The Japanese government has faced criticism for its decision to fund local semiconductor maker Rapidus, which needs $32 billion to launch a factory to produce chips using the 2nm process. Opponents of the project argue that the money to fund Rapidus came from unspent COVID relief funds earmarked for other purposes.
Image source: Rapidus
In November this year, the Japanese government announced a financial stimulus plan for Japan’s semiconductor and AI sectors of at least $63.6 billion (10 trillion yen) over seven years. Of this, about $8.2 billion (1.3 trillion yen) is included in the first phase of financing. Part of these funds was sent to Rapidus. Nearly $6.2 billion (987 billion yen) of the allocation came from unspent COVID relief funds and was earmarked for small and medium-sized businesses, opposition lawmakers said. Critics say reallocating remaining COVID-19 relief funds to support large companies is opaque and could lead to waste.
According to Nikkei, Rapidus has already secured $46.45 million (7.3 billion yen) in private investment and up to $5.855 billion (920 billion yen) in government assistance. However, according to experts, additional funding in the amount of $25.452 billion (4 trillion yen) will be required to launch mass production of chips based on the 2nm process technology in 2027. The Japanese government wants this support to be provided through private investment and government lending. However, the proposed solution to the issue faces serious criticism from the opposition.
Japanese Prime Minister Shigeru Ishiba defended the Rapidus support project, saying the funds were returned to government coffers before being diverted, so there was no embezzlement and the process complied with all legal and fiscal protocols. However, opponents of the project argue that the original source of funds for post-pandemic support was bonds covering the deficit. These bonds add to the company’s long-term debt burden without a clear, straightforward plan to repay them given Rapidus’ uncertain future.
It is noted that the balance of Japan’s emergency reserve fund as of fiscal year 2023 has grown to $113.42 billion (18 trillion yen). Before the pandemic, in 2019 it was $12.71 billion (2 trillion yen). To increase transparency, the Japanese government has promised to conduct periodic third-party audits to ensure accountability and efficient distribution of funds allocated to Rapidus.
It is noteworthy that even officials from Japan’s Ministry of Economy, Trade and Industry have previously emphasized the need for the government to be cautious in its involvement in the project so as not to scare off potential foreign customers for Rapidus. According to some lawmakers, government funding may not inspire confidence in a company’s financial stability.