"Japan will invest $21 billion at my direction,"
President Donald Trump stated on October 14 on the social media platform Truth Social. He touted the plan to build a semiconductor factory in the U.S. using funds secured from Japan through tariff reductions as one of his achievements, coinciding with the upcoming midterm elections. However, in Japan, there are mixed feelings of hope and concern regarding the investment.
GlobalFoundries (GF), a U.S. semiconductor contract manufacturer, announced plans to build two factories in New York State. This initiative is part of a $550 billion investment agreement reached during U.S.-Japan tariff negotiations last year, marking the third project under that agreement. The total project cost is expected to reach up to $21 billion (approximately 28.3 trillion won). The first factory will be constructed with an investment of about $10 billion and is set to begin operations in 2029, followed by the second factory. Trump claimed that this project would create over 27,000 jobs in construction and supply chain sectors, and more than 1,000 jobs in manufacturing.
The structure of this project involves Japan providing the investment while U.S. companies operate the factories. According to the Nihon Keizai Shimbun (Nikkei), the U.S. and Japanese governments will establish a special purpose vehicle (SPV) to secure funding and manage construction and production, while GF will handle operations, including workforce and material procurement. Both countries will hold shares in the factories. The new factories will produce logic semiconductors used in automotive, industrial equipment, and communication infrastructure, with initial customers including Japan's Renesas Electronics and U.S. tech giant Apple.
Japanese companies expect this project to provide stable semiconductor procurement and expand equipment orders. Renesas CEO Hidetoshi Shibata described the new factory's production capacity as an extension of their existing production base, stating that this collaboration will strengthen long-term supply foundations. Tokyo Electron President Toshiki Kawai also welcomed the opportunity to contribute to expanding semiconductor production capacity in the U.S.
Kyodo News reported that this project will also aid Japan in diversifying its semiconductor supply chain. With advanced semiconductor production concentrated in Taiwan and South Korea, increasing production in the U.S. aims to mitigate geopolitical risks, particularly in the event of a crisis similar to Taiwan. The report also noted that following the Kumamoto earthquake in July, which halted operations at some semiconductor factories in Kyushu, Japan seeks to reduce the risk of supply disruptions due to disasters.
However, expectations for U.S. investment are not without concerns. Nikkei reported that Japan's three major banks—Mitsubishi UFJ, Sumitomo Mitsui Trust, and Mizuho—did not participate in funding the second phase of the project due to the burden of securing large amounts of dollars over an extended period. Instead of these banks, U.S. firms Citigroup and JPMorgan Chase, which have ample dollar resources, are involved in the second phase.
Japanese banks had previously requested government support. Kyodo News reported that in July, major banks sought assistance from the Ministry of Finance for dollar procurement, and the government is considering support measures. There have been discussions about utilizing dollars held in the government’s special foreign exchange account. This reflects concerns that relying solely on private financial institutions for large-scale investment commitments may be insufficient.
In addition to funding, there are also controversies surrounding investment decision-making and profit-sharing structures. Under the U.S.-Japan investment agreement, the U.S. president has the authority to decide on investment projects. Japan will support funding through contributions, loans, and guarantees, but the profit-sharing ratio will vary based on investment conditions. According to the agreement, profits will be split equally until Japan recoups a certain amount of its investment, after which the distribution will shift to 90% for the U.S. and 10% for Japan.
Takahide Kiuchi, an economist at Nomura Research Institute, described the investment plan conditioned on tariff reductions as a "significantly unequal agreement" in a column published in July. He argued that while Japanese government-affiliated financial institutions bear the burden of loans, guarantees, and contributions, the profits would primarily benefit the Trump administration, leaving the Japanese public to shoulder the risks if the project fails.
There have already been setbacks in previously selected projects. According to Jiji Press, a U.S. federal appeals court canceled the permit for an offshore oil export terminal project in Texas included in the first phase, citing procedural flaws and remanding it for reconsideration. This project had already secured loan and insurance agreements with the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI). The Japanese environmental group FoE Japan has called for these institutions to halt funding and insurance acquisition. Jiji noted that this case highlights the risks associated with regulatory reviews and lawsuits in large-scale investment projects.
In the semiconductor factory project, the role and burden of Japanese financial institutions remain contentious issues. The Yomiuri Shimbun reported that both JBIC and the three major banks are expected to participate in financing, but specific loan conditions have not been disclosed. It remains to be seen under what conditions the banks that previously sought government support for dollar procurement will provide funding again, and what burdens the government will assume to support this effort.
* This article has been translated by AI.
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