The firm is the world’s biggest contract maker of microchips used in everything from Apple phones to Nvidia’s artificial intelligence hardware.

It opened its first Japanese chip plant two years ago in the southwestern region of Kumamoto — touting it as a move to boost the resiliency of chip supply for Japan and worldwide.

TSMC is also building a second factory there, reportedly originally slated to churn out six-nanometre chips for telecommunication devices.

Three- and six-nanometres are marketing terms, but in general the smaller the number, the higher the density of microscopic components in each chip, and the better the performance.

The move to three-nanometre tech is to “meet strong demand driven by AI”, TSMC’s public relations office said.

Chief executive C.C. Wei told Japanese Prime Minister Sanae Takaichi of the plan to “use 3nm technology for production” at the Japan subsidiary’s second factory in Kumamoto, it said.

If realised, the manufacturing of three-nanometre chips will be the first in Japan, public broadcaster NHK said.

But they are not the most cutting-edge type on the market, with TSMC already mass-producing next-generation two-nanometre chips in Taiwan.

Japanese chipmaker Rapidus is also building a plant in northern Japan to make two-nanometre chips, with production set to start in 2027.

Takaichi welcomed the plan on Thursday, hailing cooperation with TSMC as a “prime example” of how her cabinet is seeking to ramp up high-tech investment.

Taiwan is a powerhouse in the manufacturing of semiconductor chips, as well as other electronics.

Some observers say that producing chips outside Taiwan could protect the crucial industry from the threat of an invasion by China, which claims the self-ruled island as its territory.

“All TSMC’s decisions are based on customer needs, and their overseas expansion is not intended to replace Taiwan,” Taiwanese cabinet spokeswoman Michelle Lee said Thursday, citing TSMC’s Wei.