Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Japan lost its edge in chips decades ago — to chip designers in the US and manufacturers in Taiwan and South Korea. Since the 1990s, the gap has only widened. The world’s most advanced silicon, powering artificial intelligence, is not made in Japan. Yet Japanese chip-related stocks are still going strong.The supply chain disruptions and swings in demand that trouble chipmakers across Taiwan, South Korea and the US have been kinder on Japanese companies. Shares of Advantest and Resonac, formerly Showa Denko, have gained more than a third from last year’s lows, less affected by broader chip sector weakness. This week, shares in JX Advanced Metals, the largest listing in Japan in almost seven years, rose as much as 6 per cent on their first day of trading.Assembling billions of transistors on to a tiny silicon wafer may seem like an engineering feat. But just as crucial as engineering is the chemistry behind the process. From start to finish, chipmaking depends on a wide range of ultra-high-purity materials.Japan does not manufacture the most advanced chips, but it makes many of these materials and chemicals as well as testing equipment. These products may not be glamorous, but they are highly profitable.Every chip begins as a silicon wafer, and two local companies — Shin-Etsu Chemical and Sumco — together hold more than 50 per cent of global market share. Etching patterns into chips requires photoresists, or light-sensitive materials used in extreme ultraviolet lithography. JSR Corporation, Tokyo Ohka Kogyo and Shin-Etsu Chemical are among the top producers of these materialsBeyond chemicals, local makers are active in the business of testing and measuring chips. Automatic testing equipment, used to verify chip performance and detect defects, is supplied by companies like Advantest.While not entirely immune to industry downturns, Japan’s chip materials and equipment suppliers experience less volatility than companies that actually make the chips themselves. Unlike fabrication plants, which go through cycles of boom and bust, the suppliers of wafers, chemicals and speciality metals benefit from long-term contracts and steady demand.Moreover, production of these chemicals and materials require decades of expertise and infrastructure investment. Few countries have attempted to compete in these areas, allowing Japan’s key suppliers to maintain both pricing power and market stability.Japan may never reclaim the dominance in chip fabrication it enjoyed during its 1980s golden era. But the remnants of that time leave it with something equally valuable to investors looking to bet on the chip sector: expertise and stability. june.yoon@ft.com
