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

The FIFA World Cup came to an end with Spain's magnificent victory in a nailbiter of a World Cup final against Argentina early Monday in our time zone. But the heat of competition was quickly replaced with a less enjoyable kind of heat, as Japan's most intense wave of high temperatures so far this summer struck after the annual rainy season ended in most of the country.

My hometown of Nagoya and its surroundings in central Japan's Tokai region have been hit the hardest, with temperatures reaching 40.6 C in Kuwana on Wednesday and 40.3 C in Tajimi on Tuesday.

Japan's tech sector heated up as well, starting with a visit last week by Nvidia CEO Jensen Huang to Tokyo. Huang showed up at an izakaya, or Japanese-style pub, in the downtown area of Kanda. Gathered there were top executives from Japanese chip, electronics, chemical and material companies, such as Kioxia, Tokyo Electron, Panasonic, Murata Manufacturing and Shin-Etsu Chemical, among others. Earlier the same day, he was in the neighboring Akihabara electronics district to celebrate Nvidia's three decades of partnership with Sega.

The video game maker was a savior for Nvidia in the chipmaker's early days when it was on the brink of bankruptcy, providing what Huang described as "very generous" financial support. Without Sega's help, he said, the top global manufacturer of GPUs, or graphics processing units, of the artificial intelligence era "would be out of business today."

The highlight of Huang's Japan visit was his appearance at a news conference for the establishment of Japan's sovereign AI consortium Noestra. Forty-four Japanese tech companies, including Sony, NEC, Honda and SoftBank, are participating in the venture, a platform designed to protect the country's AI competitiveness in a world where the U.S. and China are expanding their leads.

Japan's focus is physical AI, that is, using artificial intelligence to control machines and robots, and Nvidia is to provide the chips for this sovereign model. Huang, who praised Japanese industrial know-how as a "national treasure," was greeted by Minister of Economy, Trade and Industry Ryosei Akazawa, who was, uncharacteristically, wearing a black leather jacket outfit to match Huang's signature style.

Huang is the latest global tech chief to tour Japan. Executives from Anthropic, Taiwan Semiconductor Manufacturing Co., Microsoft and Oracle have all come to make their business pitches to the government of Prime Minister Sanae Takaichi.

They were keen to express their interest ahead of the Tuesday announcement of the country's latest annual economic and fiscal policy blueprint, widely known locally as Honebuto no hoshin, which literally means a "plan with a large bone."

Being the maiden one released by Takaichi, the plan aims for higher growth through proactive fiscal spending. That approach is embodied in her flagship policy of public-private investment, targeting 370 trillion yen ($2.3 trillion) in 17 sectors including AI, chips, biotech, defense, energy and shipbuilding by 2040. Physical AI has been given particular prominence in order to "accelerate 'AI transformation' in all sectors."

While this all looks hot and upbeat, it is a different story in the currency market, where the yen dipped below 163 yen to the dollar for the first time in over 39 years. While reescalation in Middle East tensions is a factor in the latest selloff, Takaichi's aggressive investment plans were also met with skepticism by financial market participants.

TSMC to hike prices ... next year

Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker, is set to raise prices for both advanced and mature chip production services by up to 10% next year, according to this scoop by Nikkei Asia's chief tech correspondent Cheng Ting-Fang.

TSMC's major clients include top chip developers such as Nvidia, Apple, Google, Amazon, Qualcomm, Arm and MediaTek.

According to industry executives familiar with TSMC's pricing strategy, the chipmaker has opted for a less aggressive approach by delaying the price hike to next year.

Many chipmakers have raised prices this year to offset cost increases for labor, materials, chemicals and logistics. They include Intel and AMD, the two largest global microprocessor makers.

Amid supply constraints driven by fresh demand for artificial intelligence computing, TSMC has also decided to raise prices to meet higher costs for materials, manufacturing equipment and construction of new overseas chip plants.

Speaking of production beyond Taiwan's borders, Nikkei Asia's Lauly Li and Yifan Yu reported that TSMC's local peer Wistron opened a new manufacturing complex in Texas on Wednesday. On top of catering to the needs of key client Nvidia's supply chain expansion plan to meet local AI infrastructure demand, the $700 million investment is also meant to heed U.S. President Donald Trump's call to bring manufacturing onshore.

China's clampdown

Chinese regulators are considering tightening export controls on artificial intelligence and semiconductor technologies, as the U.S.-China rivalry intensifies in cutting-edge AI, write the Financial Times' Zijing Wu and Ryan McMorrow.

Regulators led by the Ministry of Commerce have been consulting leading domestic AI and chipmaking groups on how to prevent China's advanced technologies and star startups from being acquired by the West, according to two people involved in the discussions.

The ministry talked to AI companies including Alibaba, ByteDance and Zhipu on limiting the transfer of key data for the training of their models overseas, as well as allowing their model weights to be downloaded by foreign users, the people said. China would still let overseas customers access the models and services, however.

China's AI lab Moonshot last week released its Kimi K3 model that exceeded Anthropic's flagship Opus 4.8 on most of the benchmarks, demonstrating that China has significantly narrowed its gap with the U.S. in frontier AI.

The commerce ministry has also sought views on possible restrictions that would prevent overseas chipmakers including Qualcomm and TSMC from producing advanced semiconductors based on designs developed by Chinese companies such as Huawei, Alibaba and ByteDance, according to the people.

Potential restrictions could also be imposed on the overseas acquisition of strategic technology groups in areas such as agentic AI, the people said. This is mainly to address a loophole that Beijing believes to have led to Meta's $2 billion acquisition of Manus, a deal that was subsequently ordered to be unwound by Chinese authorities.

Most of the proposals are still under discussion, with regulators weighing industry feedback before making a final decision, according to the people, adding that the tech companies have told the regulators that some of these measures would slow down their AI development.

Taiwan's reach for the heavens

As space and satellite development is an extremely costly business, the industry has been dominated by big powers, particularly the U.S. and China. Nikkei Asia's Taipei-based correspondents Cheng Ting-Fang and Lauly Li took a deep dive into the under-reported story of Taiwan's own space ambitions.

Even among economies in the region involved in pursuing their own space projects, such as Japan, South Korea and Singapore, Taiwan has a much smaller space budget.

"You can't always count on foreign support," Wu Jong-shinn, director-general of the Taiwan Space Agency, or TASA, told Nikkei Asia. "People have no obligation to teach you everything," Wu said, as the industry is highly strategic and technologically significant.

Taiwan is set to carry out another launch of its own Formosat-8 satellite series this year, just one year after the previous mission. That marks a significant acceleration, as it used to take eight to 10 years between launches.

"The key mission is to strengthen our national security, which is critically important, while also helping local companies move up the value chain and build a space economy," said Wu, who is also known as the island's "Rocket Uncle."

Fueling change

As the war in the Middle East drags on and the de facto closure of the Strait of Hormuz continues to destabilize global oil supplies, alternative energy sources such as hydrogen are getting an extra boost.

Kiran Sharma, Nikkei Asia's South Asia chief correspondent, reported that India's first hydrogen-powered train began operating on July 17 with a send-off by Prime Minister Narendra Modi.

While it is a fairly short 89-kilometer stretch connecting the cities of Jind and Sonipat in the northern state of Haryana that borders New Delhi, Modi said the opening is "a big step toward the modernization of the Indian railways," raising the possibility of expanding the technology to other routes in the future.

Shifting northwest from India, Kawasaki Heavy Industries is proposing alternative technologies for using hydrogen to produce naphtha in its plant near Turkmenistan's capital of Ashgabat, according to Nikkei's Eisaku Nitta.

The process itself was developed in Germany in the 1920s, but the Japanese company is giving it a fresh look to deal with the chronic issue of heavy reliance on crude oil.

Kawasaki intends to apply this old technology to an existing plant in the Central Asian country where it currently manufactures 600,000 metric tons of synthetic gasoline annually by breaking down natural gas. "Even if it is more expensive, there are advantages to having a domestic naphtha supply chain that does not rely on crude oil," said Kenji Sanada, a Kawasaki executive officer.

Podcast: Tech Latest

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, Shotaro speaks with Tokyo correspondent Tsubasa Suruga about Panasonic's transformation and why investors are still waiting for a convincing growth story.

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