Japan’s prowess in semiconductor materials might be one of the main reasons attracting TSMC to open a R&D facility in Japan. Costing US$338 million, with half of it subsidized by the Japanese government, the project was mostly interpreted in terms of TSMC’s role within the loose US-Japan tech alliance, but few covered Japan’s outsized role in global semiconductor material supply chain as well as Taiwan’s efforts to increase domestic components in its supply chain.
As a global leader of materials for semiconductor manufacturing, Japan occupies a strategic position that allowed it to flex its muscle during a dispute with South Korea. South Korea, a semiconductor powerhouse too, was threatened last year as Japan restricted the export of three materials essential to South Korea’s semiconductor industry: fluorinated polyimide, photoresist and hydrogen fluoride. Seoul later claimed that as many as 20 categories of industrial materials were under Japanese export control.
Japan produces approximately 90% of the world’s supply of fluorinated polyimide and photoresists, and about 70% of hydrogen fluoride. Overall, in a dozen categories of semiconductor-related materials, Japan has approximately a 50% market share worldwide.
Meanwhile, 22% of global semiconductor-related materials are used by TSMC, making it the largest consumer, surpassing South Korea. Even though Taiwan is unlikely to get into any major dispute with Japan in the near future, Taiwan is not unaware of its potential chokepoint, and has been seeking to increase the share of domestically-sourced materials as well as securing its partnership with Japan. In addition, in a bid to extend Moore’s Law beyond 2nm, TSMC has been actively engaging in packaging, a sector where Japan has some leading players.
TSMC’s Japan 3DIC R&D Center has already attracted partnerships from more than 20 Japanese’s companies, some of them leading players in semiconductor-manufacturing materials and packaging, such as JSR, Shin-Etsu Chemical, and Ibiden. In fact, their presence might be one of the reasons convincing TSMC to follow up with a fab in Japan, despite the fact that Japanese consumers generally take up less than 5% of TSMC’s annual capacity. As one Japanese minister reportedly put it: without Ibiden, Japan would not have been able to bring TSMC to Japan.
As Europe lures TSMC and other foundries to set up a fab, especially in Germany, perhaps it is the time for European policy makers to review what exactly Europe can offer to TSMC other than subsidies, especially when European semiconductor industry has little need for TSMC’s advanced manufacturing nodes.
In this respect, Europe’s advantages in compound semiconductors, aligning with TSMC’s growing attention on the sector, can be a direction worthy of consideration. Unlike other Taiwanese foundries which relied on European tech transfers to enter the compound semiconductor sector, TSMC developed its own know-how in GaN-on-SiC, starting from epitaxy research. Recently, however, it has also partnered with European semiconductor companies such as STMicroelectronics on Gallium Nitride (GaN) products, opening up further opportunities in the future.