Japan seeks to regain technological advantage with help from foreign investment

Based on massive investments, both foreign and local, Japan has the opportunity to regain its technological leadership, although if it wants to establish itself as a convincing alternative to China will have to innovate quickly in AI and semiconductors, say sources in the sector.

American tech giants are pouring billions of dollars into artificial intelligence (AI), cybersecurity and semiconductor production in Japan, which dominated the sector in the 1980s.

Google launched a regional cyber defense center in Japan in March, and Amazon Web Services will invest $14 billion to expand Japanese cloud infrastructure.

For its part, Microsoft, a partner of OpenAI, the company that created the ChatGPT robot, committed this week to invest $2.9 billion in artificial intelligence in Japan.

Microsoft also plans to offer training in artificial intelligence to three million people in the country, which has a population of 125 million.

“Geopolitical tensions have made Japan a more attractive and stable partner compared to China,” said Khos-Erdene Baatarkhuu, CEO of technology company AND Global.

“The once-leading Japanese technology sector has lost ground due to its slow response to digital and mobile trends, compared to neighbors like South Korea,” he told AFP.

But “now, with supportive government policies, resilient startups, and a potentially changing technology landscape, Japan has the opportunity to regain its technological advantage.”

The archipelago is not there yet, far from it.

Japan was only in 32nd place in the latest digital competitiveness ranking by the Swiss management school IMD.

Additionally, only seven Japanese firms appear among more than 1,200 technology “unicorns” (startups valued at more than $1 billion) on the CB Insights list.

In this regard, Khos-Erdene explained that “Japan’s traditional corporate culture tends to avoid risks and be hierarchical, which slows down the rapid innovation typical of the computer industry.”

– The key to artificial intelligence –

Masayoshi Son, CEO of SoftBank Group, a financial vehicle for technology investments, warned that the country will become irrelevant if it ignores AI.

“Wake up Japan!” he declared at a corporate event in October. “I want to be on the side of evolution.”

Son and several executives from technology giants such as Apple’s Tim Cook and Amazon founder Jeff Bezos were with Japanese Prime Minister Fumio Kishida and US President Joe Biden on Wednesday at a dinner in Washington.

That day, Kishida and Biden pledged to strengthen “our shared role in developing and protecting emerging next-generation technologies.”

They also agreed to work with other countries “to strengthen the global semiconductor supply chain.”

Semiconductors, essential in numerous devices such as cell phones and cars, have become a battlefield in recent years. The United States and some European countries have blocked exports of semiconductor technology, fearing that China will use it for military use.

On the other hand, Taiwanese semiconductor maker TSMC is under pressure from customers and governments to div

In this sense, TSMC opened a new semiconductor factory last February in southern Japan, with an investment of 8.6 billion dollars, and is planning a second one with a budget of 20 billion.

A gesture that Kishida recently hailed as “the revival of our national semiconductor industry.”

Japan has invested the equivalent of $25 billion in the last three years in subsidies related to the semiconductor segment, a much larger proportion than that applied by the United States or Germany.

– “Crossroads” –

“This is a great time to invest in Japan,” with the yen at its lowest value against the dollar in 34 years, says Hideaki Yokota, vice president of the MM Research Institute research center, specialized in technology.

“As the CEO of a technology company, I see Japan at a crossroads,” who wonders if the country is capable of becoming “a producer, and not just a consumer, of these transformative technologies,” says Khos-Erdene, of AND Global.

Japanese and North American universities are working side by side in research, in programs funded by companies such as Nvidia and Arm.

“Globally, Japan’s commitment to AI presents enormous potential for economic revitalization,” for a country with low productivity and a shrinking workforce due to an aging population, explains Khos-Erdene.

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