Samsung and SK Hynix Turn Down Japanese Financial Aid Because Their Domestic Expenses Are Extremely High
The Japanese government has proposed to Samsung Electronics and SK Hynix multiple times since 2018 to build memory semiconductor manufacturing facilities in Japan but both companies have declined those invitations. Japanese media reported that SK Hynix made an investment declaration of 2 trillion Japanese yen for their operations in Japan but industry experts confirmed that both companies had studied the investment possibility during the previous three years. The financial benefits of the Japanese market do not lead to business expansion because South Korean political opinion blocks companies from expanding their operations in that market.
The Samsung semiconductor executives explained that operating a memory production line in Japan costs 50% less than the same operation in South Korea. The Japanese government, led by the Ministry of Economy, Trade and Industry (METI), has proposed a "full package" of incentives that includes
- Direct Subsidies The government provides funding for facility investments which matches the financial support given to TSMC and Micron.
- Infrastructure Support The program provides centralized support for utilities and transportation and site location services.
- Supply Chain Integration The program enables direct links between local equipment manufacturers and supply chain needs through their dedicated workforce.
- Policy Stability The Prime Minister’s Office extended a long term commitment that treats semiconductor manufacturing as a national security project.
The domestic investment returns for South Korean chipmakers have started to decrease according to industry experts. The high tax rates and insufficient subsidy funds together with the infrastructure cost increase, create "cost leaks" according to the critics. The government of Korea and the local municipalities require semiconductor companies to make investments in specific areas for political reasons which creates difficulties for the companies according to their operational needs. The insiders who work with these entities claim that these demands create challenges which prevent them from competing in the global market.
Japan uses its national project framework to attract international companies to its territory. Notable examples include
- TSMC The company received funding of up to 476 billion yen for its Kumamoto facility, with more support pledged for a second phase.
- Micron The company received funding for expanding its Hiroshima factory and developing advanced DRAM technology.
- Western Digital & Kioxia The government continues to provide financial backing for their collaborative production operations.
Despite the clear cost benefits and the strategic stability offered by Japan, neither Samsung nor SK Hynix is currently considering Japanese manufacturing. The political environment in Japan makes it impossible for South Korean companies to invest there because Korean citizens will reject such moves and the national government will apply pressure against them. The companies face a decision between following economic logic or adhering to nationalistic sentiments.
