TOKYO (Kyodo) -- State-backed Japanese chip venture Rapidus Corp. began the initial phase of running a pilot manufacturing line for next-generation semiconductors on Tuesday, marking key progress toward its goal of launching mass production in 2027.

The line has been set up at its plant in Chitose, located on the northernmost main island of Hokkaido, and the company plans to start producing prototype chips sometime in July this year, it said.

President Atsuyoshi Koike said at a press conference in Tokyo that the company will be focusing on achieving a satisfactory level of manufacturing yield and gaining prospective clients' trust in the quality of its chips in the run-up to mass production.

The chip development is part of Japan's efforts to strengthen its domestic semiconductor supply chain, as escalating trade tensions between the United States and China threaten to disrupt the global chip industry.

The government said Monday it will offer financial assistance worth up to 802.5 billion yen ($5.3 billion) to Rapidus in addition to the 1 trillion yen already promised for the chip maker, bringing the total amount of assistance to just over 1.8 trillion yen.

Koike expressed confidence in raising funds from the private sector in addition to the public funding, saying the company will be able to disclose more information at a later date.

The chip venture has said it needs roughly 5 trillion yen of investment for the company to get ready for mass production of the state-of-the-art 2-nanometer chips in collaboration with IBM Corp.

The competition to develop advanced semiconductors is intensifying across the globe, with the recent artificial intelligence boom increasing demand for fast and energy-efficient chips.

Taiwan Semiconductor Manufacturing Co. and South Korea's Samsung Electronics Co. are also working on chips with 2-nanometer technology, aiming to mass produce them by the end of this year.

Rapidus was established in 2022 with investment from eight major Japanese companies, including Toyota Motor Corp. and Sony Group Corp.