Japan will provide a subsidy of up to 243 billion yen ($1.64 billion) to Kioxia Holdings Corp. and Western Digital Corp. to mass produce cutting-edge chips at plants they jointly run in central and northeastern Japan, the industry minister said Tuesday.

The assistance for the facilities in Mie and Iwate prefectures that produce 3D flash memory chips, expected to be used in artificial intelligence and automated driving, comes as Japan seeks to secure a stable domestic chip production and strengthen its economic security.

The government has also decided to financially aid Japanese chip manufacturer Rapidus Corp.'s plant in Hokkaido and U.S. chipmaker Micron Technology Inc.'s plant in Hiroshima Prefecture.

File photo shows the logo of Kioxia Holdings Corp. being unveiled at a press conference in Tokyo in September 2019. (Kyodo)  

Economy, Trade and Industry Minister Ken Saito told a press conference the memory chip market is "expected to see major growth," adding the production of chips through cooperation between Japan and the United States also has "great significance" in terms of economic security.

As part of efforts to promote domestic chip production, the government has already decided to provide up to 476 billion yen to the world's leading contract chipmaker Taiwan Semiconductor Manufacturing Co.'s joint-venture fab with Sony Group Corp. and Denso Corp. in Kumamoto Prefecture.

TSMC said Tuesday that in addition to the first fab, which will open later this month, the construction of a second fab is expected to commence in the southwestern Japan prefecture by the end of 2024, with operation scheduled to begin three years later.

The overall investment in the joint venture will exceed $20 billion "with strong support from the Japanese government," TSMC said, adding Toyota Motor Corp. will take a 2 percent stake. Denso is a Toyota group company.

The Taiwan firm said the two factories are expected to offer a total production capacity of more than 100,000 12-inch wafers per month for automotive, industrial, consumer and high performance computing-related applications, as well as create more than 3,400 high-tech professional jobs.

The subsidy for Kioxia and Western Digital, an expansion of the amount determined in 2022, will account for about a third of the 729 billion yen slated to be invested under the plan.

Western Digital and Kioxia Holdings, which has a chip company that spun off from Toshiba Corp. under its arm, had hoped to merge in a move that would have created the world's leading producer of memory chips.

But sources close to the matter have revealed the two sides have halted talks due to opposition by South Korea's SK Hynix Inc., a major investor in Kioxia.

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