Japan seeks investment in AI, semiconductors from American companies

Japan seeks investment in AI, semiconductors from American companies

Once seen as America’s biggest economic challenger, Japan is now seeking to work with the world’s largest economy by appealing directly to US executives to invest in the Asian country’s emerging technology sectors including artificial intelligence (AI), semiconductors and clean energy.

Speaking in Washington at a lunch with American CEOs, Prime Minister Fumio Kishida said Japan welcomed American cooperation in “critical and emerging technologies” and assured them that any investment would flow both ways.

“The economic growth that our country obtains through your investment will serve as a source of funding for further investment into the United States by Japanese entities,” he said on Tuesday.

Kishida is in the US ahead of Wednesday’s summit with President Joe Biden expected to focus on defense and economic ties.

Last year, Japanese foreign direct investment into the US exceeded $750 billion, Kishida said, making Japan the largest foreign investor in America and creating more than 1 million jobs.

Just before lunch, Microsoft (MSFT) announced it plans to invest $2.9 billion to improve cloud computing and AI infrastructure in Japan, and open the country’s first Microsoft Research Asia lab. It is reportedly the company’s largest investment in Asia’s second largest economy. Microsoft’s vice chairman and president, Brad Smith, attended the event along with more than a dozen other executives including IBM (IBM) Vice Chairman Gary Cohn; Micron Technology (MU) Chief Executive Officer Sanjay Mehrotra; Boeing Defense, Space & Security (BA) CEO Ted Colbert and Pfizer (PFE) CEO Albert Bourla.

Closer business ties between Washington and Tokyo come as the two countries seek to modernize their political and military alliances. Both are eyeing regional threats from North Korea’s weapons tests and growing ties with Russia to Chinese incursions in the South China Sea and toward Taiwan.

Speaking to CNN in Tokyo ahead of his visit, Kishida said rising geopolitical tensions had pushed the world to a “historic turning point” and forced Japan to change its defense posture.

Collaborate on chips
At the luncheon, hosted by the US Chamber of Commerce in Washington, the prime minister praised joint US-Japan investment in the semiconductor industry. Rapidus, the Tokyo-backed chipmaker, is working with IBM to bring advanced chip technology to Japan.

“In the field of semiconductors, Rapidus collaborates with a US company in the research and development of next generation chips. And there will certainly be more opportunities for cooperation between Japan and the United States,” he said.

Earlier this month, Japan’s industry ministry approved subsidies worth up to 590 billion yen ($3.9 billion) for Rapidus. That’s on top of about 330 billion yen ($2.17 billion) in subsidies the government has promised.

Using technology from IBM, Rapidus is building a semiconductor fabrication plant, or fab, on the island of Hokkaido. It aims to start pilot production of two-nanometer chips from April 2025, with mass production aimed at starting in 2027, the chipmaker previously told CNNJapan once dominated the global semiconductor industry, but it lost its lead a few years ago to companies such as TSMC, Intel. (INTC) and Samsung.

Rapidus aims to mark the country’s comeback in chip manufacturing. It comes as Washington adds increasing restrictions on the types of semiconductors American companies can sell to China.

The technology competition between the world’s two largest economies has been heating up in recent years. Over the past year, the US has enlisted its allies in Europe and Asia, including Japan, to block the sale of advanced chip-making equipment to China.

On Tuesday, Kishida also sought to dispel doubts about the strength of Japan’s economy, which lost its position as the world’s third-largest economy to Germany earlier this year.

“We hope that 2024 will be the year for the Japanese economy to completely free itself from the sentiment of deflation and cost reduction, reducing the mentality that has burdened our country,” he said.

Last month, Japan ended its era of negative interest rates with its first rate hike in 17 years, marking a historic shift from the aggressive monetary easing program implemented several years ago to combat chronic deflation.

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