Japan is embarking on an ambitious initiative, heralded as a game-changing $65-billion investment in the fields of microchips and artificial intelligence (AI), aiming to restore its former glory as a leading technology powerhouse while also addressing critical demographic challenges posed by its ageing and declining population.
The substantial 10-trillion-yen financial package, which is anticipated to receive legislative approval this week, is viewed as a strategic move in response to global uncertainties, particularly amid rising concerns over the possibility of a Chinese military incursion into Taiwan, a country renowned for its semiconductor production.
However, experts caution that persistent issues such as labor shortages and the uncertainty about Japan’s ability to provide sufficient energy for the power-hungry AI data centers complicate this ambitious plan.
Once a dominant force in technology hardware during the 1980s, Japan has undergone a prolonged period of relative passivity, observing the rapid evolution of innovation globally, especially in the realm of artificial intelligence. “Japan had a quite a long period of almost just sitting back and observing a lot of this innovation,” remarked Kelly Forbes, president of the AI Asia Pacific Institute.
In the last few years, however, there has been a noticeable shift, signaling Japan’s awakening to the transformative potential of AI advancements. “What we have seen in the last maybe two to three years is Japan really waking up to the potential,” Forbes elaborated in her discussion with AFP.
In a notable collaboration, Japanese tech investment giant SoftBank and the American technological titan Nvidia recently announced ambitious plans to establish an extensive “AI grid” throughout Japan, laying the groundwork for a new era in AI development.
These advancements follow a wave of US investments that occurred earlier this year, including significant contributions from Microsoft, a well-known partner of OpenAI, the creators of ChatGPT.
With the world’s second oldest population, trailing only Monaco, Japan can leverage AI-driven automation to address its demographic challenges, asserted Seth Hays, author of the Asia AI Policy Monitor newsletter. “Demographically speaking, Japan’s just going to be crunched on that,” he observed, emphasizing the critical need for technological enhancements.
To sustain itself amidst these demographic shifts, “they need to utilise AI in order to get those productivity gains that keep the country going,” Hays added thoughtfully.
Energy problem
The impending government funding will also fortify Japan’s domestic Rapidus project, which aims to produce cutting-edge semiconductors, crucial for powering AI applications.
In a proactive move, Tokyo has pledged up to 4 trillion yen in subsidies, setting its sights on tripling the sales of locally manufactured microchips by 2030, a pivotal element in its strategy to regain technological leadership.
“Semiconductors are really at the core of AI innovation,” said Forbes, highlighting their essential role in fostering technological advancement.
With a majority of the world’s semiconductors produced in Taiwan, rising anxieties about a potential blockade or military action by Beijing, which claims Taiwan as part of its territory, are increasingly concerning for global markets.
Under pressure from customers and geopolitical forces to diversify production, Taiwanese semiconductor giant TSMC has taken significant steps, including the opening of an $8.6 billion chip manufacturing facility in southern Japan earlier this year and plans for an additional plant focused on advanced chip fabrication.
Moreover, the Biden administration in the US is heavily investing in domestic semiconductor manufacturing, pledging $6.1 billion to Micron and $6.6 billion to TSMC for factories on American soil, highlighting the increasing global emphasis on chip production.
Japan’s financial commitment represents an effort to maintain competitiveness within the semiconductor sector and to brace for escalating geopolitical tensions that are becoming more palpable, Forbes explained.
However, for Japan to realize these ambitious projects, a sustainable energy strategy is essential, given the high energy demands of chip manufacturing and the operation of AI training data centers.
Heavily reliant on fossil fuel imports, the Japanese government is taking steps to restart nuclear power plants that were decommissioned following the catastrophic 2011 Fukushima disaster, aiming for energy independence and sustainability.
“In Taiwan, TSMC takes up eight percent of our electricity,” Hays stated from his base in Taipei. “Where’s Japan going to get the energy?”
‘Soft’ regulation
Among Nvidia’s various collaborations with SoftBank is the launch of a new supercomputer that harnesses the capabilities of Nvidia’s cutting-edge Blackwell AI chips, representing a major leap in computational technology.
In a keynote address in Tokyo, Nvidia CEO Jensen Huang expressed his vision for the future, pledging to “transform the telecommunications network into an AI network” across Japan, a bold assertion with far-reaching implications for connectivity and technological integration.
“This is completely revolutionary,” Huang proclaimed, illustrating the concept of a radio tower that could function like an “air traffic control, essentially, for self-driving cars,” showcasing the innovative potential of AI applications in everyday life.
However, despite these promising developments, Japan still faces significant hurdles; in this year’s global digital competitiveness ranking by the Swiss management school IMD, the nation was placed a merely modest 31st.
Concurrently, Japan has been actively “taking a lead” in international dialogues surrounding AI, particularly through initiatives introduced at the G7 summit in Hiroshima last year, positioning itself as a significant player on the global stage.
Prime Minister Shigeru Ishiba has also made a bold commitment to formulate a new support framework designed to attract over 50 trillion yen in public and private investments for the sectors of AI and semiconductor technology over the next decade.
For Japan, the integration of AI advancements holds promise, especially in the healthcare sector, as Forbes highlighted, asserting that these latest investments are a strategic move to “put Japan at the forefront of this technological revolution.”
What challenges does Japan face in its efforts to become a leader in AI and semiconductor production, according to Kelly Forbes?
**Interview with Kelly Forbes, President of the AI Asia Pacific Institute**
**Interviewer:** Thank you for joining us today, Kelly. Japan is making significant investments in microchips and AI to reinvigorate its technology sector. What do you think prompted this ambitious initiative?
**Kelly Forbes:** Thank you for having me. Japan has recognized the need to adapt to global technological advancements and the changing geopolitical landscape, particularly with concerns surrounding Taiwan’s semiconductor industry. After a long period of relative passivity, Japan is now striving to regain its status as a technology powerhouse through this substantial investment.
**Interviewer:** The plan includes a significant financial package and aims to triple local microchip sales by 2030. How feasible is this goal, given the current global semiconductor landscape?
**Kelly Forbes:** While the financial commitment is impressive and signals a proactive approach, challenges remain. Japan will need to overcome issues such as labor shortages and geopolitical tensions that may impact semiconductor supply chains. However, increasing local production is essential for ensuring Japan’s technological security and competitiveness.
**Interviewer:** What role does energy supply play in the success of these initiatives?
**Kelly Forbes:** Energy is a critical consideration. AI data centers and semiconductor manufacturing are both energy-intensive processes. Japan has historically relied on fossil fuel imports, and its past experiences with energy crises underscore the importance of developing a sustainable energy strategy. Restarting nuclear power plants could be one part of the solution, but it requires careful public dialog and policy planning.
**Interviewer:** There are experts suggesting that Japan’s ageing population can leverage AI-driven automation to address workforce shortages. How realistic is this perspective?
**Kelly Forbes:** I believe it’s realistic and necessary. Japan’s demographics indeed point toward a crunch in workforce availability, and AI technologies can play a vital role in enhancing productivity. The ability to automate certain tasks will help mitigate the impact of a shrinking labor force, enabling Japan to sustain its economy and maintain global competitiveness.
**Interviewer:** do you see any potential hurdles for Japan as it embarks on this journey towards becoming a leader in AI and semiconductor production?
**Kelly Forbes:** Certainly, there are potential hurdles ranging from energy supply issues and labor shortages to the need for regulatory adaptations. Japan’s regulatory environment can be seen as comparatively lenient, but it must evolve to foster innovation while ensuring safety. Collaborative efforts between government, industry, and academia will be crucial for navigating these challenges and successfully implementing this ambitious roadmap.
**Interviewer:** Thank you, Kelly, for sharing your insights on Japan’s technological ambitions. It will be interesting to see how these initiatives unfold in the coming years.
**Kelly Forbes:** Thank you for having me. The journey ahead is full of possibilities, and I’m optimistic about Japan’s ability to regain its technological leadership.
