(Bloomberg) — Japan approved ¥631.5 billion ($4 billion) in additional subsidies to quicken Rapidus Corp.’s entry into the high-stakes AI chipmaking arena, ramping up support for a project widely regarded as a long shot.

The capital is intended to bankroll Rapidus’ work for IT firm Fujitsu Ltd., one of the initial clients that Tokyo hopes will get the signature endeavor off the ground. The new money raises the fees and investments that the government is injecting into the startup to ¥2.6 trillion ($16.3 billion) by the end of the current fiscal year to March 2027, according to a statement from the Ministry of Economy, Trade and Industry. An external committee inspected Rapidus’ foundry in Hokkaido in northern Japan, and signed off on its technological progress, the ministry said Saturday.

Tokyo is offering financial support to Rapidus to help it secure customers, Minister Ryosei Akazawa told reporters at a Rapidus event in Hokkaido on Saturday. The fledgling company aims to make cutting-edge 2-nanometer chips by 2027, a schedule Akazawa reaffirmed, and help Japan lower its reliance on industry leader Taiwan Semiconductor Manufacturing Co. Policymakers see Rapidus’ success and technological independence in AI, robotics and quantum computing as critical to the country’s security.

The Japanese state-backed venture, founded in 2022, now faces additional competition for chip expertise from an unlikely quarter: Elon Musk is entering the white-hot arena, partnering with Intel Corp. on the so-called Terafab project to make semiconductors for his companies including Tesla Inc., SpaceX, and xAI.

Read: Intel to Join Musk’s Terafab in Surprise Move, Lifting Stock

Despite its latest strides forward, Rapidus remains far behind TSMC, which began 2nm volume production last year and is the go-to chipmaker for Nvidia Corp. and Apple Inc. In addition to technological hurdles, Rapidus — like other manufacturers in resource-poor Japan — are getting hit by rising costs for energy and material input during the conflict in the Middle East. Tokyo is counting on Rapidus at a time soaring demand for the chips critical to AI development is squeezing supplies of memory and other semiconductors around the world.

The Japanese government’s bet on Rapidus is considerable, but likely to get public support due to economic security concerns, said Akira Minamikawa, an analyst with consultancy Omdia who previously voiced doubts about the feasibility of the 2027 mass production target. Now, there is a growing sense that goal may be reached due to “substantial support” Rapidus has received from partners including International Business Machines Corp., which is licensing technology to the chipmaker, and Dutch equipment supplier ASML Holding NV, he said.