Nikkei: Japanese chip subsidies require ten-year commitments from TSMC and other companies

Japan plans to require chipmakers to maintain production in the country for about a decade before they are eligible for a new subsidy designed to encourage more players to set up factories in the country, according to reports.

Japan and other countries are scrambling to increase supply as semiconductors become increasingly important in a range of products from smartphones and household appliances to cars. These chips are also increasingly seen as vital to national security.

Tokyo is supporting advanced chipmakers in setting up new production centres in the country, starting with about half the cost of TSMC's first plant in Japan, worth billions of dollars. TSMC is the world's largest chipmaker.

Last month, Japan's parliament passed legislation on chip subsidies, which will come into effect as early as March, with a total budget of 600 billion yen ($5.2 billion) to support chip makers.

The plan will provide 400 billion yen for TSMC's plant in Kumamoto prefecture. The plant will be built in partnership with Sony Group and is scheduled to begin mass production by the end of 2024. The remaining funds will be used for other projects under consideration.

The Japanese government will start consulting the public this month on specific rules on subsidies, such as a 10-year commitment.

Other requirements included increased production during periods of shortages, protection of key technologies and continued investment in subsidized plants.

To receive subsidies, chipmakers must submit new factory plans for approval by the relevant government departments. If the funds deviate from these plans, they must be returned.

The Japanese government also sees subsidies as a way to boost employment in the country's semiconductor industry, which in turn could help boost production. The TSMC-Sony plant is expected to employ about 1500 people.