The Japanese government is preparing a budget amendment for fiscal year 2024 (April 2024 – March 2025) to allocate additional support for the semiconductor and AI sectors, with funding directed toward Rapidus, which is working toward mass production of 2nm chips.
This budget amendment for the fiscal year 2024 will allocate JPY1.5 trillion to JPY1.6 trillion (approx. US$9.8 billion to US$10.5 billion) to support advanced semiconductor development and AI initiatives, according to reports from Japanese media.
Japan allocates funding for Rapidus and semiconductor development
Asahi Shimbun and Hokkaido Shimbun report that Rapidus is set to receive JPY800 billion of the nearly JPY1.6 trillion allocated.
NHK reports that JPY1.0514 trillion of the nearly JPY1.6 trillion will be allocated to develop and validate advanced semiconductor and AI technologies. Additionally, JPY471.4 billion will promote private investment in semiconductor manufacturing plants in Japan, including those for Rapidus.
While media reports vary on the exact amount of support for Rapidus, the final figure to be approved by the National Diet is still pending. However, the Japanese government's commitment to providing additional support for Rapidus is clear.
The Japanese government has allocated a total of JPY920 billion in subsidies to Rapidus through three budget amendments between 2021 and 2023.
Govt support remains unaltered
The Japanese government and the ruling Liberal Democratic Party (LDP) have continued to drive Japan's semiconductor manufacturing and AI industries forward, with no change in strategy despite the leadership transition from Prime Minister Fumio Kishida to Shigeru Ishiba.
Ishiba has proposed a larger-scale AI and semiconductor support plan than the Kishida administration, aiming to provide over JPY10 trillion in funding over seven years. Of this, JPY6 trillion will be allocated as subsidies, with the remaining JPY4 trillion allocated through financial support and other methods.
The LDP Tax Policy Research Committee discussed tax incentives for Rapidus in a meeting on November 27, 2024. Topics included corporate tax cuts for capital enhancement and tax benefits for retirement income deductions, aimed at promoting talent mobility.
The committee will align tax policies across sectors and consult with the ruling coalition's Komeito party and the opposition Democratic Party for the People (DPFP), aiming to finalize the tax reform outline for fiscal year 2025 by December 2024.
Rapidus seeks further funding for 2nm chip production
In addition to JPY920 billion in subsidies from the Japanese government, Rapidus has secured JPY7.3 billion in funding from eight Japanese companies, including Toyota. The company plans to begin pilot production of 2nm chips at its Chitose, Hokkaido, facility in April 2025, with production expected to cost around JPY2 trillion. Another JPY1 trillion in funding is still required.
By 2027, when Rapidus begins mass production of 2nm chips, another JPY3 trillion will be needed for the production phase. The Japanese government is accelerating funding for Rapidus through supplementary budgets, tax incentives, and efforts to attract private investment.
Rapidus has also invited its existing investors, including eight Japanese companies, along with new investors such as IBM, Fujitsu, and Japan's three major private banks, to contribute an additional JPY100 billion in 2025, though this has not been finalized. An IPO is also under consideration as a potential funding route.
