Japan government tightens grip on chip supply-chain network

Japan has decided to apply foreign trade regulations to chipmaking equipment as part of its efforts to secure stable supply chains, the Ministry of Finance said Friday. 

Foreign investors are now required to give prior notice when conducting direct investment in equipment tied to chipmaking, including when acquiring a 1% or bigger stake in a listed company or buying shares in an unlisted company, the ministry said in a statement. The move also aims to address the risk of technology leakage and keep commercial technologies from being used for military purposes, it said.

Other products added to the list of so-called “core business sectors” include advanced electronic components, machine tool components, marine engines, fiber optic cables and multifunctional machines, according to the ministry. With the additions, core business sectors now cover all specified critical products under the nation’s economic security promotion act, the ministry said. 

The targeted move will help the government enhance national security while its impact on companies is expected to be limited, according to a finance ministry official.

The move comes as Japan tries to revive its own capacity to produce semiconductors as a pillar of its economic security strategy. Japan has already earmarked some ¥4 trillion ($26.9 billion) over the last three years to recharge its semiconductor sectors and promote digitalization. The government is drafting legislation to further boost investment in chipmaking capacity at home.

With a new semiconductor strategy, Tokyo has aggressively recruited foreign companies like Taiwan Semiconductor Manufacturing Co. with hefty subsidies to boost chip making at home. Critics say past efforts failed to revive the sector because they didn’t incorporate collaboration with foreign companies.