TOKYO – Japan’s Sumco to spend 228.7 billion yen ($ 2.05 billion) to ramp up production of advanced 300mm silicon wafers for semiconductors, the company said Thursday, amid a shortage persistent world of chips.

“With our existing manufacturing facilities, supply cannot keep up with demand,” President Mayuki Hashimoto said at a virtual press conference.

The investment will further enhance the competitiveness of Japan’s chipmaking materials sector, which has continued to thrive even as the semiconductor and home electronics industries collapsed. Sumco and its compatriot Shin-Etsu Chemical together hold more than half of the global silicon wafer market.

Sumco will invest 201.5 billion yen in a new factory alongside existing facilities in Saga Prefecture in Japan. Construction of the building and installation of equipment will begin next year, and the plant is expected to be commissioned in stages from the second half of 2023, with full start-up in 2025.

The remaining 27.2 billion yen will be used to expand a factory run by a national subsidiary.

To help pay for that, the company is looking to raise nearly 128 billion yen by offering 60 million new shares to domestic and international investors, or about 20% of its outstanding shares, according to another announcement Thursday.

Sumco did not detail the extent of the increase in production, citing contractual relationships. “We have five-year contracts with customers, with fixed prices and quantities,” Hashimoto said.

Regarding facilities outside of Japan, such as in Taiwan, the chairman said Sumco “is considering a gradual expansion of production according to the growth of the market.”

With the surge in demand for chips, supplies of silicon wafers have been tight. Auto production has recovered from stagnating earlier in the pandemic, and demand for smartphones and data centers remains high. Market leader Shin-Etsu is running at full speed.

Other Japanese manufacturers of chipmaking materials are also increasing production. Fujifilm Holdings will pay 70 billion yen into the field over the three years ending March 2024, with a focus on photosensitive resin, which is used to deposit circuit patterns on silicon wafers. This will include a 4.5 billion yen investment in photosensitive resin manufacturing facilities for advanced lithography in extreme ultraviolet.

Sumitomo Bakelite plans a 50% increase in the capacity of epoxy molding compounds at a Chinese subsidiary, at a cost of 2.5 billion yen. The company is a world market leader in the production of epoxy compounds for the encapsulation and protection of semiconductors.