Japan’s state-backed chip venture Rapidus will need about 7 trillion yen ($54 billion) of mostly taxpayer money to begin mass producing advanced logic chips in around 2027, its chairman, Tetsuro Higashi, told Reuters on Thursday.

That plan may be Japan’s last best chance to revive its aging semiconductor industry as Japan and the United States set aside old industrial rivalries to take on China amid growing geopolitical tension.

"In the past, the United States hindered Japan’s chip industry growth. Now we have America’s support," Higashi said in an interview.

Japan and the United States worry that friction with China will result in semiconductor shortages that could threaten economic growth.

That concern has escalated as China has increased pressure on global chip hub Taiwan, with nearby military exercises after Chinese anger over visits by U.S. politicians to the self-ruled island.

TWO NANOMETRES

Following an agreement by Japan and the United States to cooperate in semiconductor technology, Rapidus in December announced a tie up with IBM Corp to develop and produce two-nanometre chips.

A nanometre is one-billionth of a metre and the smaller the number, the more cutting-edge the chip is. Japan’s most advanced semiconductor factory is a 40 nanometre plant owned by Renesas Electronics.

Rapidus will announce the location of its first factory in March, Higashi said.

The former boss of chip machinery maker Tokyo Electron declined to say where, but said it would not be near the site on Kyushu island that Taiwan Semiconductor Manufacturing Company Ltd (TSMC) recently picked for its first Japan factory.

To pay for the factory and buy production equipment, Rapidus will need sustained investment from Japan’s government, which in December announced 70 billion yen ($544 million) of initial funding.

Eight corporations that have small stakes in Rapidus, including Toyota Motor Corp and Sony Group Corp, are unlikely to stump up any money soon, Higashi said.

"They are future customers. For them, the decision to invest will be taken when they are able assess our technology and production plans."

($1 = 128.6400 yen)

Also Read: Japan to invest $500 million in new company Rapidus to manufacture advanced chips

(Edited by : Anushka Sharma)