U.S.-Japan Discuss Building Semiconductor Plant as Third Project Under Japan's Investment in the United States

[Financial News | Tokyo—Correspondent Seo Hye-jin] The United States and Japan are discussing a plan to build a large semiconductor plant in the United States using $550 billion in investment funds, equivalent to approximately 762.52 trillion won, arranged as part of their tariff negotiations, Nihon Keizai Shimbun reported on Sept. 17. Japan's investment in the United States, which had focused on power plant construction, is expanding into advanced manufacturing, including semiconductors.
According to the Nikkei, the governments of the United States and Japan are discussing a plan, requested by the United States, to build a semiconductor plant in the United States operated by GlobalFoundries (GF). The project is expected to cost ¥2 trillion to ¥3 trillion, or approximately 17.8 trillion to 26.7 trillion won. The two countries held working-level consultations on Sept. 14 and 15 to discuss the possibility of recouping the investment and the project's structure.
The new plant is expected to produce logic semiconductors used for computing and other processing tasks. As uncertainty over semiconductor supply chains has grown amid tensions between the United States and China, the United States appears to be seeking to expand domestic production of semiconductors needed by the automotive, aerospace and defense industries.
GlobalFoundries is the world's fifth-largest foundry, with production bases in the United States, Germany and Singapore. Rather than leading-edge processes, it specializes in mature-process semiconductors widely used in automobiles, industrial equipment, aerospace and defense. In 2023, it signed a 10-year semiconductor supply contract with the United States Department of Defense (DoD), and the U.S. government also provided subsidies under the CHIPS and Science Act.
It is also expanding cooperation with Japan. In February, GlobalFoundries announced that it would jointly produce next-generation automotive semiconductors with Renesas Electronics. If the plant is built, Japanese automakers producing vehicles in the United States are expected to be able to secure a stable local supply of semiconductors.
The Japanese government is reportedly requiring Japanese companies to supply the semiconductor manufacturing equipment and other items needed to build and operate the plant. The plan is to ensure that Japan's investment funds lead not only to expanded production facilities in the United States but also to orders for Japanese semiconductor equipment and materials companies and greater supply-chain stability for automakers.
This project is expected to become the third package under the investment framework established by the United States and Japan last July. After selecting gas-fired power generation and other projects as the first package in February, the two countries finalized the second package in March, including power plant construction. The projects selected so far total six, with a combined value of approximately ¥17 trillion, or about 151.2 trillion won.
The key challenge is securing private capital to cover the enormous construction costs. The likely arrangement is for the Japan Bank for International Cooperation (JBIC) and private banks to provide loans, with Nippon Export and Investment Insurance (NEXI) guaranteeing private-sector loans.
For previous investments, JBIC covered one-third of the total loans, while private financial institutions covered the remainder. Japan's three megabanks participated in the first package but withdrew from the second because of the burden of raising large amounts of dollar funding over an extended period. Citigroup and JPMorgan Chase participated instead.
The Nikkei reported, "Given the high volatility of the semiconductor industry, establishing a structure for recouping the investment and securing financial institutions to participate in the third package are expected to determine whether the project is ultimately finalized."
[email protected] Seo Hye-jin Reporter