Japan must spend at least a trillion yen (about $9 billion) in the current fiscal year and trillions more in years to come to prevent the nation’s beleaguered semiconductor industry from falling further behind advanced chip producers in South Korea and Taiwan.

That’s the verdict of Tetsuro Higashi, former chairman of Tokyo Electron and leader of an expert panel advising the Japanese government on chip industry strategy, Bloomberg reported today.

“It will not be at all easy to stage a comeback,” Higashi said, according to the report. “If we miss this opportunity now, there may not be another one.”

Higashi’s warning follows the release of a June 4 report by Japan’s Ministry of Economy, Trade and Industry (METI) outlining a “national project” to revive domestic chip-making capabilities, which the ministry deems as important as securing food and energy. It comes amid a global chip shortage that has forced production delays at Japan’s biggest manufacturers, including Nissan Motor and Honda Motor.

Trillions of yen per year may sound like a hefty outlay. In fact, it’s just the ante given that the bill for building a single advanced wafer fab can top $10 billion—and that other governments are lavishing vast sums on homegrown chipmakers.

The U.S. Congress this month approved a bill earmarking $52 billion for domestic chip manufacturers. China has vowed to spend $1.4 trillion over the next six years in support of technological advances in chips, artificial intelligence and autonomous driving. South Korean companies including Samsung and SK Hynix will invest $450 billion over the next decade to boost chip research and production, while the world’s leading chipmaker, Taiwan’s TSMC, says it will invest $100 billion over the next three years.

Japan’s share of global semiconductor sales has slumped to 10%, down from 50% in 1988. The country still has 84 chip factories, more than any other economy in the world. But few produce high-end components. Japan makes no chips with the most sophisticated, sub-10 nanometer circuitry; that segment of the market is dominated by producers in Taiwan and South Korea. As a result, Japan now imports 64% of its semiconductors.

The story of how Japan rose from the ashes of surrender after World War II to overtake the U.S. as the world’s dominant manufacturer of semiconductors is one of the most remarkable in the history of the electronics industry, if not the modern global economy. It was driven partly by the explosive growth of Japan’s consumer electronics industry, which created homegrown demand for chips, and the fact that Japanese electronics firms were part of large industrial groups and had easier access than U.S. rivals to long-term financing. State-led industrial planning played a role, as did a variety of forms of protectionism. (You can read more in this excellent report by Chad Bown of the Peterson Institute of International Economics.)

In the mid-1980s, U.S. chipmakers sought relief from the Reagan administration, complaining that Japanese competitors were “dumping” chips on global markets and that Tokyo employed unfair trade practices to keep the U.S. share of Japan’s chip market below 10%. Under threat of crippling duties from its most important trade partner, Japan in 1986 agreed to “voluntarily” limit chip sales to the U.S., and, in a controversial side letter, acknowledged that the U.S. semiconductor industry expected to achieve a 20% share of Japan’s market within five years. Bown argues that the deal led to a global supply shortage in some forms of chips that ultimately created an opportunity for producers in Taiwan and South Korea.

The U.S.-Japan rivalry became a sideshow with the rise of China—whose share of total world semiconductor imports rose from 1% in 1995 to 23% in 2019—and the globalization of the chip industry.

China remains acutely dependent on imported chips and chipmaking technologies. In 2020, the nation imported a record $350 billion worth of semiconductors—more than it spent on importing oil. And in the first quarter of this year, China’s imports of integrated circuits soared to $94 billion, up 34% from the same period last year.

Chinese President Xi Jinping has made reducing that dependence a centerpiece of his economic policy. The consensus among industry experts remains that Chinese chipmakers are at least one or two generations behind the global standard in chipmaking technology, and are unlikely to reduce that gap soon, no matter how much money Beijing doles out on domestic producers.

But the rise and fall of Japan’s chipmakers suggests that leaders of the industry today have no room for complacence.

More Eastworld news below.

Clay Chandler
– clay.chandler@fortune.com

This edition of Eastworld was curated and produced by Eamon Barrett. Reach him at eamon.barrett@fortune.com.

EASTWORLD NEWS

Apple Daily

Hong Kong’s only pro-democracy newspaper, Apple Daily, will likely close down this week, following the arrest of several executives and a government-imposed freeze on its parent company’s accounts. The executives were arrested Thursday during a raid on the paper’s offices—the second in a year—and accused of violating the new National Security Law (NSL). Apple Daily founder, Jimmy Lai, was charged under the NSL last year, accused of “collusion” with foreign forces. Lai is already serving a 20-month jail sentence for participating in the 2019 protests. Fortune

Japan's fan plans

Organizers of the much-delayed Tokyo 2020 Olympics said they will permit up to 10,000 spectators per event at the Summer Games this year, but will cap each venue at 50% capacity. The National Stadium has a maximum capacity of around 80,000. Organizers banned foreign fans from attending the Games in March, over fears of creating a COVID-19 “super spreader” event, but the logistics of ensuring athletes maintain social distancing is proving a nightmare of its own. Public opposition to the Games, which open on July 23, is waning, at least. But now businesses are less sure hosting the pandemic Olympics is a good idea. Wall Street Journal

No option

Reliance chairman Mukesh Ambani, Asia’s richest man, says society and business have “no option” but to adopt sustainable business models. That will be a challenge for Reliance itself—a conglomerate with operations spanning telecoms, retail and petrochemicals. Last year, 60% of Reliance’s revenue was generated by fossil fuel energy operations, but the giant company plans to be net-zero by 2035. Bloomberg

Black fungus

India is facing a troubling epidemic of murcomycosis, a flesh- and bone-eating fungal infection that proliferated as Indian doctors fought to combat India’s overwhelming coronavirus surge. Facing severe shortages of medical oxygen, doctors treated patients with steroids, which reduce inflammation in the lungs and ease breathing. The treatment is standard, but experts believe prolonged prescriptions weakened patient immune systems and allowed the fungus—which is commonplace in homes and hospitals—to thrive. New York Times

Cui Tiankai

China's ambassador to the U.S., Cui Tiankai, announced Monday that he will soon retire from his post in Washington after eight years in the role. Cui is already older than the normal age of retirement for Chinese ambassadors, and his resignation comes after months of speculation whether he would remain on during the Biden administration. In a farewell notice posted on the embassy's website (in Chinese), Cui said China-U.S. relations were at a "crossroads," where they can either choose dialogue or conflict. China is expected to replace Cui with former Foreign Ministry spokesman Qin Gang. Nikkei

MARKETS AND MOVERS

Iron — Beijing’s state planner said it would investigate and “severely punish” any “malicious speculation” in the iron ore market, as prices for the key steelmaking ingredient soared this year. Iron ore futures tumbled 9% on the announcement.

PUBG —Chang Byung-gyu, the founder of computer game publisher Krafton, could be worth $3.5 billion when the company goes public in Seoul, possibly next month. Krafton is the owner of PlayerUnknown’s Battlegrounds (PUBG)—the hugely successful battle royale game.

Crypto kingdoms — Seven countries across Asia are in the top 10 developers of Central Bank Digital Currencies, according to PCCW.

India — As of June 11, the Securities and Exchange Board of India has approved 18 companies to launch Initial Public Offerings on the country's exchanges, after the national stock market endured India's worst COVID-19 outbreak with remarkable resilience. 

Green bonds — Sales of green debt in China reached a record high of $23 billion this year, second only to France in green bond issuance. But China’s green bonds, which allow issuers to use 50% of proceeds to pay off debt, diverge from international standards, which require 100% of bond sales revenue to be channeled into green projects.

Amber — Hong Kong-based Amber Group—a crypto financial services company, founded by former Morgan Stanley traders—has hit unicorn status. The nearly 3-year-old company increased its valuation tenfold over 18 months, securing funding from China Renaissance Group and Gobi Partners.

FINAL FIGURE

$10 billion

China bought $10 billion of manufactured, agricultural and energy goods from the U.S. in May, marking the lowest monthly import total since October last year. The slump means China will likely fall short of the commitments it made during the so-called Phase One trade deal in January 2020, which brought the U.S.-China trade war to an uneasy ceasefire. May’s purchases bring China’s total imports of U.S. goods to $157 billion since January 2020, which is roughly 41% of the value targeted by the end of this year.