Japan tries to reclaim its dominance as leader of global tech industry

Posted by Admin September 6, 2024 Tech

4 min read Last Updated : Sep 06 2024 | 11:34 PM IST

Patricia Cohen & River Akira Davis

China’s envy-inducing success in using industrial policy to expand its economy and finance green manufacturing has helped kick off a fevered scrimmage among nations to develop and protect their own hometown businesses.

It has been 40 years since such competitive anxieties about a rising Asian power prompted this kind of embrace of government intervention among the biggest free-market economies.

Only then it was Japan, not China, that was the source of unease.

In a 1990 survey, nearly two-thirds of Americans said Japanese investment in the United States posed a threat to American economic independence. It turned out that the anxiety about Japan peaked just as the country began a long economic slide after the collapse of real estate and stock market bubbles.

Now, after a period of stagnation that Japan’s economy ministry refers to as “the lost three decades,” Tokyo is engaged in a multibillion-dollar industrial policy to jump-start the lackluster economy and recapture its position as a tech innovator.

This time, Japan is working with technology leaders in the United States and other countries — a collaborative approach that decades earlier would have been unthinkable.

But even as Tokyo is pursuing less inward-looking policies, the political storm over a Japanese-led acquisition of US Steel illustrates how the US is increasingly moving to protect other key industries from foreign influence.

Tokyo’s industrial policy focus today is on advanced forms of technologies ranging from batteries to solar panels, but the priority is reclaiming a bigger share of the global semiconductor industry, for which the Japanese government earmarked more than $27 billion over the past three years.

“In the future, the world will be divided into two groups: those that can supply semiconductors and those that only receive them,” said Akira Amari, a senior official in Japan’s ruling party who previously led the Ministry of Economy, Trade and Industry.

“Those are the winners and the losers.” Based on lessons learned over the past few decades, Japan is trying out a new playbook when it comes to chips, Amari said: “Now, we are collaborating with international partners from the very start.”

Although other nations are spending hundreds of billions of dollars to gain an edge, Japan’s efforts stand out because of its history of using industrial policy to develop quickly after World War II.

“It doesn’t have to start from scratch,” said Alessio Terzi, an economist at the European Commission. “This is already something that sets it apart from other countries.”

The centerpiece of Japan’s new industrial push is taking shape at a year-old construction site on Hokkaido, its northernmost island. The area is better known for champagne powder skiing in winter, lush carpets of flowers in summer and volcanic hot springs.

Across open pastures and not far from the Chitose airport is the rough outline of Rapidus Corporation’s new semiconductor plant, still surrounded by a sprawling exoskeleton of silver scaffolding.

The factory, financed in part by billions of dollars of government money, is being developed by an unusual collaboration between Rapidus, a start-up Japanese chip maker, and the American tech company IBM. It will produce the so-called 2-nanometer chips, a technology that IBM pioneered at its lab in Albany, N.Y.

The idea for the partnership was conceived in the summer of 2020 with a phone call to Tetsuro Higashi, the chairman of Rapidus, from a friend, John E. Kelly III, a longtime executive at IBM.

“I thought he was maybe just calling to catch up,” said Higashi, 75.

He wasn’t. Kelly explained that IBM was developing a new generation of chips and wanted to produce them in Japan.

Pandemic-related shortages of everything from computer chips to sriracha and then skyrocketing energy costs stemming from Russia’s invasion of Ukraine had refocused attention in Tokyo and capitals around the world on the importance of resilient and secure supply chains.In 2021, the trade ministry introduced a more aggressive industrial policy. A primary reason for Japan’s years of stagnation, the new planning committee concluded, was the government’s excessive anti-regulatory, hands-off approach to the economy.

The ministry also looked at what major competitors like the United States, the European Union and China were doing, and then analyzed Japan’s previous industrial and economic policies.

First Published: Sep 06 2024 | 11:34 PM IST