Japan Subsidies for Kioxia-WD NAND Flash Plant: A Step Towards 'Chip 4 Alliance'?

· Subsidy will come from the New Energy and Industrial Technology Development Organization (NEDO) under METI's supervision. NEDO is currently armed with a JPY617 billion fund dedicated to semiconductor investment.

· NEDO subsidized JPY19 billion to TSMC's 3DIC R&D center located in Ibaraki

· NEDO has subsidized up to JPY476 billion TSMC's Kumamoto fab that will cost up to JPY1 trillion in total. Under the name of Japan Advanced Semiconductor Manufacturing (JASM), the 300-mm fab co-invested by Sony and Denso aims to begin production by the end of 2024

· “Chip 4 Alliance" proposed by the US in March.

· Japan Electronics and Information Technology Industries Association called for Japan to partner with allies to establish a semiconductor research hub modeled on the Belgium-based IMEC or DARPA

· Announcement to establish a joint R&D center for 2nm process.

· Micron's planned DRAM plant in Hiroshima, producing its cutting-edge 1-beta memory chips and costing up to JPY800 billion

Following the subsidies to TSMC's 300mm fab in Kumamoto and TSMC's 3DIC R&D center in Ibaraki, Japan's Ministry of Economy, Trade and Industry (METI) has lately announced plans to subsidize Western Digital (WD) and Kioxia's Nand flash manufacturing facility in Yokkaichi, Mie Prefecture.

METI minister, Koichi Hagiuda, announced that his ministry had green-lighted the WD-Kioxia subsidy application on July 26, 2022. METI believes that the joint venture between Kioxia and WD can strengthen Japan's semiconductor supply chain resilience, in addition to deepening Japan's cooperation with the US.

Fab7 (Y7), a part of the Yokkaichi Plant jointly funded by WD and Kioxia, is expected to receive up to JPY92.9 billion (US$680 million) in subsidies. Fab7, having completed the first phase of construction, expects to kick-start initial production in the fall of 2022, with volume production planned in March 2024, focusing on the 6th-generation, 162-layer 3D NAND flash memory technology co-developed by WD and Kioxia. Approximately JPY278.8 billion will be spent on Fab7, and the announced subsidy would cover about 33% of it, strengthening Yokkaichi Plant's status as the world's largest flash memory manufacturing site.

The announced subsidy will come from the New Energy and Industrial Technology Development Organization (NEDO) under METI's supervision. NEDO is currently armed with a JPY617 billion fund dedicated to semiconductor investment.

Previously, NEDO subsidized JPY19 billion to TSMC's 3DIC R&D center located in Ibaraki, according to Nikkei Asia. The R&D center, established in March 2021 and costed JPY37 billion in total, has become operational in June, and will focus on developing state-of-the-art 3D IC packaging materials with Japanese research insituties and Japanese companies pioneering in this field, including Ibiden, Shibaura Mechatronics and Shin-Etsu Chemical.

Most notably, NEDO has subsidized up to JPY476 billion TSMC's Kumamoto fab that will cost up to JPY1 trillion in total. Under the name of Japan Advanced Semiconductor Manufacturing (JASM), the 300-mm fab co-invested by Sony and Denso aims to begin production by the end of 2024, providing 12nm and 16nm process technologies in addition to 22nm and 28nm specialty processes for CMOS image sensors, industrial/auto MCUs and other products.

The latest investment in the Yokkaichi Plant not only marks the third investment of NEDO's semiconductor-focused fund, but also signals the gradual formation of the so-called "Chip 4 Alliance" proposed by the US in March. The alliance, a part of the US Indo-Pacific strategy to counter China, seeks to unite US and Japanese leaderships in semiconductor design, equipment and materials, Taiwanese leadership in manufacturing and packaging, and South Korea's equally strong chip manufacturing and memory sectors. According to BusinessKorea and South China Morning Post, the US seeks to hold the first partner meeting of "Chip 4 Alliance" at the end of August, with South Korea reportedly wavering on the issue.

Earlier in May, Japan Electronics and Information Technology Industries Association called for Japan to partner with allies to establish a semiconductor research hub modeled on the Belgium-based IMEC or DARPA, a R&D agency under the US Department of Defense. In the same month, the US and Japan also began talks on semiconductor partnership opportunities. The talks eventually led to last week's announcement to establish a joint R&D center for 2nm process.

As reported by Nikkei Asia, a new Japanese semiconductor research center will be set up with the help from the US Semiconductor Technology Center, and participated by several Japanese research institutes, including the National Institute of Advanced Industrial Science. Joint research will begin as early as this summer, and the R&D center, armed with a prototype production line, is due to begin operation as early as 2025. In fact, the R&D center aims to gain mass production capability between 2025 and 2027.

Meanwhile, Micron's planned DRAM plant in Hiroshima, producing its cutting-edge 1-beta memory chips and costing up to JPY800 billion, is expected to enter volume production by the end of this year. METI's currently reviewing the US memory giant's application for subsidies.