Japan in talks to channel part of US investment pledge into semiconductor factory

The United States and Japan are in talks to direct a portion of Japan's pledged US investment into the construction of a semiconductor factory, sources said.

The two governments have committed $550 billion in US investment. Of that, between 2 trillion and 3 trillion yen ($12.9 billion to $19.3 billion) is expected to be allocated to the project.

Citing a person involved in the intergovernmental negotiations, the Nikkei reported Thursday that the US side had proposed the semiconductor factory construction to Japan, and that working-level talks between the two governments on matters including the investment return outlook took place Monday and Tuesday.

The factory project is expected to cost between 2 trillion and 3 trillion yen. US foundry GlobalFoundries is set to operate the facility.

The Nikkei said the factory is expected to produce logic semiconductors used in computing and other processing applications. Japan is pushing for Japanese companies to supply equipment and other products essential to factory operations and to share in the resulting profits.

The semiconductor factory is expected to form Japan's third package of US-bound investment. Semiconductors were listed as the top investment priority in the MOU the two countries signed when they reached their US investment agreement last year, reflecting growing supply chain uncertainty amid the deepening US-China rivalry.

However, the semiconductor sector is subject to sharp swings in demand, making future production forecasts difficult and clouding the prospects for recouping investment. The Nikkei noted that creating a framework conducive to private-sector participation will be key.