TAIPEI (Nov 9): Taiwan Semiconductor Manufacturing Co Ltd (TSMC) will build a US$7 billion fabrication plant in Japan, with a subsidiary of Sony Group Corp becoming a minority shareholder in the venture.

The new factory comes during a persistent chip shortage, which has hit a wide range of global industries. Governments around the world have been racing to bolster their domestic chip manufacturing capabilities, in part by attempting to entice TSMC and its South Korean rival Samsung Electronics Co with financial incentives.

TSMC's board approved on Tuesday an initial investment of up to US$2.12 billion to create a Japan-based subsidiary, the Taiwanese chipmaker said a statement. Sony Semiconductor Solutions Corp will invest US$500 million in the subsidiary, which will represent a less than 20% equity stake.

The new venture has "strong support" from the Japanese government, the two companies added in a joint statement on Tuesday. It did not specify how Tokyo will offer its support, though Prime Minister Fumio Kishida said last month his government would set aside funding in the next economic stimulus package due by year end.

"While the global semiconductor shortage is expected to be prolonged, we expect partnership with TSMC to contribute to securing a stable supply of logic wafers, not only for us but also for the overall industry," Terushi Shimizu, president and chief executive officer of Sony Semiconductor Solutions Corp, said in the joint statement.

The initial capital expenditure is estimated to be approximately US$7 billion. Construction of the TSMC fab is set to begin in 2022 with production expected to start by the end of 2024. The chip plant is expected to create about 1,500 jobs with a monthly capacity of 45,000 12-inch wafers initially made with mature 22- and 28-nanometer technologies.

In addition to the new Japan venture, TSMC is now building a US$12 billion fabrication plant in Arizona, and is also mulling over the possibility of creating a new factory in Germany.

Separately, TSMC will build a facility to produce 7- and 28-nanometer chips in the southern Taiwanese city of Kaohsiung — the company's first plant in the city — spokeswoman Nina Kao said on Tuesday. Construction will begin in 2022 with production expected in 2024.