As the era of ultra-fine processes of 2 nanometres and below takes hold, Japan's dominance is again coming into focus in the market for key materials. As the number of extreme ultraviolet (EUV) process layers increases, demand for photoresists (PR) and blank masks is also surging. Japanese companies control more than 90 percent of this market. The local investment industry has shown confidence, calling domestic companies "Invisible Champions" in the semiconductor ecosystem.

According to market research firm QYResearch, as of last year three Japanese companies - Tokyo Ohka Kogyo (TOK), JSR and Shin-Etsu Chemical - accounted for about 90 percent of the global EUV photoresist market. The average price of EUV photoresist is about $1,800 per gallon, a high value-added product. Local media outlet VisionTimes reported the figure was more than 95 percent.

The blank mask market is similar. Hoya dominates the market for blank masks, the base plates for photomasks that etch semiconductor circuits. According to market research firm Semiconductor Insights, Hoya leads the EUV blank mask market on the back of defect-free multilayer coating technology and is widening the gap with rivals in developing products for next-generation High-NA EUV.

The shift to 2-nanometre processes is behind the strengthening of Japan's materials dominance. Compared with 3 nanometres, the number of EUV-applied layers in 2-nanometre processes increases by more than 30 percent. In 1.4 nanometres in 2027, it is expected to surge to more than 30 layers. As layers increase, material consumption rises exponentially.

The structure is that the ultra-fine process race that Samsung Electronics, TSMC and Intel are staking their survival on leads to higher sales for Japanese materials companies. That is also why the two markets cannot be assessed simply by their size.

They are already exercising pricing power. According to an industry analysis by investment firm Tiger Brokers, after Japan tightened export controls to China in April 2025, prices for cutting-edge EUV photoresists rose by more than 15 percent. Intel Market Research also pointed out that as nodes become more advanced, price volatility increases due to shortages of specialty chemicals. As supply chain instability grows, Japanese materials companies are strengthening their pricing power.

The local investment industry is brimming with confidence in domestic companies. It recently analysed the 156.6 billion yen ($1.05 billion) initial public offering of Japanese semiconductor photomask company Tekscend Photomask and named Japanese semiconductor materials and equipment companies "Invisible Champions" in the supply chain.

Tekscend holds about 25 percent share of the photomask market in processes of 2 nanometres and below, and aims for mass production of 2-nanometre masks in 2026 and commercialisation of 1 nanometre in 2030. Hong Kong fintech company Futu also assessed that even TSMC cannot operate factories without Shin-Etsu Chemical and JSR, and that Japan holds the initiative at the top of the semiconductor supply chain.

Domestic production for general use, renewed dependence on Japan for cutting-edge

South Korea is responding but it is not enough. After Japan's export restrictions in 2019, the localisation rate for general-purpose materials increased. But as processes become more advanced, a pattern is repeating in which dependence on Japan rises again. Given the pace of advanced semiconductor processes, concerns are growing that it will be hard to narrow the gap if localisation results follow behind.

According to the industry, Samsung Electronics is conducting an evaluation of SNS Tech's EUV blank masks, aiming to apply them in the second quarter of this year. SNS Tech also built a dedicated plant in Yongin in the second half of last year. Samsung Electronics plans to apply domestically produced masks to some EUV lines initially, then gradually expand the scope after checking quality and yield. Dongjin Semichem is also continuing to develop domestically produced EUV photoresists.

But the industry assesses that this is still focused on general-purpose EUV process levels, and that in the most advanced High-NA EUV process it is still difficult to secure yields without Japanese materials. According to market research firm Mordor Intelligence, demand for metal oxide resist (MOR) is expected to grow at a compound annual rate of 12.94 percent after this year, when the introduction of High-NA EUV begins in earnest.

In this situation, Japan's JSR acquired U.S. Inpria, a next-generation extreme ultraviolet (EUV) photoresist (PR) startup, in 2021 and secured core technology early. An industry official said, "If you do not want to cede materials leadership to Japan in the most advanced processes, it ultimately depends on the timing of upfront R&D investment."