Issue:
September 2023
Official fervour over Hokkaido semiconductor plant masks potential pitfalls
Since chipmaker Rapidus Corp. selected Chitose, close to the Shin Chitose International Airport, Hokkaido’s main gateway, as the site of its factory for next-generation semiconductors, the rhetoric surrounding the project has been sharply divided between cheerleaders who see Rapidus as the force behind restoring Japan’s supremacy in the worldwide semiconductor market, and critics who dub the attempt to commercialize 2-nm chips as a government-backed fool’s errand.
Recent Japanese media reporting accenting the former view of Rapidus has more than a whiff of hagiography, if not nationalistic propaganda. Rapidus and its engineers – with the backing of the Ministry of Economy, Trade and Industry [METI] – are Japan’s last chance to win the international semiconductor war. Especially against leading giant Taiwan Semiconductor Manufacturing Company (TSMC). Victory means a return to the glory days of the 1980s, when Japanese semiconductor firms dominated. Defeat means humiliation and subjugation to foreign semiconductor manufacturers.
On the other side are skeptical journalists with tech backgrounds and industry insiders who see a central government-backed Titanic headed for the iceberg. In his recent book, Takashi Yunogami, a freelance journalist who once worked at Hitachi’s semiconductor unit, dubbed Rapidus “Mission Impossible” for several technological and bureaucratic reasons. One his arguments is that, given how badly the bureaucrats mismanaged Japan’s semiconductor industry in the past, the current semiconductor strategy involving Rapidus was doomed the moment METI and other government agencies got involved.
I am no expert on Japan’s semiconductor policy, but I recall hearing a perhaps apocryphal story dating back to the early-mid-1980s. METI (then MITI) officials conducted a months-long swing through the U.S. to determine whether or not the expanding use of digital technology was the real future of the electronics industry or an expensive mirage with limited commercial potential. MITI officials concluded the latter, and advised Japan’s major semiconductors and electronic firms as such. Months later, there was a major breakthrough on chip technology in the U.S. Within a couple of years, personal computer usage exploded. Japanese semiconductor firms were caught flat-footed and ultimately failed to adapt to the rapidly changing market.
I will leave it to FCCJ journalists and associate members who cover the tech industry to debate the technical merits and demerits of Rapidus and its attempts to commercialize the world’s first, and smallest, 2-nm semiconductors. Here in Hokkaido, there is less concern about the technologies required to manufacture chips that are so small, and more about three non-technical local issues related to the project: employment; the potential knock-on effects; and the natural environment.
On the first issue, Rapidus is expected to require around 1,000 engineers by the time its Chitose plant goes into full-scale production in 2027. Building the plant over the next couple years will have to involve as many as 2,000 construction workers, and then 4,000 workers at the peak of equipment installation.
Hokkaido can provide some, but not all, of the labor. Many local construction-related firms and workers are already engaged in other projects, such as remodelling the Sapporo Station area or working on the Hokkaido Shinkansen. Many small local firms are also engaged in road construction, spending months repairing potholes in roads and highways that appear after the winter. The Rapidus project, local officials hope, means new, well-paying construction jobs. At least for a while. Followed by the training and development of locals to work in the plant as engineers and general staff. But there is a labor shortage at the moment, and it’s not yet clear if Rapidus can find enough construction labor for the project.
The second issue is the economic knock-on effects - everything from a boost in local taxes to new local service industries to meet the needs of Rapidus employees and what Chitose in particular hopes will be a growing populace, with new schools, hospitals, cafes, restaurants, bars, shopping centers and local workers to staff them. Welcome to Boomtown. That’s the message Hokkaido officials hope to be giving prospective investors in everything from new semiconductor support businesses to gourmet restaurants.
The governor and the Hokkaido Chamber of Commerce speak of Hokkaido becoming one of the main Silicon Valleys of Japan thanks to Rapidus. No doubt FCCJ members will roll their eyes at that, recalling how two decades ago every prefecture in the nation, it seemed, was determined to rebrand itself as Japan’s Silicon Valley. This time, given the trillions of yen involved in the Rapidus project and the strong support of Prime Minister Fumio Kishida’s government, it’s easy to understand why Hokkaido officials are confident that this time will be different. But underneath the smiles, there are still worries. Can they really convince people from all over Japan – and the world – to set up shop in Chitose? Especially if Rapidus is more problematic than advertised?
The third issue is connected to the natural environment. As with the concept of Rapidus itself, opinion is divided. Semiconductor plants need a lot of electricity and clean water. Most of the former will be covered by renewable energy, especially solar and wind, which Hokkaido has in abundance – if developed. Thanks to Rapidus, European embassies in particular are seeking potential opportunities in Hokkaido for their renewable energy firms.
Yet renewable energy advocates are clashing with locals and environmentalists, who warn that offshore wind farms and massive solar panel farms will damage Hokkaido’s biodiversity and ecosystems. Tourism officials, who make money by selling Hokkaido as a green wilderness, worry fewer tourists will come if all they see are wind turbines or solar panel fields. Cities like Otaru, which heavily rely on tourists who want to appreciate the scenery, have indicated their opposition to lots of offshore wind turbines that would likely provide some energy to Rapidus and the surrounding area.
As for water, Hokkaido has that in abundance as well. But worries about contamination of the water table are being raised, as well as over possible water shortages in the area if strict conservation measures are not put in place.
If it succeeds, Rapidus may well prove its ardent supporters right. If it fails, it will damage the credibility of Japanese industry and the reputation of METI bureaucrats. But the stakes are much higher in Chitose. In a decade's time, Chitose and Rapidus might be viewed as a shining example of Japan’s ability to make careful plans, compete, and win against all odds. Or as dark example of the excesses of official hubris, sloppy planning and wishful thinking.
Eric Johnston is Senior National Correspondent for the Japan Times. Views expressed within are his own and do not necessarily reflect those of the Japan Times.
