At the end of May, China injected approximately 7.4 trillion yen into its state-backed fund. This funding appears to be aimed at developing cutting-edge semiconductor chip production technology. Recall the shockwaves that went through the world when, in the summer of 2023, China's Huawei unveiled its new smartphone, "Mate 60 Pro," equipped with a 7-nanometer process chip. The US Biden administration's sanctions against China have not been as effective as anticipated. Huawei plans to release another new smartphone in the fall of 2024. Moreover, the Chinese government is instructing automotive manufacturers to use 25% domestically produced chips for their vehicles. What stance should Japanese companies take in the face of this intense rivalry between the US and China?

Huawei's new smartphone is scheduled to be released this fall. The US and China are engaged in a fierce competition in the semiconductor sector. Amidst the US-China rivalry for global dominance, the US has been tightening its grip on a containment strategy against China's semiconductor industry growth. In response, China has been mobilizing all available resources to break through the containment and cultivate its semiconductor industry. The US-China semiconductor war is becoming increasingly fierce, particularly in advanced technologies.

In January 2017, the White House released a report on the semiconductor industry. The report stated that "China is aiming to become a world leader in the semiconductor field" and that "the growth of the Chinese semiconductor industry poses a security threat to the US." Since then, the US has been strengthening its policies to suppress the growth of the Chinese semiconductor industry on both the hardware and software fronts.

On the other hand, China is rapidly expanding its industrial policies in the semiconductor sector in response to the US's tightening of the containment net. China has been strengthening its subsidy policies and accelerating efforts to localize its semiconductor supply chain. Research and development related to "chiplet production," which involves combining multiple chips to improve performance, is also progressing rapidly.

Amidst the escalating US-China rivalry, global semiconductor companies are prioritizing direct investment in Japan. Notably, Japan is home to a concentration of companies that supply semiconductor components, manufacturing equipment, and other related products. The growing importance of Japan within the global semiconductor industry will be crucial for the long-term recovery of Japan's economic competitiveness.

The Japanese government has recently been strengthening its support for the development of Japan's semiconductor industry and technology. On August 29, 2023, Nishimuara, Minister of Economy, Trade, and Industry, stated in a post-cabinet press conference that Japan will strengthen its semiconductor production technology base through increased investment in "Rapidus" and expansion of the "ABCI (National Institute of Advanced Industrial Science and Technology)" AI supercomputer. This will enable Japan to secure a global supply chain in next-generation semiconductor technologies.

The Japanese government also expressed concerns regarding China's semiconductor fund, emphasizing that Japanese companies must be cautious about the security risks involved when participating in China's semiconductor industry.

Japan possesses a high level of competitiveness in semiconductor materials, equipment, and manufacturing technology. However, the country has been facing challenges due to China's rapid growth and the US's technological blockade. Japanese companies need to reduce their reliance on the Chinese market and maintain their competitiveness through technological development and investment.

As the US-China rivalry for global dominance intensifies, Japan finds itself caught in the middle of their conflict, facing difficult choices in the semiconductor sector. However, Japan can leverage its accumulated experience and expertise in semiconductor components, equipment, and manufacturing technology to create new opportunities. Through innovation and collaboration, Japanese companies should strive to carve out a new future for themselves within the US-China competition.