Report: TSMC and Japanese government to launch a new chip packaging facility

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Taiwanese Semiconductor Manufacturing Company (TSMC) is reportedly planning to open an advanced chip packaging facility with the Japanese government. The complex would be a 50-50 joint venture between the firm and the country’s trade authority. The two sides are preparing to sign a memorandum of understanding to formalize their pact.

As of this writing, neither the company nor Tokyo has publicly confirmed the collaborative project’s existence.

Last summer, Japanese officials supposedly approached TSMC about establishing a state-of-the-art foundry in their country.

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A Change of Plans

In 2019, Japan’s Ministry of Economy, Trade, and Industry earmarked ¥200 billion ($1.924 billion) to cultivate the nation’s semiconductor fabrication capability. Though the region is home to several powerhouse chip-making equipment vendors, it lacks leading-edge design centers and fabs. Local leaders decided to address the problem by enlisting the world’s top component manufacturers in modernizing its production capacity.

Japanese officials reportedly dispatched a delegation to Taiwan to enlist TSMC in the project in July 2020. However, the East Asian country never offered an update regarding its negotiations with the company. Taiwan News states the two parties could not come to terms because the manufacturer believed the nation’s supply ecosystem could not support one of its foundries.

Tokyo and TSMC apparently compromised and decided to establish a chip assembly plant together. Both sides likely found the revised deal agreeable because packaging centers do not require as much support as a fab.

A Mutually Beneficial Venture

The corporation and the country working together on a state-of-the-art component testing and packaging plant could lead to good things for both participants.

TSMC would benefit from expanding its heavily in demand manufacturing capability. Apple, Arm, Qualcomm, and other technology corporations have reportedly reserved 80 percent of its 5nm production capacity through years’ end. The firm is aggressively building new facilities to capitalize on the widespread interest in its services. It also recently teamed with Advanced Micro Devices (AMD) and Google to develop a new chip packaging methodology.

By establishing a new assembly complex in Japan, TSMC could manage its existing business more efficiently. It would also stake a position in Japan with a well-funded partner interested in large-scale infrastructure development. After building a testing and packaging center, the two parties could team up and rejuvenate the region’s electronic supply chain.

In addition, Japan could gain several advantages from working with TSMC.

The nation could make the cooperative plant the nucleus for a 21st-century semiconductor ecosystem. Tokyo would have an easier time convincing other chipmakers to build new local facilities if the contract manufacturer has a sizeable domestic presence. That means the country could attract billions of dollars in direct foreign investments from the electronic component sector’s leading providers.

By forming relationships with TSMC and other Big Tech giants, Japan would join several other world powers in the global semiconductor realignment and reshoring movement. That way, Tokyo could foster its version of America’s Silicon Valley or China’s Shenzhen. And enjoy the massive economic and social advances offered by Industry 4.0 digitalization wave.

TSMC will declare in Q4 2020 financial results on January 14. If the chipmaker has made an agreement with Japan, it will likely announce it that day.

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