TSMC, a major semiconductor company based in Taiwan, is exploring the possibility of setting up sophisticated chip packaging facilities in Japan. This may be a big step forward for the Japanese semiconductor sector.

Sources close to the situation told Reuters that the talks are still in the early stages and that they would want to remain anonymous since the material is sensitive. According to one source, TSMC is considering bringing its advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to Japan. This method involves stacking chips on top of one another to improve processing capacity, conserve space, and lower power usage.

As of now, Taiwan is home to all of TSMC's CoWoS capability, and no firm decisions have been made about the scope or timing of any possible investment. The growth of artificial intelligence applications has led to a global spike in demand for sophisticated semiconductor packaging. To keep up with this growing demand, leading chipmakers like TSMC, Samsung Electronics, and Intel are increasing their packaging capacity.

C.C. Wei, the CEO of TSMC, announced earlier this year that the company intends to treble its CoWoS output in 2024 and to continue expanding in 2025.

With total investments exceeding $20 billion, TSMC's current operations in Japan, which include the construction of a new plant in Kyushu and joint ventures with top Japanese corporations like Sony and Toyota, would be enhanced by the potential establishment of advanced packaging capacity in the nation.

TSMC's deliberate entry into the Japanese market is in line with the nation's goal of developing its semiconductor sector by taking advantage of its robust ecosystem, which includes top suppliers of equipment and materials, increasing investments in chip production, and a large customer base.

A representative of Japan's industry ministry expressed hope that the country would be open to receiving sophisticated packaging efforts and highlighted the conducive climate that would assist them.

Analysts warn that TSMC's prospective investment in Japan may not be as large as it seems because most of the company's current CoWoS clients are in the US and there is still uncertainty about the market for CoWoS packaging in Japan.

The aggressive approach taken by the Japanese government to revive its semiconductor industry has garnered considerable interest from international semiconductor companies. The Japanese government has provided significant subsidies to TSMC's business endeavors because it sees semiconductor growth as essential to the country's economic stability.

Other industry participants have also been drawn in by this proactive strategy, including Intel, which is rumored to be considering opening an advanced packaging research lab in Japan to deepen its relationships with regional chip supply chain businesses.

Samsung Electronics is also attempting to successfully compete in the high bandwidth memory chip market by establishing an advanced packaging research lab in Yokohama with government backing and by investigating joint ventures with Japanese firms for the acquisition of materials.