Japan's 2025 budget proposal is on the verge of approval, paving the way for government investment in Rapidus, a project focused on the mass production of advanced semiconductors. This legislative session is also set to introduce legal changes allowing debt guarantees for bank loans, thereby strengthening governmental support. Although public funding is progressing steadily, private investment is noticeably slow, placing a significant financial responsibility on state resources.
Semiconductors have emerged as a strategic linchpin for economic security, a shift catalyzed by the supply shortages during the Covid-19 pandemic. The US, Japan, and Europe have deployed substantial government subsidies to entice corporate investment, striving to bolster domestic chip production.
Unlike TSMC, which Japan successfully lured to Kumamoto Prefecture, Rapidus lacks a proven track record. With uncertainties surrounding product performance and customer acquisition, private capital has been slow to coalesce. The government's intent is clear: to leverage public support to propel Rapidus onto a viable trajectory.
State funding surges while private capital lags
According to Nikkei, the state financial support for Rapidus has reached JPY920 billion (approx. US$6.23 billion) so far. In the fiscal budget for 2025, an allocation of JPY100 billion is designated for further investment in the company, scheduled for the latter part of the year. This funding is anticipated to come from the proceeds of selling government-owned shares in the Shoko Chukin Bank.
However, progress on this front has been sluggish, as successful bids have only accounted for 10% of the state's total holdings. Government regulations mandate that the entire stake must be sold by June, a deadline that necessitates the creation of alternative revenue resources. According to trading prices at securities firms, the complete sale of these shares could surpass JPY170 billion, with Shoko Chukin permitted to buy back up to JPY158 billion of its own shares. Any revenue exceeding JPY100 billion is intended for further investment in Rapidus.
The government has submitted amendments to the Information Processing Promotion Act and the Special Accounts Act to parliament. These revisions would endow the Information-Technology Promotion Agency (IPA), overseen by the Ministry of Economy, Trade, and Industry (METI), with financial functions, enabling direct investments or debt guarantees for private lenders. In November 2024, a framework was established to channel over JPY10 trillion into semiconductors and artificial intelligence by 2030, with these legal changes forming a critical pillar of that ambition.
Industry hesitation clouds public-private partnership
The influence of public funds in spearheading these efforts is evident. Currently, private-sector investment in Rapidus amounts to JPY7.3 billion from eight companies, including NTT and Sony Group. The government aims to secure an additional JPY100 billion in private sector investment to match its own contributions.
Alongside existing shareholders, companies such as Fujitsu and several major banks are reportedly contemplating further investments. Nonetheless, there are hesitations within the industry. Some executives, including one from manufacturing, have expressed reluctance, noting, "We have no choice but to consider investing due to government requests, but we would not normally want to invest actively in a company that does not even have prototypes." It remains uncertain whether the public and private sectors will achieve true collaboration in this initiative.
The ongoing skepticism from Japan's opposition parties shows no sign of diminishing, as they remain critical of the government's approach to funding Rapidus. Unlike the ruling Liberal Democratic Party, which has no formal alliance with these dissenting groups, the opposition warns that the administration will eventually turn to taxpayer funds to support Rapidus
Their concerns are informed by historical precedent: the government previously provided financial backing to Elpida Memory, a major DRAM manufacturer, only to see its downfall due to mismanagement. The continuous financial support for Rapidus is being met with apprehension, as critics fear it could lead to a repetition of past failures.
Ishiba's high-stakes wager on global competitiveness
Such concerns have surfaced repeatedly since 2022, when the Japanese government began incrementally channeling funds into Rapidus. The attendant controversy has yet to subside. Prime Minister Shigeru Ishiba has candidly acknowledged that deploying taxpayer money demands a clear and cogent strategy. At the same time, he underscores the ferocity of global competition, cautioning that any lag could prove irreparable.
It is precisely this sense of urgency that has compelled successive Japanese administrations to funnel resources into Rapidus, unwilling to relinquish the endeavor despite the risks.
Article edited by Joseph Chen
