Japan, the United States, South Korea, and Taiwan have launched ‘Chip 4’ supply chain discussions

Japan, the United States, South Korea, and Taiwan organised the first summit of senior officials under a new U.S.-led framework to help ensure a steady supply of semiconductors

According to Japan’s industry ministry, the first meeting of top officials under a new U.S.-led framework to assist secure a consistent supply of semiconductors was conducted with Japan, the United States, South Korea, and Taiwan. On February 16, representatives from business groups from the four economies participated in the “Chip 4” alliance’s virtual conference to explore how to preserve supply chain resilience in the event of natural catastrophes and other crises.

More on the ‘Chip 4’ discussions:

The Biden administration created a new conversation group with Japan and South Korea on friend-shoring semiconductors as it invites businesses to compete for a piece of the $50 billion already allowed to revive the U.S. chip sector in an effort to technologically outcompete China.

In Honolulu, the Economic Security Dialogue between the United States, Japan, and South Korea was officially established. The forum aims to address issues related to critical and emerging technologies, supply chain resilience of semiconductors, batteries, and critical minerals, as well as data transparency amid the U.S.-China tech war. Japan and South Korea are home to two of the world’s strongest semiconductor industries.

In addition, the administration launched the first CHIPS for America funding opportunity, inviting companies to compete for a share of the $50 billion approved by Congress under the CHIPS Act last year, specifically the $39 billion set aside to fund the construction of new and expanded domestic semiconductor manufacturing facilities.

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The few businesses that are currently manufacturing the most sophisticated chips in the world, such as Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics, and Micron Technology, will largely utilise the funding to increase their capacity in the United States.

The US wants to restrict China’s semiconductor market:

The Biden administration faces challenges in its efforts to restrain Beijing’s semiconductor sector, such as whether Seoul would agree to support Washington’s embargo on the shipment of sophisticated chip-making equipment to China, which Japan and the Netherlands have agreed to support. Companies that are leaders in chip manufacturing technology are based in both cities.

Washington’s efforts to alter the global semiconductor ecosystem have raised concerns that they may harm Taiwan’s semiconductor sector, which Taipei views as one of its best security guarantees against an invasion by Beijing.

About The Tri-country dialogue: economic security dialogue

The trilateral collaboration among Indo-Pacific partners, which previously mostly concentrated on the North Korean nuclear threat, has been expanded by the economic security dialogue. The partnership’s conditions were set during the East Asia Summit in Phnom Penh, Cambodia, in November 2022.

The discussion is crucial for Washington as it works to forge an alliance with allies to halt supplies of sophisticated semiconductor manufacturing equipment to China. Gregory Allen, head of the artificial intelligence governance project at the Center for Strategic and International Studies, stated that Seoul’s position on the US export control embargo implemented by the Biden administration in October 2022 will be a crucial factor.

Seoul is also seeking clarification on the potential effects of the regulations resulting from the export control restriction on South Korean businesses that have sizable semiconductor manufacturing operations in China. In order to sort out the specifics of how the ban may be put into effect, South Korea has been granted a one-year exception.

Chinese government package of $140 billion:

China is increasing its own local chip capacity in the meanwhile. According to reports, it is preparing a huge $140 billion programme to boost independence and thwart US initiatives.

Chinese Foreign Ministry spokesman Mao Ning claimed earlier this month that Washington has “overstretched the concept of national security, abused export control measures, disrupted normal economic and trade activities, and destabilised global industrial and supply chains” in an effort to maintain economic and technological dominance.

Taiwan Concern: 90% of the advanced semiconductors:

TSMC has committed to invest $40 billion to establish semiconductor operations in Arizona as part of the U.S.-led effort to protect the world’s chip supply chains. The facilities, one of the biggest foreign investments in American history, are expected to be operational in 2024.

Yet, some in Taiwan are worried that shifting its manufacturing to the United States and other countries may erode one of the island’s most significant strategic assets known as the “silicon shield” given that it produces more than 90% of the most cutting-edge semiconductors in the world.

The silicon shield, in theory, shields Taiwan in two ways from a military assault by China. First, the majority of the chips required by China’s consumer electronics sector are produced by TSMC, which links Beijing’s financial health to Taiwan’s stability and may encourage China to exercise prudence on the battlefield.

Second, the United States and the European Union are driven to defend Taipei’s sovereignty because of their reliance on it.

The America’s technological leadership: the chip shortage:

In a speech about the administration’s objectives to “build a reliable and resilient semiconductor industry that protects America’s technological leadership for the coming decades,” U.S. Secretary of Commerce Gina Raimondo said additional funding opportunities for supply chain companies and research and development investments will be announced in the upcoming months. According to Raimondo, 37% of the world’s chip production capacity was located in the United States in 1990. The percentage is barely 12% now.

From autos to consumer gadgets, the pandemic-caused semiconductor scarcity has wreaked havoc on a number of businesses. According to the U.S. Department of Commerce, the chip scarcity reduced the nation’s GDP growth by 1% in 2021.