Japan currently holds approximately 20 percent of the world market share in semiconductor manufacturing, while Japanese semiconductor equipment companies enjoy a 35 percent world market share, according to a report by Industrial Info Resources. More than half of the world”s semiconductor material market is held by Japan as well.

Industrial Info says Japanese chip manufacturers suffered heavy losses due to downed semiconductor manufacturing as a result of the March 11 earthquake, tsunami and subsequent power crisis. This caused a chain reaction that interrupted electronics production for multiple industries. The world automotive industry was one of the hardest hit, with Japanese automotive makers suspending operations at multiple global production sites. Manufacturing resumed throughout the second quarter, and the global industry entered the third quarter with high stocks.

The global semiconductor industry, like most other industries based on manufacturing, is still recovering from the world economic crisis of 2008. According to Industrial Info, recovery was slow through 2009, and the beginning of 2010 raised hopes, though demand began to lull by the end of the year. However, Industrial Info says there could be a slight upswing in demand during the second half of 2011 due to increased demand following the earthquake in Japan.

A steady demand for smartphones, tablet computers and e-readers in Japan and other countries could keep growth steady, though Industrial Info says it might be tempered with cautious consumer spending. Japan”s economy has been shrinking since the fourth quarter of 2010, contracting more than an annualized 3 percent during the first quarter of 2011. However, Industrial Info says semiconductor-related companies are expanding, hoping to gain better economic ground after 2012, boosted by a growing automotive industry in developing countries.

Industrial Info is currently tracking approximately $400 million in Japanese semiconductor projects, including grassroot etching machine facilities and expansions for semiconductor manufacturing sites. Most projects, such as Tokyo Electron Limited”s new etching machine plant in Kagawa prefecture, are currently under construction, with the remaining projects scheduled to start by mid-2012.