January 22, 2026 18:07 JST

Hello, this is Kenji, presenting the latest #techAsia newsletter from Tokyo.

Once again, public debate here is dominated by local politics as Japan prepares for its third nation-wide election in less than 16 months. It was initiated with a surprise move by Prime Minister Sanae Takaichi, who has decided to call a snap parliamentary election while her popularity is high.

The actual dissolution of the House of Representatives – the larger and more powerful chamber of the country’s bicameral legislature – is set to occur on Friday, when a regular Diet session convenes. This means the annual budget and related legislation are now extremely unlikely to be passed by April 1, when Japan’s fiscal year kicks off, despite a virtual consensus among major parties that government spending, in some form or another, is needed to support and stimulate the country’s chronically muted economy.

One of the big surprises that followed Takaichi’s announcement came from the top opposition Constitutional Democratic Party (CDP). Not only has it decided to form a new party with Komeito, formerly the LDP’s longtime coalition partner, it has stated its position on China much more explicitly.

The alliance announced the new party’s fundamental policies on Monday, including its intention to "take a resolute stance in addressing concerns with regard to China and secure national interest," albeit while also aiming to "foster a long-term, mutually beneficial strategic relationship" between the two countries. Neither the CDP nor Komeito had ever directly mentioned China in policy documents for previous national elections.

This new China clause could be read in the bigger context of a changed political reality in Japan: Major parties will no longer be able to remain ambiguous on the country’s biggest neighbor as Beijing ramps up economic and military pressure in the region, including controls on exports of critical minerals to Japan and conducting live fire drills around nearby Taiwan.

With national security concerns growing and economic priorities shifting in response, the region’s tech supply chains are also continuing to adapt. Australia, for example, is pouring at least a billion dollars into its rare earth industry and looking to cooperate more closely with Japan on this front.

Whatever the outcome of the election on Feb. 8, the next administration – whether led by Takaichi or someone else – will have to navigate a delicate and complex global and regional situation surrounding both national security and economic growth – in other words, a balancing act between the U.S. and China.

Chipmaking is like ...

The need for supply chain security in Taiwan, especially in the strategic chip industry, is urgent, as the latest military threats from China this year have highlighted.

In her latest deep dive into the sector, Nikkei Asia’s Taipei-based chief tech correspondent Cheng Ting-Fang discovered a surprising cast of companies moving into the semiconductor business, including suppliers to steel and plastics industries, and even a maker of tennis rackets and insoles.

But becoming a chip supplier is much easier said than done. Chan Wen-Hsiung, chairman of Advanced Echem Materials, which was previously focused on supplying the display industry, described his company’s painful transformation into a successful maker of semiconductor materials using an unconventional analogy.

"For a small company, entering the chipmaking materials business is as risky as robbing a bank: you either succeed or you don’t survive. Failure likely means the collapse of the company," he said.

Customized delays

Suppliers of parts for Nvidia’s H200 chips have paused production after Chinese customs officials blocked shipments of the AI processors, writes the Financial Times’ Zijing Wu and Eleanor Olcott.

Makers of essential H200 components, such as the printed circuit board, have paused manufacturing following Beijing’s moves to prevent chip shipments entering China, according to two people with knowledge of the matter.

A customs ban, if sustained, would be a blow to Nvidia. The company has heavily lobbied Washington and Beijing to allow sales of its H200 chips, an older generation of AI processors, in China.

After U.S. President Donald Trump indicated he would permit sales last month, Nvidia began stepping up production. The company had expected more than 1 million orders from Chinese clients, according to the people with knowledge of the matter.

Its suppliers had been working around the clock to prepare for deliveries initially planned for as early as March. However, Chinese customs officials on Tuesday last week summoned logistics companies in Shenzhen to tell them they could not submit customs clearance applications for H200 chips, one of the people said, though it was unclear if the ban was temporary.

The regulatory uncertainty led Nvidia’s parts suppliers to pause production last week to avoid incurring inventory write-offs, the people said.

Nvidia and China’s General Administration of Customs did not immediately respond to requests for comment.

Profit over growth

Southeast Asia has been an emerging hotbed of artificial intelligence startups. According to the latest "e-Conomy SEA report" by Google, Temasek and Bain, there are over 680 AI tech companies in the region, with more than 70% of them based in Singapore, well ahead of Malaysia and Indonesia.

However, Nikkei Asia’s Dylan Loh reports that a number of them are starting to prioritize profitability over rapid growth at all costs, as funding may not come so easily as in the past. Scrutiny over their business plans is getting tighter, as investors become increasingly choosy amid concerns that growth over the past few years may prove to have been a bubble.

Sky-high valuations in the AI sector, meanwhile, mean the risk of market correction could be substantial if the hype over the past few years does not translate into solid revenue streams. While the overall level remains well above the 2023 total, venture capital funding for the region’s AI startups in 2025 dropped 20% from the year before, according to one estimate.

A tailwind from the Pentagon

South Korea has been a clear winner under the wave of supply chains shifting away from China in the field of batteries for drones and advanced electric aircraft.

Nikkei Asia’s New York correspondent Pak Yiu reports that U.S. battery makers SES AI and Amprius Technologies are expanding their cell manufacturing capacity in South Korea, as the U.S. National Defense Authorization Act, or NDAA, will bar the Pentagon from procuring made-in-China batteries from October 2027.

SES AI founder Qichao Hu said making a battery pouch cell in South Korea is two times more expensive than making it in its factory in China. While its plant and contract manufacturers in China continue to serve customers that are not U.S. defense contractors, Hu said demand for NDAA-compliant batteries is growing and products from its South Korea operations will make up nearly half of its sales this year.

Suggested Reads

1. Brussels in move to bar Chinese suppliers from EU’s critical infrastructure (FT)

2. Sony to spin off TV business, form joint venture with China’s TCL (Nikkei Asia)

3. Vietnam breaks ground on first chipmaking plant in high-tech push (Nikkei Asia)

4. Opinion: China will clinch the AI race (FT)

5. TikTok owner ByteDance targets Alibaba with AI-led cloud drive (FT)

6. Let it grow: Panasonic’s plant formula boosts CO2 absorption (Nikkei Asia)

7. Japan to help ASEAN develop local-language AI amid China concerns (Nikkei Asia)

8. White House sets tariffs to take 25% cut of Nvidia and AMD sales in China (FT)

9. Taiwan chipmaker PSMC to sell factory to US counterpart Micron for $1.8bn (Nikkei Asia)

10. Nexperia Europe managers devised state intervention to save their jobs, claims Chinese owner (FT)

Podcast: Tech Latest

What’s behind Google’s smartphone production plans in Vietnam

Welcome to the Tech Latest podcast. Hosted by our tech coverage veterans, Katey Creel and Shotaro Tani, every Tuesday we deliver the hottest trends and news from the sector.

In this episode, our host Shotaro speaks with Taipei tech correspondent Lauly Li about Google’s move to develop and make high-end phones in Vietnam this year from scratch in a move similar to what Apple has planned for India.

Find us on Apple Podcasts | Spotify | YouTube | YouTube Music | Amazon Music | Voicy

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