Taiwan Semiconductor Manufacturing (TSM) announced on Thursday that it will manufacture some of the world's most advanced semiconductors in Japan to meet the explosive growth in artificial intelligence-related demand. This move will support Japan in achieving its chip manufacturing ambitions.

As a core chip supplier for companies such as Nvidia and Apple, Taiwan Semiconductor Manufacturing announced plans to produce 3-nanometer chips at its second factory in Kumamoto Prefecture, Japan. These advanced chips are widely used in AI products, smartphones, and other fields. The factory is currently under construction.

This decision by Taiwan Semiconductor Manufacturing, the world's largest dedicated chip foundry, represents a significant positive development for Japanese Prime Minister Sanae Takaichi. With a general election scheduled for Sunday, Takaichi aims to leverage high approval ratings and this project to garner public support for her policies.

The announcement coincided with a meeting in Tokyo between Prime Minister Takaichi and Taiwan Semiconductor Manufacturing Chairman C.C. Wei.

During the meeting, Takaichi stated, "This is extremely significant from the perspective of Japan's economic security. I strongly hope the project will proceed as planned."

The advanced chips slated for mass production in Kumamoto Prefecture will be applied in artificial intelligence, robotics, autonomous driving, and other areas—all designated as strategic priority industries by the Takaichi cabinet.

Taiwan Semiconductor Manufacturing's first factory in Kumamoto Prefecture began mass production at the end of 2024, primarily manufacturing less technologically advanced chips. Additionally, the company is constructing new plants in Arizona, USA, to create a cluster of wafer fabrication facilities addressing growing customer demand amid the global AI boom.

In a separate email statement, Taiwan Semiconductor Manufacturing indicated that Chairman Wei believes Japan's "forward-looking semiconductor policy will bring significant benefits to the semiconductor industry."

To enhance competitiveness in the global advanced chip manufacturing sector, Japan is providing substantial subsidies to domestic chipmaker Rapidus, which is progressing toward the goal of mass-producing cutting-edge chips.

The Japanese Cabinet Secretariat posted on platform X on Thursday, stating, "Hosting the world's most advanced semiconductor factory in Japan holds great significance from an economic security perspective."

Despite growing market concerns about a potential AI-related bubble—where massive investments may fail to yield returns—Chairman Wei expressed confidence last month that the increasing AI demand from customers is "genuine and reliable."

Last month, Taiwan Semiconductor Manufacturing announced that, buoyed by profit growth driven by AI-related demand, it plans to increase capital expenditure by up to nearly 40% this year. The company raised its 2026 capital expenditure target to $52-56 billion, up from $40 billion last year.