Japan's Sony Group, the world's leading image sensor manufacturer, and Taiwan's TSMC, the largest semiconductor foundry, are set to invest a total of 1 trillion yen (approximately $9 billion) in a joint venture for next-generation image sensor production in Kumamoto, Japan, following a magnitude 7.1 earthquake in the region last month. Sony will contribute about 60% and TSMC about 40% to the new company, which plans to begin mass production by 2029. This move is seen as a strategic effort by Sony to solidify its market leadership amid competition from Samsung Electronics and Chinese firms.
According to the Nihon Keizai Shimbun (Nikkei), Sony and TSMC are expected to finalize their investment agreement soon and establish the joint venture within the fiscal year 2026 (April 2026 to March 2027). The two companies had reached a basic agreement in May to collaborate on the development and production of next-generation image sensors, but did not disclose specific cooperation details at that time. Sony declined to comment further, while TSMC stated there was no new information to share since the May announcement.
The production facility will be located at Sony's semiconductor subsidiary in Koshi, Kumamoto, where a large-scale development and production line will be established, aiming for mass production in about three years. The companies are currently negotiating with Japan's Ministry of Economy, Trade and Industry regarding government subsidies for the project.
The anticipated total investment of 1 trillion yen is equivalent to four years of capital expenditures for Sony's semiconductor division and nearly matches the $8.6 billion (approximately 1.35 trillion yen) investment in TSMC's first factory in Kumamoto. The Koshi plant is located about 30 kilometers from the earthquake's epicenter and sustained minimal damage. Kumamoto is rich in water resources essential for semiconductor production and offers relatively inexpensive electricity generated from renewable sources like geothermal and solar energy. The two companies plan to continue their semiconductor investments in Kumamoto over the long term, leveraging these advantages.
The joint venture is expected to supply high-performance camera sensors for Apple's iPhone. In the future, the companies aim to expand their applications into the field of 'physical AI,' which involves AI controlling robots and vehicles. The performance of image sensors, which act like human eyes, is crucial for robots and autonomous vehicles to accurately perceive their surroundings. The companies plan to develop next-generation sensors to enhance AI recognition accuracy.
Sony currently holds over half of the global market for complementary metal-oxide-semiconductor (CMOS) image sensors, but faces increasing competition from Samsung Electronics and Chinese firm OmniVision, which are making significant investments. Sony aims to strengthen its technological collaboration with TSMC, a leader in advanced semiconductors, to widen the gap with these emerging competitors. With the ongoing shortage of advanced semiconductors due to the rise of AI and increasing equipment prices, Sony has decided to share investment costs with TSMC to enhance investment efficiency.
This joint venture expands the scope of collaboration between the two companies from contract manufacturing to joint production. Previously, Sony developed and mass-produced the sensor components, while TSMC produced the processing semiconductors. The new joint venture will broaden their collaborative efforts. Hiroki Totoki, President and CEO of Sony Group, described the partnership with TSMC as the first step in a 'fab-lite strategy' that minimizes in-house production facilities. TSMC's annual capital expenditures are around 10 trillion yen, making it the largest in the world, which is expected to provide Sony with significant procurement advantages.
However, Sony plans to keep its specialized manufacturing technology for image sensors, which is key to its competitiveness, confidential from TSMC. TSMC appears to be looking to expand its collaboration with the world's largest image sensor manufacturer to accumulate related know-how and enhance its capabilities in the physical AI sector. TSMC is focusing on investments in cutting-edge semiconductors with circuit line widths of 2-3 nanometers in Taiwan while utilizing Japanese government subsidies to diversify semiconductor production outside of advanced products to mitigate geopolitical risks.
TSMC already operates a semiconductor factory in Kumamoto through its manufacturing subsidiary JASM, which is partially owned by Sony, Denso, and Toyota. TSMC holds an 86.5% stake in JASM, making it the largest shareholder. In contrast, TSMC will hold about 40% in the new joint venture, which Nikkei noted is unusual for the company not to secure a majority stake when forming a joint venture with a client.
Meanwhile, the JASM plant temporarily halted operations following the earthquake on July 28, causing some production disruptions. However, JASM reported that the plant has returned to normal operations as of August 4, and construction on the second factory, currently underway, has also resumed.
* This article has been translated by AI.
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