Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, opened its first factory in Japan on Saturday, as the Japanese government aims to enhance the supply chain of advanced semiconductors while mitigating the economic risks from tensions between Taiwan and China.

The government will provide about 1.2 trillion yen ($8 billion) in subsidies for the project, which also sees TSMC starting the construction of a second plant in Kumamoto Prefecture, southwestern Japan, within the year. Production there will start at the end of 2027.

The first factory, built in the town of Kikuyo in Kumamoto, is set to start mass production of mature-technology semiconductors, including 12-nanometer chips used in automobiles and industrial equipment, in the October-December quarter this year.

Photo taken on Feb. 24, 2024, shows Taiwan Semiconductor Manufacturing Co.'s first factory in Japan, built in the town of Kikuyo in the southwestern prefecture of Kumamoto. (Kyodo)

In a video message to attendees at the opening ceremony of the first plant, Prime Minister Fumio Kishida said the government has decided to financially support the second factory as well.

"Semiconductors are an essential technology for digitalization and decarbonization," Kishida said, while his industry minister Ken Saito told reporters in the prefecture that the subsidies for the second plant will reach 732 billion yen.

Morris Chang, founder of TSMC, told the ceremony that the project will lead to the "renaissance" of semiconductor production in Japan, emphasizing the significance of Japan-Taiwan cooperation.

The Japanese government has been trying to rejuvenate the country's once-powerful chip sector and strengthen its supply chains as demand for semiconductors continues to grow in every corner of a digitalizing world.

Taiwan Semiconductor Manufacturing Co. holds an opening ceremony on Feb. 24, 2024, for the company's first chip plant in Japan, located in Kikuyo in Kumamoto Prefecture, southwestern Japan. The factory of the world's largest contract chipmaker will be operated by its subsidiary Japan Advanced Semiconductor Manufacturing Co. from the October-December quarter of 2024. (Kyodo) ==Kyodo

The country's chip companies held over 50 percent of global market share in the 1980s, but began to lose their competitiveness after fierce friction with the United States over trade.

The investment in the first plant totals around $8.6 billion, of which up to 476 billion yen ($3.2 billion) will be subsidized by the government.

The plant is operated by TSMC's subsidiary Japan Advanced Semiconductor Manufacturing, in which Sony Group Corp. and Denso Corp., a major Japanese auto parts maker, each have a minority stake. Toyota Motor Corp. has also announced its capital participation in the operating firm.

Kenichiro Yoshida, chief executive of Sony Group, and Toyota Chairman Akio Toyoda also attended the ceremony.

TSMC, which is also building plants in Arizona in the United States and Dresden in Germany, is diversifying its production sites in the wake of risks arising from tensions between Taiwan and China, which sees the democratic island as its territory.

According to Taiwanese media, TSMC's overseas production is expected to account for some 20 percent of its total output capacity by 2028.

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