99.1 billion yen, bringing the total to 388.3 billion yen. The maximum subsidy is set at 120.4 billion yen, or one-third of the total investment.
Rohm will concentrate on production of SiC power devices and substrates (wafers) at a new facility in Miyazaki on the island of Kyushu. Toshiba will focus on the production of Si devices at its new Kaga plant in Ishikawa prefecture, north of Kyoto.
Rohm is migrating production from 150-millimeter to 200mm wafers, the emerging standard for SiC. The Kaga facility is designed to process 300mm, which should provide it with competitive economies of scale.
Compared with silicon, silicon carbide offers greater energy efficiency and reliability. Its advantages include resistance to higher voltages, tolerance of wider ranges of temperature and vibration, and longer device lifetimes. Silicon carbide is now replacing basic silicon in electric vehicles for use in powertrains, battery charging and other demanding applications.
Rohm plans to start making 200mm SiC wafers in Japan next year. Miyazaki will be its first domestic SiC wafer production base, supplementing its SiCrystal subsidiary in Germany, which it acquired in 2009. As demand for EVs continues to rise, SiCrystal is likely to be fully occupied meeting demand in Europe.
Rohm is planning a steep ramp-up of production of both SiC power device and wafers, targeting combined sales of 40 billion yen this fiscal year, 130 billion yen in the year to March 2026 and 270 billion yen in the year to March 2028. If the forecasts of various market research organizations are correct, that could give the company a global market share close to 20% by the end of the decade.
In response to analysts’ questions after the release of business results for the six months to September, Rohm’s management noted that sales of SiC power devices were going according to plan, with about 90% of these sales made outside Japan. At present, the largest market for Rohm’s SiC power devices is China, followed by Europe and the US.
Over the next several years, Rohm expects the share of sales made in Europe, the US and Japan to rise, but sales in all markets, including China, should grow. With this in mind, Rohm is already considering the use of SiC wafers made in China.
Follow this writer on Twitter @ScottFo83517667.