TSMC could revolutionise rural Japan

HOSPITALITY IS not in short supply in Kikuyo, a small town in Japan’s southern prefecture, Kumamoto. At a local shopping centre, Kumamon—the prefecture’s bear mascot—grins with a sign saying “Welcome” in traditional Chinese. Supermarkets now stock Taiwanese snacks and cooking ingredients. The gestures are aimed at the hundreds of Taiwanese engineers and their families who have arrived since TSMC, the world’s most advanced chipmaker, set up a plant nearby.

TSMC is transforming Kumamoto and the wider Kyushu region, an island in the south-west. Its first factory—run through JASM, a joint venture with Sony, a Japanese electronics giant, and Denso, a car-parts supplier—began producing logic semiconductors for cars and electronics in December. The move was part of Japan’s push to rebuild domestic chip capacity, driven by fears over Taiwan’s vulnerability and a broader effort to regain technological superiority. A second plant, set to produce more advanced chips, will break ground this year and should be running in 2027.

Beyond its strategic role, the project has created a boom locally. It is now closely watched as a test case for the rest of the country. Since TSMC’s arrival, over 60 companies have established a presence in Kumamoto. Wages are rising, pushed up by TSMC’s relatively high pay. Japanese newspapers marvelled at its job listings, including positions in the factory canteens that offered ¥3,000 ($20) an hour—roughly triple the prefecture’s average wage. Land prices have soared, hurting local renters but boosting tax revenues. Growth extends beyond the chip industry itself to surrounding sectors such as logistics and hospitality. Kyushu Financial Group, a regional banking firm, estimates the economic impact in Kumamoto will reach ¥11trn ($76bn) in total over the next decade.

Kumamoto won the plant partly for the prefecture’s proximity to Taiwan; it is also near lots of water, needed for chipmaking. But it also had industrial heritage. In the 1980s, when Japanese firms dominated the global semiconductor market, Kyushu was nicknamed “Silicon Island”. Since then Japan has fallen behind Taiwan and South Korea. Officials hope TSMC’s arrival will help reverse the trend. Kimura Takashi, Kumamoto’s governor, argues that opening up to foreign firms in the region, especially those from Taiwan, is vital to Japan’s future. The prefecture is planning to build a science park to connect universities, suppliers and startups.

Now, across Kumamoto, the influence of the Taiwanese workers can be seen everywhere. Signs in residential areas near the plant are printed in Japanese, English and Chinese. Local city halls have hired Chinese-speaking staff. State schools have expanded language assistance, while a new international school opened last year in order to accommodate the new Taiwanese families. “The area has suddenly become so multicultural,” says Chiu Kuei-fen, a Taiwan-born longtime resident in Kikuyo, who runs a website which helps newcomers navigate everyday life.

But the speed of development has brought strain, too. Komatsu Atsushi, a local official, points to traffic jams that have worsened as workers poured into the area. Environmental concerns persist, especially over water use. Officials say the impact is minimal and that the company will recycle most of what it uses. But some residents are not reassured. “Maybe some people are excited about TSMC’s arrival,” grumbles one carrot farmer in Kikuyo, who says some of her neighbours have been pushed out by soaring land prices. “But for people like us, it’s more trouble than it’s worth.”

The biggest challenge, however, may be talent. Japan faces a big shortage of semiconductor engineers. Until very recently the chip industry was seen as stagnant. “People stopped seeing the sector as a promising one,” says Okano Hideyuki of the Kyushu Economic Research Centre. He reckons TSMC’s arrival is slowly starting to change that perception.

Local universities are scrambling to adapt, launching chip-focused courses and seeking closer ties with industry. Tanaka Hisao, president of Japan Material, a supplier that built a plant in Kumamoto after TSMC moved in, also sees a deep cultural problem. “People don’t feel proud to work in semiconductors any more,” he says, recalling the 1980s heyday. If Japan’s chip revival succeeds, that could soon shift. ■