TSMC said its two factories would create 3,400 high-tech jobs in and around Kumamoto prefecture.

Taiwanese chipmaker TSMC said on Tuesday it will build a second Japanese plant to begin operation by the end of 2027, bringing total investment in its Japan venture to more than $20 billion with the support of the Tokyo government.

Taiwan Semiconductor Manufacturing Co announced plans in 2021 to build a $7 billion chip plant in Kumamoto in southern Japan's Kyushu.

TSMC said last month the first Japanese factory would open in February with volume production in the fourth quarter, and that the company was also exploring building a second factory in the country.

In a statement, TSMC, the world's largest contract chipmaker, said its majority-owned unit Japan Advanced Semiconductor Manufacturing in Kumamoto would build a second fabrication plant, or fab, in response to rising customer demand.

The second fab will begin construction by the end of this year and with both factories the site is expected to have total monthly capacity of more than 100,000 12-inch wafers to be used for automotive, industrial, consumer and high performance computing-related applications, TSMC said.

The capacity plan may be further adjusted based upon customer demand, it added.

TSMC holds a 86.5% stake in the Japanese venture, with Sony Group 6%, auto parts maker Denso 5.5% and carmaker Toyota 2%.

TSMC's expansion in Kyushu is central to the Japanese government's efforts to rebuild the country's position as a leading chip manufacturing centre and ensure the stable supply of chips amid trade tensions between the United States and China.

The decision to build a second fab is a vote of confidence by TSMC in Japan where construction of the first fab has run smoothly and which it sees as a source of diligent workers with a government that is easy to deal with.

Japan's chip-making sector, the world's biggest in the 1980s, has struggled to maintain its competitive edge, going into a steady decline in the past three decades, while rivals such as Taiwanese manufacturers gained ground.

While both TSMC and the Taiwan government have said the majority of the company's most advanced manufacturing would continue to take place in Taiwan, TSMC has been expanding its global manufacturing footprint in response to what it says is customer demand.

TSMC's flagship overseas investment is a $40 billion project to build two fabs in Arizona, supporting Washington's plans to boost U.S. chipmaking capacity.

TSMC is also planning its first European factory, in Germany, which will mainly supply the auto industry.

TSMC's Taipei-listed stock has risen 8.9% so far this year on the back of a boom in demand for chips for artificial intelligence applications, outperforming a 0.9% gain for the broader index.

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