Sony Group and TSMC signed a binding agreement on Tuesday to build a $4.69 billion joint venture in Kumamoto, Japan, to make next-generation smartphone image sensors in a deal that helps to track where the world’s camera chips get built and how much Taiwan’s top chipmaker is betting on Japan.

The venture will be called Advanced Vision Semiconductor Manufacturing Corp., TSMC said in its statement, and it will be located in Koshi City, in Kumamoto Prefecture.

Sony takes charge of new venture

Sony’s semiconductor arm, Sony Semiconductor Solutions, will keep the controlling stake in the venture. The arm will run the business as a subsidiary of Sony Group, and a director will be appointed from Sony’s side of the venture.

The funding is also split unevenly, with Sony Semiconductor Solutions putting in about 465 billion yen, equal to approximately $2.92 billion in part cash and part assets moved over through a company split. TSMC’s investment share is said to be about 282 billion yen. Nippon.com, citing Jiji Press, put the combined figure at 747 billion yen, which comes to roughly $4.69 billion according to the 159.33 yen-per-dollar cited by Reuters.

The Taiwanese chipmaker stated that the investment contributions will come in stages, and will be timed to market demand and business conditions. This suggests both partners will have the chance to slow down on the funding if orders reduce.

TSMC also stated that the investment assumes that the venture receives sufficient backing from the Japanese government, with the partners planning to take that question to the Ministry of Economy, Trade and Industry. Tokyo has already spent heavily to pull chip manufacturing into Japan’s borders, and this joint venture has been made expecting more of the same.

Sony focuses on designs, TSMC manufactures

Sony Semiconductor Solutions will lead the core sensor technology, product planning and design, while the venture leans on TSMC’s advanced-process technology and manufacturing experience to pull these designs into mass production. The two companies have said they “intend to accelerate the commercialization of image sensor products driven by customer needs,” according to TSMC.

The venture’s commercial production is set to fully commence in 2029. The plan integrates new development and production capacity into a Sony image sensor plant already built in Koshi, and the venture is not only aimed at the smartphone market, but the AI, automotive and mobile markets in addition.

Kumamoto’s history with TSMC

TSMC’s first advanced wafer plant in Kumamoto, run by its JASM unit, started commercial operations at the end of 2024 using specialty processes, and a second fab is currently under construction with 3-nanometer mass production expected in 2028.

The Kumamoto prefecture already has a growing local supply base and the joint venture with Sony being developed here places it close to already existing TSMC capacity.

The companies first floated the plan in May through a nonbinding memorandum of understanding, and the signing of the deal after a two-day meeting converts that intention into a legally binding definitive agreement.

Don’t just read crypto news. Understand it. Subscribe to our newsletter. It’s free.