(Bloomberg) -- Every morning, some of the world’s top chip engineers can be found stuck in traffic on Kumamoto Prefecture’s Route 30, as vehicles carrying heavy machinery and thousands of workers inch toward what will soon become Japan’s most-advanced chip hub when Taiwan Semiconductor Manufacturing Co.’s new factory goes online next year.

Billions of dollars are pouring into Kikuyo in semiconductor-related subsidies, converting fields of cabbages, daikon and carrots into huge factories, lifting land prices and bringing new jobs. But the flood of investment and the influx of workers are also overwhelming the farm town of 43,000, causing chronic gridlock, shortages in housing and services and stretching commute times to the chip industrial park to 90 minutes or more. 

“The traffic is so bad,” said resident Miki Ikeda. “And staffing shortages are everywhere. An elementary school built just two years ago doesn’t have enough classrooms; daycares don’t have enough teachers; town hall — which is supposed to make sure everything is running — doesn’t have enough people to deal with the problem.”

And the pace of change is accelerating. Companies around the globe are discovering Kikuyo and Japan’s water-rich countryside as they remake their supply chains in a world increasingly divided by US-China rivalry. As manufacturers seek to lower their technological reliance on Taiwan, an island at the center of geopolitical tensions, Tokyo is jumping at the opportunity.

Prime Minister Fumio Kishida’s administration is prepared to commit more than $14 billion in subsidies as part of a push to triple domestic production of chips by 2030: Japan’s shouldering almost half the estimated $8 billion cost of the TSMC factory while in talks about support for a second Kumamoto plant; it’s poised to provide about $1.5 billion to help finance an expansion at Micron Technology Inc.’s Hiroshima factory; and it’s funding homegrown Rapidus Corp. to make the country’s own cutting-edge chips. The jammed roads of Kumamoto, the first step in Japan's strategy, risk undermining the country's national silicon ambitions.

Kishida is betting the shifting geopolitical priorities will help aging Japan regain some of its long-lost leadership in semiconductors and remake the southwestern island of Kyushu into a Silicon Island that’ll draw young global talent. But the region’s sudden rise in fortune is bringing to light years of delay in building out roads and public transportation systems — and that’s turning into a potential bottleneck for Japan’s chip aspirations. 

Kumamoto’s rich underground water reserves and vast tracts of level land were a boon for Japanese chipmakers when they dominated overseas rivals in the 1980s. As NEC Corp., Hitachi Ltd., Mitsubishi Electric Corp., Toshiba Corp. and Fujitsu Ltd. rose in prominence, so too did a vast network of domestic suppliers. Companies ranging from Japan Material Co. to Tokyo Ohka Kogyo Co. to Ebara Corp. now manufacture semiconductor chemicals and equipment in Kumamoto, while Sumco Corp. churns out wafers in neighboring Saga prefecture. Sony Group Corp. produces camera sensors and Tokyo Electron Ltd. makes multi-million dollar chip gear in the same industrial park as TSMC’s new plant. The presence of a global chipmaker, along with easy access to Taipei, Seoul and Tokyo, is now attracting even more suppliers.

But while construction on TSMC’s factory proceeds at breakneck speed, with workers clocking in to three round-the-clock shifts, little has been done to improve the prefecture’s traffic conditions — ranked among the country’s worst.

The area around the TSMC plant is a checkerboard of unmarked roads just wide enough for three adults to walk abreast without touching. Used mostly for mini trucks helping farmers bring equipment or produce from one field to another, they crisscross one another until they ultimately lead to Route 30, which links Kikuyo’s fields to its residential and commercial neighborhoods to the west and to the city of Ozu to the east. Trucks going in and out of the TSMC construction site travel along Route 30 through more traffic-clogged junctions to get to nearby Kumamoto Airport or Yatsushiro Port.

“The roads are so narrow in Kumamoto,” said Kikuyo resident and Taiwanese translator Calla Chiu, who couldn’t believe TSMC was coming to her neighborhood. “It’s a world-class chipmaker that builds factories in places where everything it needs is already there. I wondered where in Kikuyo they’d even build a factory. It’s just rice fields.”

TSMC has voiced concerns about the traffic conditions to the prefecture, but it will be years before the congestion eases, local officials say. Discussion is still focused on how much wider Route 30 needs to be, with purchases of land adjacent to the road to begin by March next year. Officials have yet to set a construction start date, let alone a target for completion. Beyond Route 30, construction remains years away, with most projects still in the planning phase, due to opposition from local residents, negotiations with landowners and the bidding process by which contractors are selected.

Some progress has been made on expanding Route 311, which links Kikuyo to the airport. The prefecture has bought up roughly 80% of the land needed to widen the road, but even here, Kumamoto has only just signed on contractors, and construction is at least a month away. Kumamoto expects the road to be ready by March 2027. 

“We may have fallen short in the past, but with TSMC as a huge impetus, the prefecture, together with the economy and land ministries, will focus our efforts on tackling the traffic problem,” Kumamoto Governor Ikuo Kabashima told Bloomberg News. “My job as governor is to make sure TSMC does not come back to us and say, ‘This isn’t what we expected.’”

Japan Advanced Semiconductor Manufacturing Inc., the Taiwanese firm’s operating unit in Japan, has been in discussions with local officials about infrastructure, a TSMC spokesperson said in an emailed statement. “JASM encourages employees to commute with public transportation and has started a trial shuttle bus to support employees commuting via the nearest train station to JASM.”

While the flow of investment shows little sign of slowing, Kumamoto’s ability to unclog its roads remains paramount if the economic benefits of hosting the world’s biggest contract chipmaker are to reach beyond the town of Kikuyo.

TSMC is expected to hire 1,700 people when it goes online late next year. Over the next 10 years, it could generate about 7,000 jobs and ¥4.3 trillion in wealth, according to local bank Kyushu Financial Group Inc., while the prefecture expects chip-related annual revenue to more than double to ¥1.9 trillion by 2032. TSMC suppliers, such as Marushow High-Tech Co. and Topco Scientific Co., are looking to open offices in the area, helping to lift Kikuyo’s industry-zoned land prices by more than 30% last year — the biggest jump in the country. Residential land prices rose more than 20% this year in the sharpest gain in more than three decades, with prices immediately around the TSMC factory surging.

But the dearth of public transportation and Route 30’s congestion are discouraging workers from living any significant distance from the industrial park where TSMC is located. There is just a one-track train line linking Kikuyo to Kumamoto City and limited bus service.

The lack of infrastructure is also concentrating wealth into the hands of a few. Bidding wars have emerged near the TSMC plant, lifting prices by 25% in a span of weeks and convincing landowners to wait for bigger payouts, according to Terumasa Uehara, who buys land for development for local real estate firm Meiwa Estate. “It’s a bubble. It’s like there is no market price,” he said. That wealth has yet to reach much of the rest of Kumamoto, according to Mariko Nishimura, Vice Chair of the Kumamoto Chamber of Commerce and Industry. Many rooms remain vacant in nearby Kumamoto City, which workers often rule out due to the slow traffic, she said. 

“Whether Kumamoto or Kyushu as a whole can maximize the benefits from TSMC’s investment depends on our finding solutions to improve access issues while we have the attention of TSMC and the Japanese government,” she said.

Pockets of resentment are also forming.

“TSMC brings nothing but trouble,” said Satoru Futa, a long-time member of Kikuyo’s town council. The 70-year-old blames chip companies’ moving into the neighborhood for the traffic conditions that led to the deaths of three friends. More drivers now take side roads to avoid the congestion on the main two-lane throughways, speeding down narrow roads that border the town’s farms. Futa and other residents are especially worried about the impact TSMC’s factory could have on the local water supply. “Our safety is at stake,” he said.

TSMC’s new semiconductor plant is expected to use roughly 12,000 cubic meters of groundwater per day. The company said it’s reducing water consumption, recycling more water and making efforts to replenish more water than it uses. The Japan unit “believes in fulfilling our responsibility to protect groundwater together with the people of Kumamoto,” and signed an agreement in May with local officials and organizations to accelerate groundwater collection and storage, a spokesperson said. 

“I think everyone is concerned about the groundwater, the power and the wastewater,” said Chiu. “I have so much hope, but I’m also worried.”

As for the region’s traffic, local authorities are focusing on short-term fixes, such as coordinating traffic signal cycles, creating right-turn-only lanes and increasing the number of shuttle buses to the factories. Success has been limited. In January, local bus companies tried to reduce the daily number of cars on the road by 800 cars in Kikuyo by increasing the number of buses in the morning, but only 200 rode the buses. Workers said they avoided the service, because the traffic jams made the shuttle’s schedule unreliable.

More incentives and measures such as bus lanes and taxi-sharing services are needed to change commuter behavior, according to Kumamoto Gakuen University Professor Shoshi Mizokami, who points to nearby city Arao’s success in using AI-powered ride-sharing services it implemented in 2020.

Still, the promise of what might be is making residents more hopeful about the community’s future in a way they haven’t been in decades. Kikuyo is one of a handful of places in the aging country seeing an influx of young workers and technological knowhow. Young and old are enlisting a growing number of Mandarin language tutors in the neighborhood, and a new international school to be run by Kyushu Lutheran College is attracting strong interest from local and Taiwanese families alike.

“Hundreds of Taiwanese moving here will change how we work and live,” said Michiya Nakamura, chief operating officer of local chip-related company meistier corp. Workers now can get pay commensurate with work done, rather than at a discount to wages in Tokyo, he said. “Kumamoto has gotten a chance most of Japan is not getting, to change.”

Hope is high among parents like Ikeda that their children will be able to find jobs closer to home. Until recently, the option to work in Kumamoto was just not available for new graduates, unless one went into local government service, Ikeda’s husband Kenichi says.

TSMC’s arrival may be taxing the community’s infrastructure, but it’s opening up horizons for the next generation, he said. The prospect of more opportunities closer to home convinced the Ikedas’ son to pursue a science degree at Kumamoto College’s National Institute of Technology. “It’s more than just about TSMC. I’m hopeful about the many different ripple effects.”

--With assistance from Debby Wu.

(Updates with comment from TSMC spokespersonfrom the 14th paragraph)

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