彭博特写称Kioxia北上工厂扩张显示日本AI半导体投资外溢有限

In Kitakami, a sleepy city deep in the countryside 500 kilometers north of Tokyo, Japan’s AI revolution is unfolding more as a slow burn than a boom.

On a humid Friday evening in July, the city’s downtown hummed with activity as tech workers from Kioxia Holdings Corp.’s nearby chipmaking plant let off steam in bars and karaoke clubs. A few streets over, taxis crawled along the gravel of a road that’s being repaved to improve access to the factory after it opened a new production facility last year.

For Kitakami’s residents, these are welcome signs of progress in a city that, like much of rural Japan, has been grappling with depopulation and economic stagnation for decades. A steady inflow of Kioxia employees has helped stall its demographic decline, and Kitakami now boasts one of the youngest populations of any municipality in Iwate prefecture.

“Kioxia’s presence pretty much keeps our town functioning,” said Daisuke Okuyama, a manager in the commerce and industry division at Kitakami City Hall. Since the chipmaker began operations at its plant in 2020, local manufacturers have seen sales rise, restaurants have more customers and flashy cars are becoming a more common sight on the town’s roads, he said.

Kioxia, which makes NAND flash memory used to store data for AI systems, is betting big on Kitakami. With support from Japan’s government, the companyplans to spend an extra ¥1.8 trillion ($11.3 billion) constructing a third chipmaking facility at its plant in the city. “We believe that by achieving further business expansion and growth, we can contribute to the revitalization of Kitakami and serve as a pillar of its economic foundation,” a representative for Kioxia Iwate told Bloomberg.

Read more: Kioxia Plans New Chip Fab in Japan to Meet AI Memory Demand

But the hints of revitalization Kitakami has seen so far fall short of the economic transformation rural communities were promised from Japan’s technology buildout. Kioxia’s expansion comes as part of a government-backed push to bolster the nation’s chip sector, with as much as ¥150 billion in subsidies approved in 2024 for the firm’s facilities in Iwate and Mie prefectures. Officials at the time said the investment would generate “extensive” economic spillovers, but Okuyama says the reality in Kitakami has been more nuanced.

While Kioxia employees and workers at its suppliers enjoy comfortable salaries, other residents have seen little change in their wages, and local businesses struggle to compete with the chipmaker for talent. Few of the young tech specialists arriving in Kitakami plan to settle there permanently, and most local high school graduates still choose to leave in search of better-paid jobs elsewhere, according to Okuyama. And beyond the shiny new apartments popping up around Kioxia’s plant, much of the city’s infrastructure is visibly aging, with none of the upscale hotels or shopping facilities that might attract tourists and other higher-spending visitors.

“Of course, we want to believe that the real economic benefits are yet to come,” says Okuyama. “But right now, it’s hard to say that the impact has truly trickled down.”

Kitakami’s experience underscores a major test facing Prime Minister Sanae Takaichi, who in June unveiled a ¥102 trillion ($640 billion) investment plan aimed at turning Japan into an artificial-intelligence and semiconductor powerhouse. Her wager, unprecedented in scale, seeks to achieve what her predecessors could not: meaningful economic growth that extends beyond the urban centers of Tokyo and Osaka.

Financial markets are already betting on success. Expectations that Takaichi’s fiscal largesse will boost corporate profits have fueled a stock-buying frenzy dubbed the “Takaichi trade,” helping propel the tech-heavy Nikkei 225 Stock Average to multiple records. Kioxia’s shares, buoyed by rampant AI demand for memory chips, have rallied more than 2,000% in the past year, briefly making the firm Japan’s most valuable listed company in June.

In the rural manufacturing hubs building the nuts and bolts of the AI boom, the mood is more cautious. The government estimates its chip funding alone will generate ¥443 trillion in economic spillover effects by fiscal 2040. But after years of smaller investment pledges yielded only pockets of limited growth, doubts remain over whether Takaichi’s massive spending plan will be enough to revive Japan’s embattled regional economies.

Read more: Takaichi Unveils Unprecedented $2.3 Trillion Japan Spending Plan

“Of course, Japan has benefited from the AI boom, but compared with other countries, it hasn’t quite managed to fully ride the wave,” said Kengo Tanahashi, a senior economist at Nomura Securities. “That’s frustrating.”

It’s not for lack of trying. Since releasing a new strategy to revive its chip industry in 2021, Japan has set aside about ¥7.2 trillion for semiconductors and AI, according to the industry ministry. That includes more than ¥2 trillion in support for state-backed chip venture Rapidus, whose research and production facility on the northern island of Hokkaido is becoming a hub for the nation’s tech ambitions.

Previous government initiatives have yielded some success. Since 2022, Taiwan Semiconductor Manufacturing Co.’s Tokyo-backed expansion in Kumamoto has brought jobs, investment and international attention to the southern prefecture, helping revive Kyushu’s reputation as Japan’s ‘Silicon Island.’ TSMC’s presence is set togenerate ¥11.2 trillion in economic benefits for the region through 2031, according to Kyushu Financial Group.

The challenge for Takaichi will be replicating that impact at scale. Japanese companies’ approach to AI investment so far has been too fragmented to affect large-scale economic change, according to Atsushi Osanai, a professor at Waseda Business School. He points to South Korea, where investment centered around two powerful chipmakers has delivered faster and more substantial economic gains.

The contrast between the economic ripple effects of the AI buildout in the neighboring countries is stark. In Korea, chip workers at Samsung Electronics Co. and SK Hynix Inc. threatened to go on strike as earnings skyrocketed, leading the companies to promisemassive bonuses to ensure labor peace. That in turn has unleashed a wave of real estate sales and luxury good outlets around semiconductor factories.

“There are efficiency benefits that can only be achieved through concentration,” Osanai said. “Because Japan’s industry is diversified, there isn’t a single dominant player, so profits aren’t generated as efficiently.”

Key to Takaichi succeeding where her predecessors fell short will be making sharper choices about where Japan can compete, said Jeongmin Seong, a partner at the McKinsey Global Institute in Tokyo. Rather than trying to catch global rivals in already crowded fields, the government should focus spending on areas where Japan has technological or resource-driven advantages, such as robotics and energy, he said.

“If you prioritize everything, then you prioritize nothing,” Seong said. “But if Japan chooses to take bold action, there is a real opportunity to write a very exciting comeback story over the coming decade.”

Details of how Takaichi’s ¥102 trillion pledge will materialize remain unclear, but the government has designated several rural areas, including the northern prefecture of Akita, as priority zones for investment. The administration has alsocommitted as much as $1 billion to Israeli chipmaker Tower Semiconductor Ltd., which has chipmaking facilities in Niigata and Toyama prefectures. Kioxia’s Chief Executive Officer Hiroo Ota last week said he hopes that the government will subsidize around a third of the company’s latest expansion plan.

Tokyo-based firm Highreso Co., which specializes in building and operating data centers in rural Japan, is cautiously optimistic about Takaichi’s plan. Any government support to help cover the skyrocketing price of graphics processing units would be a great help for domestic firms, said Taishi Koyachi, who oversees Highreso’s technical alliance operations in Shika, a coastal town in the western prefecture of Ishikawa. “It’s very encouraging that the government intends to spend more on AI, but we haven’t felt any direct benefits yet,” he said.

Read more: UAE Fund Weighs $6.3 Billion for Japan AI Data Center

Back in Kitakami, realtor Yasuhiro Ito sees the town’s future as inextricably linked to Takaichi’s AI bet.

Kioxia’s expansion has already transformed his business, with demand for apartments and office space surging since the chipmaker opened its second fab last year. The Kitakami branch of his firm, Fudosan Honpo Holdings, now relies almost entirely on Kioxia-related rentals for profits as local home sales remain sluggish.

“Our business is fully dependent on the AI boom now, for better or worse,” Ito said. “If the buildout falters, we don’t stand a chance.”