ROHCY - Land Of The Rising Chip Factories

2023-08-09 01:35:00 ET

Summary

• Japan, once a dominant player in the global semiconductor industry, is determined to reclaim its leading role.
• Semiconductor manufacturing has become a mission-critical asset for global powerhouses racing to develop the next generation of artificial intelligence (AI) technology.
• The market’s response to those plans has been relatively subdued, but that is changing as new plants - the first in more than 40 years - start to sprout in Kyushu, once known as Japan’s “Silicon Island.”.

By Felix Zheng

Japan, once a dominant player in the global semiconductor industry, is determined to reclaim its leading role.

Semiconductor manufacturing has become a mission-critical asset for global powerhouses racing to develop the next generation of artificial intelligence ((AI)) technology. While the Biden administration mulls new restrictions on the export of AI chips to China, Chinese officials have countered with export controls on gallium and germanium - key elements in the compound semiconductors essential to AI computation.

Now, a once dominant player is rejoining the chip wars: Japan. Thanks to the country’s 2022 Chips Act initiative, which allotted 450 bn yen ($3.2 bn) for chip production and another 370 bn yen ($2.6 bn) to fortify the supply chain, an entire semiconductor ecosystem is ready to rise in the Land of the Rising Sun.

The market’s response to those plans has been relatively subdued, but that is changing as new plants - the first in more than 40 years - start to sprout in Kyushu, once known as Japan’s “Silicon Island.”

Japan Advanced Semiconductor Manufacturing (JASM), jointly owned by TSMC ( TSM ), Sony ( SONY ) and Denso ( DNZOF ), plans to start building a new chip fab by September 2023.

TSMC also announced the possibility of a second plant in Kumamoto (a prefecture in Kyushu), while other leading players such as ROHM ( ROHCF ), Mitsubishi Electric ( MIELY ) and Sumco ( SUMCF ) have all announced capex plans. With these new investments, Kyushu - also known as the “Land of Fire” for its volcano Sakurajima and the Beppu hot springs - is indeed heating up.

Japan also boasts high-precision manufacturing equipment to support chip production throughout the supply chain.

This leading-edge equipment enables nanometer-sized 3D transistors on integrated circuits; slicing and grinding super-thin wafers on which the circuits are built; and making “chiplet” modules for processors that can render 3D images and complex AI calculations.

We believe these equipment vendors are well positioned to capitalize on new opportunities as demand for AI computing components continues to accelerate.

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Investment decisions and the appropriateness of this material should be made based on an investor's individual objectives and circumstances and in consultation with his or her advisors. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. The firm, its employees and advisory accounts may hold positions of any companies discussed. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. This material may include estimates, outlooks, projections and other “forward-looking statements.” Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed.

This material is not intended as a formal research report and should not be relied upon as a basis for making an investment decision. The firm, its employees and advisory accounts may hold positions of any companies discussed. Specific securities identified and described do not represent all of the securities purchased, sold or recommended for advisory clients. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable.

Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.

This material is being issued on a limited basis through various global subsidiaries and affiliates of Neuberger Berman Group LLC. Please visit www.nb.com/disclosure-global-communications for the specific entities and jurisdictional limitations and restrictions.

The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.

© 2009-2023 Neuberger Berman Group LLC. All rights reserved.

For further details see: