On Tuesday, IBM said it was working with Rapidus, a newly formed chipmaker backed by the Japanese government, to help it make its most advanced chips.

The announcement comes as US-China relations remain strained, particularly over chips, and as Washington has recently restricted Beijing’s access to advanced semiconductor technology.

Japan, which has long lost its lead in chipmaking, is now scrambling to catch up to ensure its automakers and information technology firms have no shortage of critical components.

Last month, Japan said it would invest 70 billion yen ($500 million) in Rapidus, a joint venture led by tech firms, including Sony Group and NEC.

While that’s small in chipmaking, where factories can cost tens of billions of dollars to build, sources say more investment is on the way.

Dario Gil, director of research at International Business Machines Corp, said the two companies would work together to make the so-called 2-nanometer node chips that IBM unveiled last year.

In the chip industry, “nanometer” or a billionth of a meter now refers to a specific technology rather than a measurement. Generally speaking, the lower the number before the word “nanometer,” the more advanced the chip.

Asked whether Japan’s current state-of-the-art factories could leapfrog manufacturing such advanced technology when producing 40-nanometer chips, Gill said, “It’s not like starting from scratch.”

“Japan already has enormous strength in the semiconductor industry, and from a material and equipment standpoint, Japan is a global leader in this area,” he told Reuters ahead of the announcement.

“The engineering and scientific expertise in Japan and the network of suppliers and partners around it are rich and strong.”

As part of the agreement, Rapidus scientists and engineers will work alongside IBM Japan and IBM researchers at its Nanotechnology Centre in Albany, New York, IBM said. The new factory will be in Japan, but the companies have yet to announce the exact location.