Japan to draft roadmap for Physical AI and semiconductors, target is eightfold increase in chip revenue by 2040

Financial News Tokyo Bureau Chief Seo Hye-jin reports that the Government of Japan is set to adopt a target of increasing domestic semiconductor revenue to 40 trillion yen (about 37.64 trillion won) by 2040. This would be eight times higher than the level in 2020. To meet growing demand for domestically produced artificial intelligence (AI) and data centers, the government also plans to develop hubs for cutting-edge semiconductor research and development.
According to the Nihon Keizai Shimbun (Nikkei) on the 8th, the Government of Japan will convene the Council for Japan's Growth Strategy on the 10th and present a draft timetable for "crisis management and growth investment." This schedule, to be implemented through public–private cooperation, will be incorporated into the Japan Revitalization Strategy, which is to be finalized this summer.
"Crisis management and growth investment" is a core element of the growth strategy underpinning Prime Minister Sanae Takaichi's policy of "responsible proactive fiscal management." The idea is to strengthen supply capacity and raise potential growth, thereby reducing the debt-to-gross domestic product (GDP) ratio through economic expansion.
The Takaichi Cabinet has already designated 17 strategic fields, including AI, semiconductors, quantum technology, shipbuilding, and new drugs and advanced medical care. The draft further breaks these down into 61 specific products and technologies, and among them, 27 will be given priority for detailed timetables.
The 27 priority products and technologies include Physical AI and semiconductors, as well as next-generation shipbuilding using ammonia and hydrogen fuel, green steel, permanent magnets, and games.
The draft also sets explicit revenue targets for semiconductors. As of 2020, revenue from domestically produced semiconductors in Japan stood at 5 trillion yen (about 4.7 trillion won). The Government of Japan had previously set a goal of increasing this to at least 15 trillion yen by 2030. The new draft adds a further target of expanding it by another 25 trillion yen by 2040.
The global semiconductor market is projected to grow from 50 trillion yen (about 47.05 trillion won) in 2020 to 190 trillion yen (about 178.8 trillion won) by 2035. As AI becomes more widespread, demand is surging for semiconductors capable of processing massive volumes of data at high speed.
In response, the Government of Japan is concentrating support on semiconductors that underpin AI, particularly Physical AI that powers robots and machinery. It aims to secure a 30% share of the global market by 2040 and stand on par with the United States and China.
The draft further states that Japan will "develop hubs for cutting-edge semiconductor research, development, and design." The plan is to enable low-cost supply of semiconductors used in next-generation autonomous vehicles and other applications.
The government will also support the acquisition of industrial land needed for building and expanding semiconductor plants, and invest in infrastructure such as water and electricity. To this end, it intends to provide subsidies and at the same time consider regulatory reforms. The Government of Japan has submitted amendments to the Industrial Competitiveness Enhancement Act and related laws to the current Diet session. It plans to ease regulations on industrial water to make it easier to attract data centers that use semiconductors.
Under the Fumio Kishida Cabinet, Japan has promoted domestic semiconductor investment centered on Taiwan Semiconductor Manufacturing Company (TSMC) in Kumamoto and Rapidus Corporation in Hokkaido.
Building on this, the Takaichi Cabinet adopted the "Policy Framework for Strengthening the AI and Semiconductor Industrial Base" in November last year and decided to provide more than 10 trillion yen in public support over seven years. It also plans to present a long-term policy package through 2040 to make it easier for companies to formulate investment plans.
Prime Minister Takaichi has recently indicated that she intends to instruct relevant ministers to visualize the economic impact of public–private investment.
sjmary@fnnews.com Seo Hye-jin Reporter