Taiwan Semiconductor Manufacturing Company (TSMC) is planning to build a third semiconductor facility in Japan to produce three-nanometer (nm) chips, reported Bloomberg, citing sources.

The chip manufacturing major has informed its supply chain partners about its plans to build a new plant, the sources added.

Code-named TSMC Fab-23 Phase 3, the new factory could be built in the Kumamoto prefecture in southern Japan.

The 3nm process is currently the most advanced chipmaking technology that is available commercially.

By the time TSMC’s proposed fab is operational, the technology will probably have advanced by one or two generations.

The cost of a 3nm fab, including the machinery needed for manufacturing, is estimated to be approximately $20bn (Y2.97tn), though exact costs will depend on when the facility is constructed and how land and other resources are acquired.

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The amount that TSMC plans to spend on the third fab is currently unknown.

Japan usually pays up to 50% as a subsidy for these kinds of infrastructure to boost domestic supply.

TSMC is building its first plant in the Kumamoto prefecture in partnership with Denso and Sony Group.

By late 2024, the facility is expected to start producing 12nm chips.

According to sources, the second fab will be built near the first plant in Kumamoto and it is expected to start producing 5nm chips by 2025.  

If TSMC’s proposal for the third plant materialises, it would be a significant victory for Japan.

Under Prime Minister Fumio Kishida, the Japanese Government has been offering subsidies worth trillions of yen to attract investments from both domestic and overseas semiconductor companies.

Besides TSMC, Micron Technology, Samsung Electronics, and Powerchip Semiconductor Manufacturing are investing in Japan.  

Japanese authorities are also assisting local company Rapidus in setting up production lines in Hokkaido for 2nm chips.

Earlier this month, reports emerged that Japan would allocate an additional $13.3bn to bolster its domestic semiconductor manufacturing capabilities.