Japan’s Strides in Artificial Intelligence and Semiconductor Market
In recent years, Japan has seen a decline in its standing within the artificial intelligence (AI) and semiconductor sectors. The COVID-19 pandemic further worsened the situation by disrupting the production lines and supply chains, heavily impacting the country’s ability to meet domestic and export demands.
However, Japan is gearing up to regain its position in the next-gen tech industry. The country’s government has announced plans to introduce a hefty stimulus package of 2 trillion yen ($12.8 billion) to encourage investments in the AI and semiconductor domains. Slated for release by November’s end, this package is a testament to Japan’s strategic preference for robust policy support from the government to drive its economic goals.
Over the past three years, the government has demonstrated its commitment to this cause, investing roughly 0.71 percent of GDP or around 4 trillion yen under the leadership of former Prime Minister Kishida Fumio. The Liberal Democratic Party’s consistent efforts reflect its determination to rebuild Japan’s stature in the AI and chip markets.
Japan’s Tech Aspirations
Japan’s tech policies are designed for a comprehensive AI rollout, featuring domestic AI-enabled chips that surpass the 5nm barrier. The objective is to spur transformative economic and social progress by digitizing the economy, health services, and disaster responses.
A study by GLOCOM reveals that Generative AI (Gen-AI) could unlock productive capacity in Japan equivalent to over one-fifth of the country’s current GDP. With this potential benefit in sight, Japan is investing heavily in its AI and chip markets to regain its strategic tech autonomy and extend its influence in major emerging markets.
The AI market forecasts further reinforce the rationale behind this substantial stimulus package. Japan’s AI market is predicted to hit $27.12 billion by 2032, representing the fastest growth during the forecast period of 2022-2032.
The forthcoming stimulus package is a two-pronged solution for Japan. It not only bolsters the Japanese AI and chip industries, stimulating economic growth, but also tackles the challenges of an aging population and a shrinking workforce.
The Stimulus Package
Previous packages from the Japanese government emphasized long-term support measures and capacity generation for the chip and AI industries. However, these measures did not immediately facilitate Japan’s entry into global markets. The upcoming stimulus package aims to address this issue with medium-term support measures.
The government will also offer upfront investment support to semiconductor companies that plan to establish new production facilities within Japan. This support will continue even if the private sector withdraws from the designated projects, ensuring financial backing to investors until the project is fully established.
Japan’s Economic Security Promotion Act, 2022, emphasizes a stable semiconductor supply chain and a robust domestic chip industry as critical national tasks. The upcoming stimulus package aligns with this, encouraging companies to relocate their production hubs domestically.
The role of the Japanese government-backed Rapidus, a coalition of eight major Japanese companies, is pivotal in this stimulus package. Rapidus is mandated to fortify Japan’s semiconductor and AI landscape through strategic initiatives.
Domestic Challenges
While Japan’s AI market is witnessing a rise in the adoption of AI-powered chatbots and virtual assistants, efforts to digitalize services have not been well-received by the public. This skepticism, combined with a cultural preference for human interaction over AI-backed digital mediums, presents a significant challenge.
Additionally, Japanese society has a deeply ingrained aversion to risk, which manifests in conservative corporate practices. This aversion has significantly hindered next-gen tech advancements in Japan.
The upcoming tech stimulus packages aim to encourage Japanese corporations to reclaim their leadership position by embracing the entrepreneurial ecosystem of the current digital landscape.
The new stimulus package will strive to align the government’s aspirational policies with the sentiments of private corporations. The large-scale mid-term strategic financial support aims to enable Japanese corporations to collaborate, co-develop, and eventually co-produce the next-gen technologies necessary for future national growth.
