Stocks involved in Japan’s semiconductor supply chain jumped in Tokyo on Tuesday following a report that chip giant Taiwan Semiconductor Manufacturing Co. will build an advanced packaging facility in Japan together with the country's trade ministry.

The two sides will soon sign a memorandum of understanding and form a 50-50 joint venture for the project, Taiwan’s United Daily News reported, without saying how large investment for the plant might be.

"This would be a positive surprise for Japan’s semiconductor sector, including device firms and parts suppliers, due to the large investment,” said Kazuyoshi Saito, a senior analyst for Iwai Cosmo Securities. "While the scale is still unclear, we can expect there to be a certain amount of orders, which could accelerate the potential recovery of Japan’s chip industry.”

Packaging materials firm Shinko Electric Industries Co. rose 6.5%, the biggest gain since April, while Lasertec Corp., which gets 42% of its revenue from TSMC, climbed 4% to another record. Tokyo Electron Ltd. also reached a new high, while Nikon Corp., whose precision equipment business now brings in a larger share of revenue than its more familiar camera operations, added 4.6%.

TSMC spokeswoman Nina Kao declined to comment, citing the company’s quiet period before its earnings announcement.

Japan has been boosting spending in semiconductor manufacturing and cutting-edge technology as it eyes the national security implications amid U.S.-China confrontation over the technologies — an area the country lacks in expertise despite being a world leader in chip-making equipment and materials.

The Economy, Trade and Industry Ministry allocated ￥110 billion in the fiscal 2019 budget and an additional ￥90 billion to a forthcoming extra budget to manufacture advanced chips domestically.

While traders jumped on the TSMC report on speculation the deal will help advance Japan’s competitiveness in the field, its impact may be limited. A chip assembly plant, while an important stage in the semiconductor production process, usually requires much less investments than a chip fabrication facility: the world’s largest chip testing and packaging service provider ASE Technology Holding spent slightly less than $1.6 billion in capital expenditure in 2019, while TSMC spent about nine times that amount.

Seiichi Miyashita, an assistant manager at the ministry's IT industry division, said no decision had been made, but that the ministry was conscious of the need for Japan to acquire the ability to manufacture advanced chips domestically.

The Yomiuri newspaper reported in July last year that Japan had offered several billions of dollars in support to TSMC to tempt it to build plants in the country. At least one Japanese delegation traveled to Taiwan hoping of convincing the chipmaker to invest, a person with knowledge of the visit told Bloomberg News last year.

That followed TSMC’s decision to build a $12 billion chip plant in Arizona that will employ its 5-nanometer technology, though even that will likely be several generations old by the time output begins.