The Global Semiconductor Race Heats Up: Japan and South Korea Strengthen Foundry Capabilities

As demand for consumer electronics lags, sectors like artificial intelligence (AI) and flagship smartphones are driving robust growth in advanced semiconductor manufacturing. TrendForce projects a 20% annual growth in global foundry output in 2025, up from 16% in 2024. While Taiwan dominates with over 70% of global foundry capacity—thanks largely to TSMC—other regions, including Japan, South Korea, the U.S., and mainland China, are accelerating their investments to compete.

Recently, Japan and South Korea have unveiled ambitious initiatives to bolster their semiconductor industries and secure their positions in the global foundry market.

Japan’s Semiconductor Revival: Rapidus at the Helm

Japan’s government has announced plans to invest ¥100 billion (approximately $680 million) in Rapidus by the latter half of 2025, matching additional contributions from current and new shareholders. The funds will be used primarily for the acquisition of extreme ultraviolet (EUV) lithography machines—essential for advanced chip production.

About Rapidus

Founded in 2022, Rapidus is a joint venture backed by eight Japanese giants, including Toyota, Sony, and Mitsubishi UFJ Bank. With initial investments totaling ¥73 billion and an additional ¥700 billion in government funding, Rapidus aims to restore Japan’s semiconductor prowess by developing chips using 2nm and smaller nodes.

Progress on 2nm Chips

Rapidus has already made significant strides. By March 2025, the company expects to complete the installation of all necessary equipment for 2nm chip production, with trial production lines set to launch in April. This development positions Japan as a formidable player in next-generation semiconductor technology.

Japan’s Broader Strategy

The Rapidus initiative is part of a larger national plan to revitalize Japan’s semiconductor sector. By fiscal year 2030, the Japanese government has committed to investing over ¥10 trillion in the semiconductor and AI industries, with Rapidus as a key beneficiary.

South Korea's Ambition: Building "Korean TSMC"

In South Korea, calls for the establishment of a national foundry champion, akin to TSMC, have gained momentum. Experts propose the creation of Korea Semiconductor Manufacturing Company (KSMC) with a targeted investment of ₩20 trillion (approximately $15 billion). Analysts estimate that KSMC could generate ₩300 trillion in economic benefits by 2045.

Challenges and Opportunities

South Korea's semiconductor sector, historically reliant on memory chips, faces mounting challenges:

Erosion of Leadership: Competitors are closing the gap in memory technology.

Structural Weaknesses: Heavy reliance on Samsung Electronics for advanced processes below 10nm leaves smaller firms underserved.

Policy Gaps: Limited support for SMEs and startups has hindered ecosystem growth.

Proposed Solutions

KSMC is envisioned to address these structural issues by focusing on mature and specialized processes, complementing Samsung's advanced nodes. Furthermore, increased support for SMEs and direct investments in materials, components, and equipment firms are seen as vital to fostering a robust ecosystem.

Government Support

South Korea’s recent semiconductor initiatives include:

Policy Financing: ₩14 trillion allocated for 2025, including ₩4.25 trillion in low-interest loans through the Korea Development Bank.

Infrastructure Investments: ₩1.8 trillion pledged for power transmission networks in semiconductor clusters.

Semiconductor Fund: A new ₩120 billion fund, projected to grow to ₩420 billion, to support startups and SMEs in the sector.

Industrial Clusters: Large-scale hubs in Yongin and Pyeongtaek, with a focus on comprehensive supply chain integration.

Conclusion

Japan and South Korea are making bold moves to reshape the global semiconductor landscape. Japan’s Rapidus initiative underscores its ambition to reclaim leadership in advanced chipmaking, while South Korea’s proposed KSMC aims to diversify its foundry offerings and strengthen its ecosystem. These efforts highlight a broader trend of regional investments as countries vie for technological sovereignty in an increasingly competitive industry.