Japan has pledged up to 732 billion yen ($4.86 billion) in additional subsidies to support TSMC's construction of a second chip fabrication plant.
The move follows the opening of TSMC's first Japanese factory in Kumamoto on Kyushu island.
This commitment is part of Japan's broader strategy to boost advanced semiconductor manufacturing and secure supply chains amidst growing tensions with China.
The new plant is expected to produce more advanced chips for applications such as AI and autonomous driving. The investment is poised to surpass 1 trillion yen in taxpayer-funded subsidies for TSMC's Japanese ventures.
TSMC, the world's largest chipmaker, is also expanding operations in the U.S. and Germany. The company aims to achieve mass production in Japan by the end of the year.
The total investment, including the second plant, is projected to exceed $20 billion. Once both factories are operational, monthly capacity will exceed 100,000 12-inch wafers, supplying technology firms and automakers like Sony and Toyota Motor.
Japan is simultaneously supporting a domestic chip venture named Rapidus, collaborating with IBM and Imec, a European chip research organisation. This partnership aims to mass-produce cutting-edge chips on Hokkaido Island from 2027, reinforcing Japan's semiconductor capabilities.