Go to Japan to put into production advanced technology? TSMC: Not ruled out!

TSMC executives said at a press conference held in Yokohama, Japan last Friday (June 30) that they would not rule out the possibility of producing advanced chips in Japan in the future, and said that the development of TSMC's 2-nanometer (nm) product "N2" was going smoothly, and The president of TSMC's Japanese subsidiary said that the Kumamoto factory is undergoing exterior wall construction and is expected to allow employees to move in within the year.

Kyodo News reported that regarding whether advanced chips for autonomous driving and other applications will be produced in Japan, TSMC senior deputy general manager Kevin Zhang said at a press conference held in Yokohama, Japan, last Friday (June 30), "In the future, this possibility cannot be ruled out."

Zhang Xiaoqiang did not discuss details such as possible production locations, but only said, "First of all, the Kumamoto factory under construction must be opened and committed to production with high yield."

The Kumamoto factory under construction by TSMC (hereinafter referred to as Japan Factory 1) is located in Kikuyo Town, Kumamoto Prefecture. It is expected to start production in December 2024. It is currently planned to produce 22/28nm and 12/16nm process chips, with a monthly production capacity of 55,000 pieces.

Radio News reported that TSMC held a media conference related to advanced technology and Japan's development in Yokohama last Friday. Zhang Xiaoqiang emphasized at the conference that the research and development of the 2nm product "N2" targeted for mass production in 2025 is going smoothly. Zhang Xiaoqiang said, "The yield rate of 256Mb SRAM has exceeded 50%, and more than 80% of the research and development goals have been achieved."

Zhang Xiaoqiang said that automotive chips that originally relied on mature processes are "accelerating the introduction of the most advanced technology" as electrification, ADAS, and self-driving become more popular. Zhang Xiaoqiang pointed out that by introducing the new technology platform "Auto Early", the adoption of the most advanced technologies such as 3nm for automobiles will be advanced by at least 2 years.

In addition, Makoto Onodera, the president (general manager) of TSMC's Japanese subsidiary, also reported the latest progress of TSMC's Japan factory at the above press conference: "Exterior wall construction is underway, and the office will be completed and employees can move in within this year." Onodera Makoto pointed out, "Especially from Japanese customers, it is expected that there will be continued and strong demand."

TSMC stated in January that it was considering building a second factory in Japan. On June 6, TSMC Chairman Liu Deyin said at a press conference after the shareholders’ meeting that regarding the second factory in Japan under evaluation, “it is still under evaluation.” It is in the land acquisition stage, but it should be located near the first factory."

Liu Deyin pointed out that "the Japanese government hopes that TSMC will build a second factory, and subsidies (for the new factory) are still in the evaluation stage." Liu Deyin said, "Many customers feel that TSMC's production capacity in Japan is still insufficient."

Japanese media Nikkan Kogyo Shimbun reported on February 24 that the "Japan Second Factory" that TSMC is considering building will also be located near Kikuyo Town, Kumamoto Prefecture. The total investment is estimated to exceed 1 trillion yen, and the scale will be at least the same as that expected to start production at the end of 2024. The "Japanese Factory No. 1" and "Japanese Factory No. 2" may introduce 5-10nm advanced processes and are expected to start production in the second half of the 2020s.

Japan's Nikkei News reported that just as TSMC was preparing to set up a second factory in southwest Japan and suppliers were preparing to move in, it encountered a big challenge: land was not easy to obtain, which also became an obstacle to the Japanese government's development of a major chip town.

TSMC is building Japan's first wafer fab in Kikuyo City, Kumamoto Prefecture, a major agricultural town in Japan, and has attracted other projects to move in. For example, Sony Group will build a large-scale image sensor factory.

TSMC Chairman Liu Deyin told reporters after last week's annual shareholder meeting that from an economic perspective, Kumamoto would be the first choice to set up a second factory in Japan.

Japanese politicians all hope that TSMC will increase investment in order to revive Kyushu's "Silicon Island" title. Kumamoto Prefecture Governor Ikuo Kabashima is happy to see the results, believing that this proves that TSMC's first factory is proceeding smoothly as planned.

Suppliers said that TSMC usually does not set up just one factory, but forms a cluster. Hsinchu, where the headquarters is located, is one example, and TSMC also plans to build a second factory next to its factory in Arizona, USA.

If TSMC expands its territory in Kumamoto, it is expected to attract more semiconductor supply chain players to enter, but Nikkei pointed out that acquiring land is not easy.

Japanese law restricts development in "Urbanization Control Areas" (UCAs), such as forests, and generally prohibits the conversion of agricultural land. Kumamoto is an important center for grain production in Japan. Most of the land in Kyushu and the area near Kumamoto is high-quality agricultural land and it is difficult to use it for other purposes.

Officials from the Taiwan Electronic Equipment Association (TEEEA) mentioned this issue when they visited Kikudai Mayor Takatoshi Yoshimoto in April. 85% of the land in Kikuyo City is "urbanized control area", which restricts other companies from settling near TSMC factories.

A survey by Kumamoto Bank late last year showed that most companies that had considered expanding their business in Kikudai gave up the idea in the end. Some people advocated that Kikuyo should be classified as a "special economic zone" with looser controls. Representatives from other regions in Kumamoto Prefecture are also worried that they may lose the opportunity to develop into an industrial center.

Japanese local governments are actively acquiring land. Kumamoto City estimates that 101 hectares of industrial land will be needed and has drawn up plans to reserve approximately 20 hectares of land in four locations for more than 10 companies. Land development could be completed in fiscal 2025 at the earliest.

Municipal governments invited private companies to submit development proposals this spring until June. The private sector will be responsible for everything from initial development to attracting tenants, while the city will help simplify building restrictions.

Ozu Town near Kikuyo is preparing for a plan to build an industrial park covering an area of ​​10 hectares in 2027, with the ultimate goal of expanding to 25 hectares. The prefectural government's plan is to establish two 25-hectare industrial parks in the area, with a total estimated cost of 7 billion yen (US$50 million).

Whether these efforts will be enough to meet demand is unclear. Liu Deyin said last week that TSMC has not yet obtained enough land to build a second factory. TSMC's first factory acquired 21.3 hectares of land with government assistance, which is about the size of four large baseball fields.

There are many factors to consider when choosing the location of an industrial park, such as whether it is close to highways or transportation, water supply, and whether there are communities nearby where workers can live. Japanese semiconductor materials manufacturer Sumco has selected a potential factory location in Saga Prefecture near Kumamoto, Kyushu.