Dubbed 'Rapidus' the firm will also have Japanese government money behind it to the tune of $500 million.
Toyota, Sony, NTT, SoftBank, Kioxia, Denso, and NEC will each invest $7 million in the new company, while MUFG Bank will put in $2.1m.
Minister of Economy, Trade, and Industry Yasutoshi Nishimura said: “Semiconductors are going to be a critical component for developing new leading-edge technologies such as AI, digital industries, and health-tech. Semiconductors are becoming even more important from an economic security perspective” due to the rising geopolitical risks."
He said: “As the rivalry between the US and China over tech supremacy has been intensifying, chips are becoming more important in terms of economic security."
Nishimura said that Rapidus is expected to begin producing chips in the second half of the decade.
The new company is reportedly set to work with IBM on the development of sub 2-nanometer chip technology. The US company was the first to demonstrate 2-nanometer chips, although it does not manufacture them.