Japanese Prime Minister Kishida vows government funds for local chip fabs — Rapidus eyes 2nm production by 2027

Japanese Prime Minister Fumio Kishida recently visited Hokkaido, where Japanese startup Rapidus is building up its advanced 2nm-capable fab. Kishida pledged to secure state-backed funding for the project through new legislation, according to a report from Nikkei . The Japanese government sees the plant as crucially important for the country, as it will enable Japan to make chips on a leading-edge node.

Rapidus intends to build an advanced fab in Hokkaido that will offer a 2nm-class process technology and advanced packaging by 2027. That first phase is expected to cost ¥5 trillion ($32 billion). The second phase of the fab, set to come online after 2027, will be able to produce chips on a 1.4-nm-class process technology. So far the government has sanctioned subsidies of up to ¥920 billion for Rapidus and the company has secured ¥7.3 billion from investors, which include major corporations such as Toyota and Sony.

Despite the involvement of MUFG Bank, Japan's largest bank, other large banks remain hesitant to extend loans without government guarantees. The proposed legislation intends to secure private-sector financing for Rapidus with state guarantees. The goal is to present the bill during an extraordinary legislative session in the fall. The government anticipates that the new legislation guaranteeing loans will ease the process of securing financing for Rapidus.

"We will promptly submit to the Diet the bill necessary for the mass production of next-generation semiconductors," Kishida said, according to Nikkei . "Relevant agencies will begin to consider the substance [of the bill] and the timeline for submitting it. […] We will provide large-scale, calculated and focused investment support for mass production investments and research and development over multiple fiscal years."

Currently, the lack of financing is compounded by the need for government guarantees to attract large-scale lending — which is typically structured as syndicate loans. However, according to Nikkei, bank executives have expressed concerns about lending to Rapidus because the company does not have commitments from potential customers, nor does it have a proven track record in mass production. Competing against TSMC , Intel Foundry , and Samsung Foundry will be hard, and therefore financing the project is risky.

The economic impact of establishing a semiconductor industry in Hokkaido is estimated to be over ¥18 trillion by 2036, so it makes sense for the government to support the project. This project will be key for Japan's national economic security as well as its domestic semiconductor supply chain.