A Quiet Town Reimagined for High-Tech Ambitions

When I first visited Chitose in early 2024, it felt like many regional cities in Japan—quiet, clean, and somewhat distant from the country’s political and industrial cores. But that impression changed quickly after I stepped onto the planned site for what may soon become one of the world’s most advanced semiconductor factories. This isn’t just an industrial project; it’s part of Japan’s calculated return to the top tier of the global chipmaking hierarchy.

Hokkaido’s Strategic Rationale

While Hokkaido has in the past had more renown for ski resorts and livestock farms than industries like high-tech manufacturing, it is being reimagined for strategic purposes courtesy of securitised overdrive! Many billions are being spent by a government-backed initiative to turn this northern Japanese island into an industrial hub of technology. The motor player in this endeavour is going to be Rapidus, a semiconductor startup formed in 2022 with big-name support from Sony, Toyota, Kioxia, and the NTT telecommunications giant.

Building the Factory of the Future

In April 2024, Rapidus secured $3.9 billion in government subsidies to begin building its flagship fabrication plant in Chitose. As of early 2025, total government funding for the company has reached approximately $6.1 billion (over 920 billion yen), with another $1.3 billion earmarked for fiscal 2025. Groundbreaking began in September 2023, and by December 2024, the factory’s exterior was in place. Crucially, Japan’s first EUV lithography tool from ASML was delivered and installed at the site.

The goal is to produce cutting-edge 2-nanometre chips by 2027. Rapidus is moving aggressively—pilot line testing began in April 2025, and in July 2025, the company unveiled a 300mm wafer containing its first 2nm prototypes using gate-all-around (GAA) transistors.

Why Chitose Makes Sense

Hokkaido was not a random choice. The site offers critical advantages for semiconductor manufacturing: abundant land, a cool climate that helps reduce cooling costs in temperature-sensitive cleanrooms, and the potential for renewable energy integration. Japan’s Ministry of Economy, Trade and Industry (METI) has outlined this area as central to its decoupling strategy—reducing reliance on foreign chip suppliers, especially amid growing geopolitical uncertainty in Asia.

A Global Supply Chain Reset

COVID autocatalysed chip shortages, signalling well the precariousness of reliance on a few fabrication clusters in South Korea and Taiwan. To the extent that many US and European automakers were forced to stop production, the global automotive industry sustained a loss which has been estimated at some $210 billion in 2021, according to Bloomberg reporting. Thus was Japan made acutely aware of its vulnerabilities, prompting Tokyo to act urgently and decisively.

A National Strategy Backed by Billions

The broader vision involves more than a single facility. The Japanese government is preparing a ¥10 trillion ($65 billion) package to fund a range of semiconductor initiatives over the coming years. This includes subsidies for infrastructure, research and development, and international collaboration. Hokkaido’s role in this strategy is pivotal—Rapidus isn’t expected to stand alone. Ancillary firms in materials, packaging, and equipment manufacturing are being encouraged to co-locate and form a regional cluster.

A Move Watched from All Angles

Globally, this effort is being closely monitored. The United States, which has launched its own CHIPS Act worth $52.7 billion, is looking for reliable allies in its bid to secure semiconductor independence from China. Japan, through partnerships like the one between Rapidus and IBM, is positioning itself as just that. Meanwhile, the European Union is pushing forward with its €43 billion Chips Act, underlining the same trend: diversification, decentralisation, and national resilience in tech supply chains.

Reclaiming Lost Ground

Chip competence in Japan does not only mean economic security; it refers to a position in the post-silicon era. In the past, for stones from the 1980s, Japan registered a global market share of over 50%; yet, today, it is below 10%. Nevertheless, Japan remains critical to the semiconductor industry. In 2024, Japanese chip-making equipment accounted for a sale of ¥2.831 trillion, 17.3% higher year-on-year, making it the second-largest of all countries after the USA in terms of semiconductor manufacturing equipment sales.

The domestic semiconductor market itself was valued at $40.4 billion in 2024 and is projected to grow to $61.6 billion by 2033.

Timelines and Technical Hurdles

Rapidus plans to reach mass production by 2027, maintaining one of the fastest timelines globally for advanced-node development. To support its aggressive pace, over 100 Rapidus engineers and scientists are stationed at IBM’s Albany NanoTech Complex in New York for technology transfer. Major suppliers like ASML, Applied Materials, and Lam Research have also announced plans to establish bases around the Chitose site.

The company announced its first customer in 2025: Canadian AI startup Tenstorrent. It is reportedly in talks with 50 potential U.S. clients and plans to deliver 2 nm chip samples to Broadcom by mid-2025.

What It Means for Global Brands

For global brands—whether in automotive, telecom, healthcare, or computing—Japan’s semiconductor play introduces a potential new node in an increasingly strained supply web. If successful, Hokkaido could emerge as an alternative to Taiwan and South Korea for advanced chips, offering more resilience to multinational production strategies.

If you’re managing sourcing decisions, procurement strategies, or global R&D pipelines, it may be time to map Japan—and Hokkaido specifically—into your contingency plans. Brands are already rethinking how they define “just-in-time” logistics. Semiconductor access could define operational stability in the next decade.

The Investor Viewpoint

Investors are also watching closely. Venture firms, infrastructure funds, and corporate VCs are looking at Japan’s semiconductor sector as it reawakens. Opportunities may exist not just in chip production but in related areas like AI computing, industrial robotics, and precision manufacturing tools.

A Defining Two Years Ahead

The next two years will be defining. If the Rapidus project can meet its milestones, Hokkaido could become more than a case study. It could be a playbook.