Japan will spend as much as ¥45 billion ($300 million) to back a research group developing advanced chip technology, part of a national push to catch up in semiconductor manufacturing.

The Ministry of Economy, Trade and Industry said it approved outsourcing research on cutting-edge fabrication tech to Leading-edge Semiconductor Technology Center. The year-old organization was set up to assemble Japan’s researchers in areas such as nanotechnology, materials and artificial intelligence and support chip manufacturing at state-backed Rapidus.

“We outsource research and development that the government deems is necessary but is too risky for the private sector to carry out,” Hidemichi Shimizu, director of METI’s strategy office for the software and information services industry, said at a news briefing on Friday. The contract is for up to five years and would span chip technology for 2 nanometers and beyond, as well as AI-enabling chip design, he said.

LSTC aims to develop 1.4 nanometer chip manufacturing know-how by 2028 that it plans to share with Rapidus.

Rapidus is spending billions of dollars in subsidies on a long-shot bid to produce advanced 2 nanometer chips in Chitose, Hokkaido, and compete with Taiwan Semiconductor Manufacturing Co. and Samsung Electronics.

The startup aims to create a cycle that sparks new demand in parallel with developing cutting-edge technology, Rapidus Chairman Tetsuro Higashi said at a news conference on Friday. The former chairman of chip equipment-maker Tokyo Electron also addressed widespread skepticism over the startup’s prospects, given TSMC’s scale and command of more than 90% of the world’s advanced foundry business.

“We have such broad support from the government, support from overseas and support from gear-makers,” said Higashi, who also heads LSTC. “I don’t have the slightest doubt of Rapidus’ success.”

Japan is host to some of the global semiconductor industry’s indispensable tool and materials suppliers, from JSR to Ushio. Tokyo Electron surpassed estimates with its earnings and outlook on Friday after sales of legacy equipment to China ramped up.

Tokyo-based LSTC is working on designs that will enable AI applications on devices such as smartphones as well as connected electric vehicles. The center comprises researchers at the University of Tokyo, Tohoku University and others, according to its website.

LSTC will also serve as the center of joint development with overseas partners on next-generation semiconductor technology and will help generate demand for Rapidus while bolstering Japan’s sustainable competitiveness, economy minister Ken Saito said.