Japan to invest $21 billion in US chip factories under Trump trade deal

Liaquat Ali

Islamabad: Japan will invest approximately $21 billion to build up to two semiconductor factories in New York State under a deal involving the US government and Japanese investors, with GlobalFoundries operating the facilities, the company announced this week.

The investment forms part of an agreement reached last year by the Trump administration and Japan under which Tokyo pledged to invest $550 billion in the United States in exchange for Washington reducing tariffs on Japanese cars and other imports from at least 25 percent to 15 percent.

The first factory is scheduled to begin construction this year, with semiconductor production expected to start in 2029. A decision on whether to proceed with the second facility will be made before the end of 2028, GlobalFoundries executives said.

Once fully operational, the first factory is expected to add annual US manufacturing capacity of approximately 900,000 300-millimetre wafers, placing it among the country’s larger semiconductor manufacturing facilities. The project is also expected to create more than 1,000 factory jobs in New York.

GlobalFoundries, headquartered in Malta, New York, is majority-owned by Abu Dhabi’s sovereign wealth fund, Mubadala Investment Company. The US government, which previously held a 3 percent stake in the semiconductor manufacturer, will increase its ownership to 7 percent under the new arrangement. Japan will provide all the investment capital for the project.

US President Donald Trump said the government valued its 7 percent stake at more than $2 billion, following $1.63 billion in grants previously provided to the company. He described the arrangement as a way of turning government grants into financial value for the United States.

GlobalFoundries Chief Executive Officer Tim Breen told Reuters that Japan’s Renesas Electronics and Apple, the maker of the iPhone, were among the initial customers for the planned New York facilities.

The agreement is also expected to provide GlobalFoundries with a long-term revenue stream. Company executives said the arrangement would generate management fees for at least 20 years, with revenue expected to reach $50 million next year as the company begins managing construction of the first factory.

As part of the restructuring of existing US support, GlobalFoundries will redirect $955 million previously awarded by the US government towards accelerating investments in silicon photonics, silicon-germanium chip materials and advanced packaging technologies at its existing manufacturing facilities in Malta, New York, and Burlington, Vermont.

The project is expected to strengthen industrial cooperation between the United States and Japan, particularly in semiconductor manufacturing equipment and supply chains. Breen said some of Japan’s investment capital would flow back to Japanese equipment manufacturers, including Tokyo Electron, which, alongside US companies, plays a significant role in the global semiconductor supply chain.

He said GlobalFoundries intended to engage closely with Japanese equipment suppliers, citing their technological capabilities and the importance of the Japanese industrial ecosystem to the project.

Japan has so far announced two batches of projects worth more than $100 billion combined under the broader investment framework with the United States.

Under the arrangement, Trump selects the projects to be financed by Japan. Available free cash flows generated by the investments will initially be divided equally between the two countries until a specified allocation is reached, after which 90 percent will go to the United States.

The semiconductor investment represents a significant component of the broader effort to expand US manufacturing capacity, create domestic jobs and deepen economic ties with Japan, while reinforcing the strategic importance of advanced chip production to both countries.