When you make a purchase through the links in our articles, Future and its syndication partners may earn a commission. The issue of government funding for semiconductor projects has always been a topic of debate, particularly due to the substantial upfront investments required for microelectronics fabs, which may not guarantee profitability upon operation. Rapidus, a project seeking $32 billion for its first 2nm-capable fab, is currently under scrutiny by opposition lawmakers who question the funding source and accountability, especially since the country has allocated money from its COVID funds to support the chipmaker, as reported by Nikkei.
In a move to bolster Japan’s semiconductor and AI sectors, the government unveiled a seven-year plan in November valued at a minimum of $63.6 billion (¥10 trillion). Of this amount, around $8.2 billion (¥1.3 trillion) allocated for the initial phase has been channeled to Rapidus. Critics have raised concerns after learning that almost $6.2 billion (¥987 billion) of this allocation originated from unspent pandemic relief funds designated for small and medium-sized businesses. The argument against repurposing leftover COVID-19 relief funds to aid large corporations revolves around the lack of transparency, potentially leading to wasteful expenditure.
While Rapidus has received private investments totaling $46.45 million (¥7.3 billion) and government aid of up to $5.855 billion (¥920 billion) thus far, an additional estimated $25.452 billion (¥4 trillion) will be necessary for launching mass production by 2027. The government intends to provide this financial support through a combination of investments and loan guarantees, carefully balancing public and private contributions. However, opposition parties have voiced significant criticism regarding this strategy.
Prime Minister Shigeru Ishiba has defended the reallocation of funds, clarifying that the money was returned to the treasury before being redirected, ensuring no misappropriation occurred and that the process adhered to legal and fiscal regulations. Nonetheless, critics argue that the initial source of the COVID funds was deficit-covering bonds, adding to the long-term debt burden without a clear repayment plan, especially given the uncertain future of Rapidus.
Considering the strategic importance of the project, aimed at reestablishing Japan as a leader in chip production on cutting-edge nodes, alternative funding sources are being explored. This discussion is particularly pertinent as Japan’s relief reserves have grown substantially, standing at $114.42 billion (¥18 trillion) as of fiscal 2023 compared to $12.71 billion (¥2 trillion) pre-pandemic in 2019. The government has committed to conducting periodic third-party evaluations to ensure accountability and operational efficiency within the Rapidus project.
Interestingly, officials from the Ministry of Economy, Trade, and Industry have emphasized the need for caution in government involvement to prevent discouraging potential overseas customers for Rapidus. They highlight that government funding might not instill confidence in the company’s financial stability, underscoring the delicate.
