Japanese startup Rapidus, backed by IBM IBM, is set to commence test production of the country’s most advanced semiconductors in April.
What Happened: The development is a direct result of a phone call from IBM, which sought to mass-produce its newly designed 2-nanometer chips in Japan but was struggling to find a partner, reported Nikkei Asia on Thursday.
At the time, Japan’s chip industry was lagging behind competitors like Taiwan Semiconductor TSM and Samsung Electronics Co. SSNLF in South Korea. The most advanced chips produced in Japan were 40-nanometer, far less advanced than IBM’s 2-nanometer chips.
Despite the challenges, IBM chose Japan as a partner, likely to diversify its technology and reduce reliance on any single supplier. Rapidus, led by Tetsuro Higashi, is now preparing to start test production in April, with mass production scheduled for 2027.
However, some experts are skeptical about the project, citing the plant’s technology being two years behind global rivals. Rapidus aims to address this by offering faster factory response times and a willingness to produce smaller batches of specialized chips, tailoring its business model to fit the needs of startups.
“Japan’s cutting-edge chip industry has been lost for nearly 20 years. The market share and technical level have declined,” Tetsuro Higashi, retired chairman of Japanese chip tool producer Tokyo Electron and now chairman of Rapidus, said. “One rarely has an opportunity to recover from that.”
“If you are later than others, you need to have either an overwhelming price competitiveness or technological prowess, otherwise it will be difficult to compete with the leading rivals,” said Kazuhiro Sugiyama, consulting director of U.K. research company Omdia.
Despite the challenges, Higashi and his team at Rapidus have been working to meet IBM’s needs. The company has secured a significant investment of up to $6 billion from the Japanese government, primarily for research and development.
Why It Matters: IBM’s move to partner with Rapidus comes at a time when the company is making significant strides in the AI sector. In the second quarter of 2024, IBM’s AI bookings surpassed the $1 billion mark, driving share gains. This was part of a larger trend, with more clients transitioning from experimenting to deploying AI at scale for productivity gains.
IBM’s focus on AI has been a key driver of its success, with CEO Arvind Krishna forecasting a significant shift in the use of AI by enterprises to drive tangible business results. This shift has been reflected in IBM’s financial performance, with the company’s AI offerings seeing consistent growth, primarily driven by consulting services.
In July, Prime Minister Fumio Kishida announced a new bill aimed at boosting domestic investment in AI and semiconductor production, in response to a growing rivalry between the U.S. and China.
Meanwhile, NVIDIA Corp. NVDA has been likened to IBM in the AI era, according to Jim Keller, a former engineer at AMD and Tesla Inc. Nvidia’s focus on AI has paid off significantly, making it one of the top three companies globally by market valuation.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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