Japan is mounting its most ambitious industrial revival in decades as it seeks to transform Hokkaido—traditionally an agricultural stronghold—into a centre for cutting-edge semiconductor manufacturing. The island, known for producing more than half of the nation’s dairy and for its picturesque landscapes, is now dotted with cranes and construction sites as the government pushes ahead with a multi-billion-dollar plan to reboot the country’s chip-making capabilities.
For years, Hokkaido has lacked major industries beyond farming and tourism, prompting a local saying that the island attracts people only for them to leave. Now, Tokyo hopes to reverse that narrative by creating what some have dubbed “Hokkaido Valley,” a Japanese counterpart to Silicon Valley. At the centre of this transformation is Rapidus, a relatively new chipmaker backed by the government and major corporations including Toyota, SoftBank and Sony. Partnered with IBM, Rapidus has secured billions to build Japan’s first advanced chip fabrication plant in decades, with the government alone injecting around $12 billion into the project.
Chitose, the chosen site for the massive chip factory, offers stable water and electricity supplies and lower earthquake risk—key factors for sensitive semiconductor manufacturing. Rapidus plans to integrate the facility into Hokkaido’s landscape by covering it with grass. Earlier this year, the company reached a major milestone when it produced prototype 2-nanometre transistors using an extreme ultraviolet lithography machine supplied by Dutch giant ASML. Only TSMC and Samsung have achieved this level of miniaturisation so far, making Rapidus’s advance a significant step for Japan’s re-entry into the global chip race.
Rapidus aims to begin mass-producing 2nm chips by 2027, but analysts warn the company still faces daunting obstacles, from achieving high yields to securing customers in a market dominated by well-established rivals. A 2024 regional economic report estimated that current funding falls far short of the roughly 5 trillion yen needed to reach large-scale production. The CSIS think-tank has also noted that Rapidus lacks experience in advanced chip manufacturing and may struggle to access essential know-how.
Despite these concerns, the Japanese government continues to ramp up investment. Between 2020 and early 2024, it committed $27 billion to the chip sector—proportionally more, relative to GDP, than the US allocated through the CHIPS Act. In late 2024, Tokyo unveiled an additional $65 billion package for AI and semiconductor growth. The push comes after decades of decline: in the 1980s, Japan accounted for more than half of global chip production, but today manufactures just over 10%. Trade tensions with the US and a failure to sustain subsidies left domestic firms trailing Taiwan and South Korea.
Demographic pressures add further complexity. With a shrinking population and soaring social welfare costs, Japan struggles to channel resources into research and technology. The country also faces a shortfall of about 40,000 semiconductor engineers in the coming years. Rapidus is partnering with Hokkaido University and others to train workers, but acknowledges it will need significant foreign talent at a time when public resistance to migrant labour remains high.
Still, momentum is building. TSMC has already begun producing 12–28nm chips at its Kumamoto facility and is constructing a second plant, helping revitalise the local economy. Domestic firms such as Kioxia, Toshiba and ROHM are also expanding with state support, while Micron and Samsung are increasing investments in Japan. In Hokkaido itself, global chip-equipment companies like ASML and Tokyo Electron have opened offices near Rapidus’s new site.
Rapidus CEO Atsuyoshi Koike says the company’s competitive edge will be speed—promising to deliver custom chips three to four times faster than global rivals. As demand surges due to AI and automakers push for secure regional supply chains, Japan sees strategic importance in restoring control over chip manufacturing amid rising geopolitical risks.
For Tokyo, the Rapidus gamble is part industrial strategy, part national security priority. While success is far from guaranteed, analysts say this renewed focus on semiconductors may be Japan’s strongest opportunity in decades to rebuild a domestic ecosystem and reassert itself as a serious contender in the global chip industry.
