Powerchip Semiconductor Manufacturing intends to develop a chip facility in northern Japan’s Miyagi prefecture with an initial expenditure of approximately 400 billion yen ($2.67 billion), according to the Nikkei business newspaper on Friday.

Semiconductor device sales peaked at $573 billion in 2022 and is predicted to fall 7% to $534 billion in 2023. This industry is crucial to allowing technology developments in a variety of industries, including mobile and consumer, infrastructure, automotive, and industrial. 

The sector has grown at a steady 6.4% CAGR over the last several decades, owing to rising demand for mobile and consumer electronics, the emergence of internet applications such as social media, and the fast digitization of most industries.

Integrated circuits are shrinking in size, becoming more powerful, and capable of performing complicated tasks, opening the door for new technological advances like artificial intelligence, machine learning, and edge computing. 

This transformation creates both possibilities and problems for industry businesses, necessitating huge investments in R&D and capital expenditure for new foundries in order to retain relevance in this fast-paced environment.

Because the semiconductor device business is strongly reliant on global ecosystems, supply chain resilience and risk mitigation are critical for long-term success. Recent interruptions and geopolitical conflicts have exposed the semiconductor supply chain’s vulnerability.

The semiconductor industry is concentrated in a few locations, principally in the United States, Taiwan, Korea, Japan, Europe, and mainland China. 

The dominance of US-based semiconductor device firms is historical; they have maintained a 53% market share over the previous five years. When all types of semiconductor company business models are considered, i.e., open foundries, OSAT, equipment, and material companies, the market share of US companies drops to 41%; when only added value is considered, the market share of US companies drops to 32%, and this number has been decreasing at a rate of 1 percentage point per year over the last five years.

The fabless business model built by US semiconductor corporations has enabled them to preserve their supremacy while creating significant vulnerabilities toward Taiwan.

According to the publication, Powerchip plans to open the next factory in 2026.

Reuters reported earlier this month that Powerchip had narrowed down five potential sites for a new facility and was in the process of negotiating subsidies to pay a portion of the first phase.