JAPAN Trends and Developments Contributed by: Haseru Roku, Nagashima Ohno & Tsunematsu
Technological advancements and energy efficiency in AI semiconductors As power consumption by AI semiconductors increases, there is a growing demand for high- performance and energy-efficient AI semicon- ductors. NVIDIA announced plans to establish a research and development centre in Japan by the end of 2023. In September 2024, NVID- IA invested in Sakana AI, a Japanese startup developing energy-efficient AI technologies. This investment elevated Sakana AI to unicorn status, with a valuation exceeding USD1 billion within a year of its founding. Surge in data centre investments and M&A Large-scale data centres are indispensable for AI training and the secure management of domes- tic data. This has led to a surge in investments and M&A in the data centre sector in Japan. In June 2024, SoftBank announced it would acquire part of Sharp’s factory and land to build a large-scale AI-focused data centre. Addition- ally, major US tech companies such as Amazon, Microsoft, Google, and Oracle have successively announced investments totalling tens of billions of dollars in Japan’s cloud sector. Government support and challenges amid geopolitical risks These active developments are backed by strong support measures from the Japanese government. In recent years, the government has enacted the Economic Security Promotion Act and the 5G Promotion Act, providing subsi- dies reaching several billion dollars per project. In November 2024, it further announced support exceeding JPY10 trillion by fiscal year 2030 for the AI and semiconductor industries. However, the purpose of this government sup- port is to achieve policy objectives such as sta- bilising supply chains and promoting regional
economies, which may not always align with the business objectives of companies receiving the subsidies. Companies, especially foreign entities, need to seriously consider and nego- tiate what commitments they should make in exchange for such subsidies. For example, in the dissolution of the SBI and PSMC joint ven- ture, PSMC cited that the Japanese government required a commitment to the long-term opera- tion of the new factory as a condition for subsidy allocation. PSMC stated that this could poten- tially violate Taiwan’s Securities and Exchange Act, leading to its decision to dissolve the part- nership. Furthermore, while establishing semiconductor- related joint ventures (JVs) in Japan serves as a form of risk diversification for Taiwanese com- panies, if the risk materialises – specifically, in the event of a “Taiwan contingency” – questions arise about how the JV will continue to operate and how the Taiwanese partner’s shares in the JV will be managed. Addressing these concerns may require introducing mechanisms that have not been previously included in M&A contracts, as traditional change of control or force majeure clauses might not suffice. Perhaps the funda- mental question is whether Japanese compa- nies – known for their politeness but also for their cautiousness to risk – can even raise these sensitive and touchy issues with their Taiwanese counterparts, with whom they are about to form a partnership? Additionally, derivative issues such as how the Japanese government – which provides sub- stantial subsidies – might intervene also come into consideration. This issue could become a crucial point not only in the contracts between JV parties but also in negotiations with authori- ties regarding subsidies.
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