Japan's Chip Comeback Faces Its Biggest Test as Rapidus Targets 2nm Production in 2027

A breakthrough in Hokkaido, with a bigger test still ahead

Rapidus announced successful pilot production of two nanometer (2nm) transistors in July 2025, less than three years after its founding in 2022. At its factory in Chitose, on Japan's northernmost island of Hokkaido, the semiconductor startup is attempting to turn that early achievement into mass production by 2027.

The company, led by 73-year-old engineer and chief executive Atsuyoshi Koike, sits at the centre of Japan's effort to recover a place among the world's leading chip manufacturers. Its ambition is to recover two decades of lost technological ground in just five years, using public funding, private investment and technology partnerships with IBM and Belgium's IMEC.

Koike described the speed of the company's progress with a brief assessment:

an incredible pace

As of August 22, 2025, the next test is whether Rapidus can turn experimental production into a dependable business. Prototype deliveries to partners such as Broadcom are expected to help determine its prospects. The company must make chips reliably, attract enough customers and raise the money needed to support commercial production.

Rapidus needs an estimated 5 trillion yen, or $34.5 billion, to reach mass production. Government subsidies already exceed $6 billion, with additional private investment, but the company has secured only a fraction of the estimated total requirement. Japan's wider semiconductor push includes a plan to invest more than $65 billion by 2030 and raise domestic chip sales to more than 15 trillion yen, three times their previous level.

The stakes reach beyond one factory. Chips power Japan's cars, communications networks and digital services. A stronger domestic supply could make those industries less vulnerable to shortages and international tensions, while giving Japan a larger role in the technology used for artificial intelligence and advanced computing.

How Japan lost its manufacturing lead

Japanese companies controlled more than half of the global market for dynamic random-access memory, or DRAM, in the 1980s. These chips provide the working memory that computers and other electronic devices use while operating. Japan's manufacturers were central to the expansion of computers and consumer electronics.

Trade disputes with the United States and the rapid rise in the value of the yen put pressure on that position. A stronger yen made Japanese products more expensive for buyers using other currencies. Japanese companies also struggled to adapt as the industry moved toward logic chips and a different division of work between chip designers and manufacturers.

Logic chips process information and perform calculations. Under the fabless and foundry business model, one company designs a chip without owning the factory that makes it, while a foundry manufactures chips for outside customers. Japan's failure to shift successfully toward those markets helped rivals in Taiwan, South Korea and the United States move ahead.

By the 2000s, Japan's share of the global semiconductor market had fallen to around 10%. Its earlier DRAM share and its later share of the broader semiconductor market describe different markets, but both show the scale of the change in its industrial position. Japan's electronics trade surplus had turned into a deficit by 2022.

The COVID-19 pandemic exposed the consequences of fragile international supply chains. Chip shortages disrupted Japan's vital automotive industry. At the same time, competition between the United States and China, alongside the risk of instability around Taiwan, the world's chipmaking epicentre, increased concern about relying heavily on foreign suppliers.

Why chips became an economic security priority

Japan's Economic Security Promotion Act of 2022 identified stable semiconductor supplies as an urgent national goal. Policymakers want the country to meet its own needs and support its allies without having essential industries exposed to global disruptions or foreign policy shocks.

Semiconductors act as the "brains" of modern devices. They enable smartphones, electric vehicles, artificial intelligence systems and advanced weaponry to process information and carry out instructions. Their role across civilian industries and defence makes them strategic materials as well as commercial products.

Japan's policy connects economic independence with the ability to design and manufacture advanced chips. For a carmaker, dependable access to semiconductors affects whether vehicles can leave the production line. For the country, access affects how much control it has over the technologies used in transport, communications and security.

The revival strategy therefore extends beyond replacing imported chips. Japan is trying to build a more resilient domestic supply chain while becoming an indispensable part of an alliance led by the United States for secure, advanced semiconductor production. International partnerships remain central to that effort.

Rapidus combines Japanese backing with overseas technology

Rapidus is a venture backed by public and private funding, supported by the Ministry of Economy, Trade and Industry, known as METI, and a group of major Japanese companies that includes Toyota, Sony, NTT and SoftBank. Its government subsidies and private investment are intended to support a jump into the most advanced end of logic chip manufacturing.

IBM provides access to its Gate-All-Around, or GAA, chip architecture. The term describes a transistor design in which the gate surrounds the channel that carries electrical current, giving it greater control over the transistor's operation. IMEC contributes expertise in extreme ultraviolet, or EUV, lithography, the technology used to create extremely fine patterns during chip production.

Rapidus has sent more than 150 engineers to IBM's research centre in New York and IMEC's laboratories in Belgium for intensive training. The partnerships give the company access to technology and practical knowledge as it attempts to close Japan's manufacturing gap.

In December 2023, Rapidus became the first Japanese company to acquire an EUV system from Dutch supplier ASML. The equipment is a critical part of its effort to manufacture at the 2nm node. Its Hokkaido pilot line now serves as the proving ground for bringing the equipment, manufacturing process and engineers together.

The main dates show how compressed the project's schedule is:

• 2022: Rapidus was founded, and Japan established the Economic Security Promotion Act and the Leading-edge Semiconductor Technology Center.
• December 2023: Rapidus acquired an EUV system from ASML.
• May 2024: Then Prime Minister Fumio Kishida joined China and South Korea in pledging cooperation on supply chains.
• July 2025: Rapidus announced successful pilot production of 2nm transistors in Hokkaido.
• 2027: Rapidus aims to begin mass production of 2nm logic chips.
• 2030: Japan's wider investment plan targets domestic chip sales of more than 15 trillion yen.

What makes 2nm technology valuable?

Rapidus's 2nm goal concerns the shrinking scale of transistor technology. Transistors are the tiny switching components used to process information on chips, which are produced on silicon wafers. Smaller transistors allow more of them to fit on a chip, helping improve computing performance and energy efficiency.

The benefits matter for artificial intelligence, high-performance computing, autonomous vehicles and 6G telecommunications. Those applications demand substantial computing power, and using energy more efficiently becomes increasingly valuable as their demands grow.

TSMC, Samsung and Intel are among the small number of companies competing to commercialise 2nm technology. TSMC and Samsung are expected to begin mass production in 2025, two years before Rapidus's target. Japan's new entrant is therefore trying to catch competitors that are already moving toward commercial production.

Japan's current best logic chip manufacturing technology is at the 40nm node, leaving it about two decades behind the leaders. Rapidus's strategy is to move directly into advanced production through international cooperation, rather than gradually work through every intervening generation.

The July pilot milestone gives the company a starting point. Its next technical task is to reproduce the process consistently across commercial volumes, with quality good enough for customers to rely on.

Japan's investment reaches beyond one company

Japan spent 3.9 trillion yen, or $27 billion, on the semiconductor sector between 2021 and 2023. Measured as a share of gross domestic product, that spending exceeded the United States' CHIPS Act effort. GDP measures the size of an economy, so this comparison shows the scale of Japan's commitment relative to its economic resources.

The broader plan to invest more than $65 billion by 2030 combines subsidies, foreign investment, research, infrastructure and workforce development. Its target of more than 15 trillion yen in domestic chip sales would represent a tripling of sales.

TSMC, the world's largest chipmaker, has opened a plant in Kumamoto with Sony and Denso, and a second factory is planned. Intel and Micron are also expanding in Japan. These investments broaden the revival beyond Rapidus's attempt to enter the most advanced logic chip market.

The Leading-edge Semiconductor Technology Center, or LSTC, was established in 2022 to coordinate advanced research and development and work with international partners. Japan is also investing in advanced packaging, automation and artificial intelligence research.

The strategy links factory construction with the businesses and research organisations that make production possible. Domestic suppliers of materials and equipment are part of that effort, as are training programmes and international recruitment. Japan wants a manufacturing base that can support several parts of the industry rather than depend on one project.

Money, manufacturing and customers must come together

Rapidus's estimated 5 trillion yen funding requirement makes financing a central challenge. New laws allow additional public support and debt guarantees, which can help lenders provide money with government backing. Critics question whether taxpayers should bear such large costs for a venture without an established production record.

Koike wants to attract more private funding to preserve the company's autonomy. Investors, however, must weigh its technical progress against its lack of a track record and the expense of building a competitive foundry.

Manufacturing presents another difficult stage, often called the "Valley of Death": the move from a successful research result to a product that can be made reliably and sold. Rapidus's engineers are working to master IBM's GAA technology and EUV lithography while converting laboratory knowledge into factory practice.

A crucial measure is yield, meaning the share of manufactured chips that work properly. Commercial production needs consistently high yields because defective chips consume materials, equipment time and money. Producing a prototype is one step; making large numbers of dependable chips is the next.

Rapidus also needs customers in a market dominated by TSMC and Samsung. It has announced a partnership with Broadcom and is courting companies in Silicon Valley. Koike hopes faster lead times and specialised services will give customers a reason to choose Rapidus.

Whether those efforts will generate enough orders to sustain operations is still unknown. The company's ability to become profitable depends on securing business while meeting its production, quality and financing targets. Prototype deliveries are expected to help prospective partners assess its capabilities.

A shrinking workforce adds pressure

Japan faces an expected shortage of 40,000 semiconductor engineers. Its workforce in the sector has shrunk sharply over recent decades, and many experienced engineers are now in their 50s or working overseas. A declining birthrate makes rebuilding that workforce harder.

Japanese companies are recruiting talent from abroad, particularly Vietnam, and partnering with Vietnamese universities. They are also expanding training programmes at home. These efforts are intended to build a steady supply of people with the skills needed for factories, research and supporting businesses.

Rapidus's overseas training programme addresses an immediate need for expertise in its chosen manufacturing technology. The wider industry needs a much larger pipeline of workers, and developing that pipeline will take years.

The risk of a "deepening talent shortage" connects the national strategy's different parts. New factories, research centres and suppliers all need skilled people. Funding buildings and equipment must be matched by the ability to recruit and train the people who will operate them.

The factory depends on gases, equipment and electricity

Air Liquide's new air separation unit is part of the infrastructure being developed to support semiconductor production. The project will supply essential industrial gases used in chipmaking and renewable energy, serving both the semiconductor and green technology sectors.

Japan retains a strong position in chipmaking materials and equipment. It remains a global leader in photoresists and other materials, with JSR and Tokyo Electron playing key roles. Photoresists are materials used when transferring patterns during chip manufacture.

Cooperation involving Intel and Japanese companies aims to automate assembly and testing, the stages that prepare manufactured chips for use and check their performance. Improving those processes can help factories operate more efficiently and compete on cost and quality.

Electricity is another practical requirement. Semiconductor factories consume large amounts of energy and need a stable supply. Nuclear power is viewed as a potential source of dependable electricity for Rapidus's operations in Hokkaido.

Japan's effort therefore stretches from research partnerships to basic industrial services. Advanced transistor production depends on gases, materials, machinery, trained workers and reliable power being available together.

Japan balances alliances, trade and the cost of subsidies

The United States, Japan and the Netherlands have coordinated export controls to limit China's access to advanced chipmaking technology. Japan's strength in materials and equipment gives it an important role at points in the supply chain where access can be restricted.

China is also Japan's largest trading partner and the world's biggest semiconductor consumer. Japan is wary of fully separating its economy from China even as it strengthens technology partnerships with the United States and Europe.

In May 2024, then Prime Minister Fumio Kishida joined China and South Korea in pledging to strengthen supply chain cooperation and avoid disruptions. That commitment reflects Japan's effort to diversify its suppliers, deepen alliances and preserve regional stability at the same time.

Rapidus's relationships with IBM and IMEC, alongside investment from TSMC, Intel and other foreign companies, place international cooperation at the centre of Japan's revival. The country's goal is greater resilience within a network of partners.

Some economists warn that large subsidies can distort markets without guaranteeing lasting success, especially as the United States, China and South Korea continue to spend heavily. The Organisation for Economic Co-operation and Development and the International Monetary Fund caution that competing industrial policies can weaken global trade rules and create inefficiencies.

Japan must also balance strategic investment against fiscal pressures and the needs of an ageing population. Continued support for chipmaking competes with the goal of fiscal consolidation, meaning bringing government finances onto a more sustainable footing.

A successful revival could support artificial intelligence, autonomous vehicles and digital infrastructure, strengthen economic growth and give Japan more technological influence. Benefits could reach industries from automotive manufacturing to renewable energy, while a more resilient domestic supply chain would reduce exposure to global shocks.

The caution "All that glitters may not be gold" captures the financial and industrial risk. Rapidus's pilot line is a milestone in Japan's comeback attempt, while reliable mass production, sufficient customers and sustained funding remain the practical tests that will determine its outcome.

The Essentials

• Rapidus announced pilot production of 2nm transistors in July 2025 and targets mass production in 2027.
• The company needs an estimated 5 trillion yen, or $34.5 billion, to reach mass production and has secured only part of that amount.
• Japan's wider plan calls for investment exceeding $65 billion by 2030 and domestic chip sales above 15 trillion yen.
• IBM, IMEC and ASML support Rapidus's technology effort, while foreign manufacturers are expanding Japan's production base.
• Japan faces an expected shortage of 40,000 engineers, alongside challenges in production quality, financing and customer recruitment.
• Japan is strengthening technology alliances while balancing trade with China, fiscal pressures and the risks of large industrial subsidies.