Japanese chip manufacturer Rapidus plans to build a 1.4 nanometer wafer fab to accelerate catching up with Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US).

According to reports, the cutting-edge chip company Rapidus in Japan plans to start construction of its second factory in Hokkaido in the fiscal year 2027, with production of 1.4 nanometer chips to begin in 2029. The efforts of this Japanese company may narrow the gap with the world's largest chip manufacturer, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US). This project is expected to cost trillions of yen, and the Japanese government will provide hundreds of billions of yen in initial funding for research and development work. This plan is expected to be a key step in revitalizing Japan's chip industry. The first factory in Chitose City is scheduled to begin mass production of 2 nanometer chips in the second half of the fiscal year 2027. Additionally, even though mass production of 2 nanometer chips has not yet been fully matured, Rapidus plans to advance the construction of a second factory. In addition to producing 1.4 nanometer products, the second factory may also produce 1 nanometer chips. The total investment for the second factory is expected to exceed 20 trillion yen. The Japanese government's support will provide most of the funding, while the rest will be raised through loans from Japanese banks and investments from private companies. According to reports, these loans will be guaranteed by the Japanese government. Starting from the fiscal year 2026, Rapidus plans to fully launch the research and development work of 1.4 nanometer products, while continuing to cooperate with IBM (the company providing technology for 2 nanometer chips). In December 2022, IBM (IBM. US) and Rapidus reached a collaboration agreement to jointly develop semiconductor technology, aiming to provide Rapidus with IBM's breakthrough 2 nanometer technology solutions in Japan. In July, Rapidus pointed out that a 2 nanometer device is already operational, but the specific path to achieve mass production has not been determined. The report also mentioned that Rapidus hopes to set mass production targets for nodes smaller than 1.4 nanometers, which will help secure long-term customers. Generally, the smaller the nanoscale size, the higher the performance and energy efficiency. Advanced 1.4 nanometer chips are expected to be used in high-tech products and applications such as data centers, Siasun Robot & Automation, autonomous driving cars, and smartphones. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR plans to mass produce 2 nanometer chips this year, and mass produce 1.4 nanometer chips in 2028. The report indicates that South Korean tech giant Samsung Electronics plans to mass produce 1.4 nanometer chips in 2027. After starting production in 2029, Rapidus plans to accelerate mass production to keep up with competitors. However, reports suggest that Samsung and Intel Corporation (INTC.US) have encountered difficulties in improving the yield of their advanced products, indicating that Rapidus may also face similar challenges. Rapidus has been receiving subsidies from the Japanese government. Last week, Rapidus announced that it has been selected as the official business operator for the Japanese government. In October 2023, there were reports that Japan plans to secure an additional 149 billion yen (about 10 billion US dollars) in subsidies for two key semiconductor projects. One is for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, and the other is for Rapidus. In April 2024, Japan approved providing approximately 590 billion yen (about 39 billion US dollars) in subsidies to Rapidus as part of the country's measures to promote the development of the domestic semiconductor manufacturing industry. In November last year, reports indicated that the Japanese government plans to invest 1.28 billion US dollars in Rapidus to help the company achieve commercial production in 2027. According to reports, Rapidus CEO Atsuyoshi Koike stated in April that the company is in talks with Apple Inc. (AAPL.US), Alphabet Inc. Class C (GOOGL.US), and other companies to mass produce processors for their respective needs.