Japan is concerned that the U.S. plans to pump billions of dollars into chip production to compete with China could seal the fate of a Japanese semiconductor industry that once dominated the planet.

With China and the U.S. ramping up support for the production of chips that cover everything from smartphones to missiles, driven by a trade war and security concerns, officials fear that Japan will be left behind altogether.

Japanese officials fear that the U.S. may tempt other firms to follow suit by luring Asian chip industry giants such as Taiwan’s Semiconductor Manufacturing Co Ltd onto American soil.

“It’s possible for companies to build in Japan and export, but the closer you can be as a supplier the better, it’s easier to exchange information,” said Kazumi Nishikawa, director of IT at METI.

The technology companies Nishikawa is worried about moving to the U.S. are wafer makers Shin-Etsu Chemical and Sumco Corp, photoresist supplier JSR Corp, and manufacturing machinery makers Screen Holdings and Tokyo Electron.

So far, none of the companies has announced plans to move production to the U.S.

Japanese Prime Minister Yoshihide Suga’s government recently approved a strategy devised by Nishikawa’s team at METI to ensure that Japan has enough chips to compete in technologies that will drive future economic growth, such as artificial intelligence, high-speed 5G connectivity, and self-driving vehicles.

One plan is to turn Japan into an Asian data centre hub, generating huge demand for semiconductors that could potentially entice chip makers to build plants on Japanese soil.

But the success of Japan’s industrial policy will depend on financial resources.

The country has already allocated 500 billion yen to revitalize technology supply chains, help businesses overcome chip shortages and other semiconductors during the coronavirus pandemic, and promote a shift to 5G.

The U.S. Senate has approved a bill that allocates $190 billion of public money to new technologies, including $54 billion for chips alone, while the European Union plans to allocate 135 billion euros towards developing its own digital economy.

Japan would have to provide larger sums that the country could otherwise spend on health and welfare.

For more information, read the original story in Reuters.