Japan invests $16 billion in its own startup Rapidus for AI chip production

Japan has approved an additional 631.5 billion yen ($4 billion) in subsidies to accelerate Rapidus Corp.'s entry into the highly competitive AI chip manufacturing market, increasing support for a project many consider unlikely, UNN reports, citing Bloomberg.

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The capital is intended to finance Rapidus's work for IT company Fujitsu Ltd., one of the first clients on whom Tokyo is pinning its hopes for launching this landmark project. According to a statement from the Ministry of Economy, Trade and Industry, the new funds increase the total government investment in the startup to 2.6 trillion yen ($16.3 billion) by the end of the current fiscal year (March 2027).

The young company aims to begin production of advanced 2-nanometer chips by 2027, as confirmed by Minister Resei Akazawa, and help Japan reduce its dependence on industry leader Taiwan Semiconductor Manufacturing Co. Policymakers consider the success of Rapidus and its technological independence in AI, robotics, and quantum computing critical to the country's security.

The Japanese state-owned enterprise, founded in 2022, also faces additional competition for chip expertise from an unexpected rival: Elon Musk is entering this rapidly developing market, collaborating with Intel Corp. within the framework of the so-called Terafab project to produce semiconductors for his companies, including Tesla Inc., SpaceX, and xAI.

Despite recent successes, Rapidus still lags significantly behind TSMC, which began mass production of 2nm chips last year and is a major chip manufacturer for Nvidia Corp. and Apple Inc. In addition to technological hurdles, Rapidus, like other manufacturers in resource-poor Japan, faces rising energy and material prices amid the conflict in the Middle East. Tokyo is counting on Rapidus at a time when growing demand for chips critical to AI development is reducing the supply of memory and other semiconductors worldwide.

Rapidus, which plans to conduct an initial public offering (IPO) around fiscal year 2031, intends to raise about 3 trillion yen in private financing, partly through government loan guarantees, the Japanese ministry said. The company has established an analytical center in Chitose, Hokkaido, for testing and diagnosing Rapidus chips to improve the yield of usable products, and has also launched a process technology development center.

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