Pachinko Parlor Transformed into Semiconductor Factory: The Rise of 'Silicon Island' in Japan

Kyushu's Economic Revival Driven by TSMC's Semiconductor Investments

The transformation of Kyushu, Japan’s southernmost major island, into a semiconductor powerhouse is marked by the massive investments surrounding TSMC’s (Taiwan Semiconductor Manufacturing Company) presence in Kumamoto. Once home to pachinko parlors and agricultural fields, the region is now rapidly evolving into a cutting-edge industrial hub. This change follows the establishment of TSMC’s first manufacturing plant in Japan, which has triggered a cascade of investments and developments in the semiconductor sector, boosting the local economy and revitalizing the region.

The Emergence of Japan’s 'Silicon Island'

In the past, Kyushu was a significant player in the global semiconductor industry, accounting for 10% of the world’s semiconductor production during the 1980s. However, the decline of Japan’s semiconductor industry left Kyushu behind, earning it the nickname ‘Galapagos of semiconductors.’ Fast forward to 2021, when TSMC made the groundbreaking decision to set up its first Japanese manufacturing base in Kumamoto, and the region has experienced a remarkable resurgence, earning the title of ‘Silicon Island.’ The ongoing investments in semiconductor-related facilities have surpassed ¥5 trillion (approximately $47.5 billion), with TSMC’s projects forming the backbone of this transformation.

TSMC’s Expansion and the Creation of a Semiconductor Hub

TSMC’s initial investment in Kumamoto was marked by the opening of its first semiconductor manufacturing plant in December 2023. This facility has already begun mass production, supplying major customers such as Sony. In keeping with its commitment to revitalize Japan’s semiconductor industry, TSMC has continued to push forward with ambitious expansion plans. The company is currently building its second plant, set to be operational by late 2027, which will focus on advanced semiconductor production, including 6-nanometer logic chips. The total investment for these plants is estimated at around ¥3 trillion, with the Japanese government contributing up to ¥1.2 trillion in subsidies.

The Ripple Effect of TSMC’s Investment

The arrival of TSMC has had a profound impact on the local economy, with numerous semiconductor-related companies flocking to the Kumamoto region. Sony is set to begin construction of a new image sensor plant in nearby Koshiki, while Tokyo Electron, one of the world’s top semiconductor equipment manufacturers, will open a new research and development center in the same area. Additionally, Mitsubishi Electric is preparing to launch a new power semiconductor plant in Kikuchi City later this year.

The surge in semiconductor-related investments extends beyond manufacturing. Companies in the semiconductor supply chain, such as Fuji Film and Mitsubishi Chemical, have also increased their investments in the region. Fuji Film recently added ¥2 billion to expand its semiconductor wafer polishing plant, while other companies are ramping up production of essential materials like photoresist and silicon wafers.

Kyushu’s Potential for Economic Growth

According to the Kyushu Economic Research Association, the semiconductor sector is projected to generate an economic impact of ¥23 trillion in the Kyushu, Okinawa, and Yamaguchi regions over the next decade. The region’s future looks even brighter with the expected entry of ASE, the world’s leading semiconductor packaging and testing company, which has already signed a land acquisition agreement in Kitakyushu. If ASE secures government subsidies, its investment will further boost the area’s status as a global semiconductor hub.

Environmental and Industrial Changes Amid Rapid Growth

The transformation of Kumamoto has not been limited to manufacturing alone. A significant environmental shift has occurred, with former agricultural fields now being developed into sprawling industrial parks. A factory focused on recycling precious metals from semiconductor production waste, including gold, silver, and rare earth metals, has already been established. Furthermore, consulting firms focused on disaster preparedness for the region’s semiconductor plants and traffic management are preparing to enter the market to support the growing industry.

Real Estate Boom and the Surge in Property Prices

The semiconductor boom has also sparked a surge in local real estate markets. According to Japan’s Ministry of Land, Infrastructure, Transport, and Tourism, land prices in Kikuyomachi, where TSMC’s first plant is located, rose by 16.9% from the previous year, ranking sixth in the nation. In nearby Otsumachi, land prices increased by 19.4%, the highest in Japan. This real estate growth reflects the broader economic benefits brought about by the semiconductor industry’s expansion.

Challenges and Future Outlook

While the semiconductor boom in Kyushu is a positive development, the region faces challenges, particularly in securing the skilled workforce needed to meet the growing demand. An analysis predicts that Kyushu will experience a shortage of about 1,000 semiconductor professionals annually. In response, local universities, including Kumamoto University, have introduced graduate programs focused on semiconductor technologies, with other institutions like Miyazaki University and Kyushu University expanding their curricula to meet industry needs.

The rapid industrialization of Kyushu, fueled by TSMC’s investments, has not only revitalized the region but also positioned it as a global semiconductor manufacturing hub. The transformation of Kumamoto from a sleepy agricultural town to a center of semiconductor innovation reflects the broader shift occurring across Japan, as the country works to reassert its position in the global technology sector.