Nagashima Ohno & Tsunematsu | View firm profile
Introduction
Semiconductors are a critical foundation of the modern economy, evolving from conventional electronic components into indispensable technologies supporting AI, robotics, smartphones, cloud computing, and advanced manufacturing. The global semiconductor market reached USD 630.5 billion in 2024 and is projected to exceed USD 1 trillion by 2030.
As digitalization becomes a key source of national power, countries worldwide are pursuing unprecedented policies to secure semiconductor supply chains and technology. The US, through the CHIPS and Science Act, provides subsidies, tax incentives, and export controls targeting China for sensitive semiconductors and advanced manufacturing equipment. China, Europe, and Taiwan have similarly launched large-scale strategic initiatives.
Japan has followed this trend by implementing substantial policy measures, including subsidies and other financial support to expand domestic manufacturing capacity under the 2022 Economic Security Promotion Act (“ESPA”), large-scale backing through the NEDO (New Energy and Industrial Technology Development Organization) framework, and funding from the Post-5G Fund to develop advanced semiconductor technologies for post-5G information and communication systems. Learning from past shortcomings – such as insufficient strategic support and underinvestment in R&D, which caused Japan’s global market share to fall from nearly 50% in 1990 to around 10% today – the government has shown a strong commitment to strengthening domestic supply chains and R&D. To enhance domestic capabilities and competitiveness, large-scale programs now address specific “weaknesses” in Japan’s semiconductor industry based on detailed assessments of supply chains and technology.
Given such strategic importance, foreign direct investments (“FDIs”) in Japan’s semiconductor industry are increasingly subject to close scrutiny under the Foreign Exchange and Foreign Trade Act (“FEFTA”). While such investments are not categorically prohibited – as illustrated by the acquisition of Kioxia Corporation (formerly Toshiba Memory) by a consortium led by Bain Capital – foreign investors must carefully assess the likelihood of a strict and long duration government review and any potential restrictions on post-investment activities. In doing so, they should consider factors such as their own profile, the strategic importance of the target company, the government’s interest, and the nature of the investment, including the intended level of post-investment management involvement. For investment funds, it is also critical to evaluate any exit-related restrictions, including limits on future buyers, when making investment decisions.
Osawa brings extensive experience in the Japanese government, having worked on both FEFTA policymaking and FDI screenings – reviewing over 2,000 investment cases as a regulator – along with broader semiconductor-related policy initiatives. He leverages his dual expertise in M&A and economic security to advise foreign corporations and investment funds. Together with his colleague Takamura, an M&A lawyer experienced in economic security–related cases, they provide an overview of recent trends in Japan’s semiconductor M&A market, highlight key regulatory developments, and offer practical insights for foreign investors navigating this strategic sector.
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[Author]
Oki Osawa (Partner)