By The South Asia Times

TOKYO - Japan and the United States have agreed on a semiconductor manufacturing project worth up to about $21 billion in New York, strengthening their economic security partnership as Washington competes with China for technological influence and Tokyo faces heightened diplomatic tensions with Beijing.

Japanese Trade Minister Ryosei Akazawa announced the agreement on Thursday, saying the project would help build a more resilient semiconductor supply chain and reinforce cooperation between the two allies, according to Kyodo News.

The initiative follows a bilateral trade deal reached last year under which Japan secured tariff relief from the United States in exchange for investment commitments. It is the third project to be launched under that arrangement, according to Japanese officials.

US-based chipmaker GlobalFoundries announced on Wednesday plans to construct two new semiconductor manufacturing facilities in Malta, upstate New York. Japan's Ministry of Economy, Trade and Industry confirmed that the company is leading the project, with approximately $10 billion earmarked for the first phase. Production at the first facility is expected to begin in 2029.

The project comes amid intensifying competition between Washington and Beijing over advanced technologies, semiconductor supply chains and economic security. The United States has imposed restrictions on China's access to certain advanced chips and chipmaking technologies, citing national security concerns, while Beijing has sought to strengthen its domestic semiconductor industry.

Japan's own diplomatic and economic relationship with China has also faced tensions, adding to Tokyo's incentive to deepen cooperation with Washington on strategically important industries. However, the announcement did not explicitly identify tensions with Beijing as the direct cause of the investment.

"We believe Japan currently has the strongest economic relationship with the United States of any country in the world, including in terms of tariff agreements," Akazawa said.

- Focus on chips for cars, industry and AI

The planned facilities will expand production of mature-node semiconductors, which are widely used in automobiles, industrial machinery, smartphones and artificial intelligence data centres.

Although less advanced than the cutting-edge chips used to train and operate many AI systems, mature-node semiconductors remain essential to a broad range of industrial and consumer products. Ensuring reliable supplies has become a priority for governments seeking to reduce vulnerabilities in global production networks.

Japan's ministry said the project could also create business opportunities for Japanese suppliers of semiconductor equipment and materials.

Tokyo Electron and Screen Holdings have expressed interest in supplying manufacturing equipment, while Tokyo Ohka Kogyo is interested in providing materials and components. Renesas Electronics has indicated interest in purchasing chips produced through the project, according to the ministry.

Akazawa said the semiconductor initiative would join other projects under the Japan-US strategic investment programme, including one intended to supply power to an AI data centre and related facilities.

The projects would help both countries strengthen their competitive position in the artificial intelligence era, he said.

- Jobs and economic security

US President Donald Trump has promoted the investment as a major economic and national security achievement. In social media comments, he said the project would generate 27,000 construction and supply-chain jobs, along with more than 1,000 additional highly skilled manufacturing positions in New York.

Trump has repeatedly highlighted foreign investment commitments from Japan, South Korea and Taiwan, arguing that they will expand domestic manufacturing, support employment and strengthen US energy and technology infrastructure.

The announcement also comes ahead of the November 3 US midterm elections, during which the administration is emphasizing investment, manufacturing and economic security.

For Japan, the project offers a way to strengthen ties with its principal security ally while supporting a more diversified semiconductor supply chain. For the United States, Japanese investment provides additional manufacturing capacity and closer cooperation with a key partner as Washington seeks to reduce strategic dependence on China.

The project illustrates how geopolitical competition is increasingly shaping decisions about where critical technologies are manufactured, who supplies essential components and how governments seek to secure their economic futures.