US-led ‘Fab 4’ chip alliance meets to coordinate supply chain resilience

A semiconductor alliance comprising the US, Taiwan, Japan and South Korea met earlier this month to discuss the global resilience of the chip supply chain, according to published reports.

Senior officials of the US-East Asia Semiconductor Supply Chain Resilience Working Group — colloquially referred to as “Fab 4” or “Chip 4” — held a video conference on Feb. 16 to promote the establishment of an “early warning and mutual reminder” system to discuss. ensure a stable supply chain for chip manufacturers, according to a report of the Central News Agency (CNA) controlled by the Taiwanese government.

The formation of an early warning system is important as it should prevent a recurrence of chip shortages and supply chain disruptions during the COVID-19 pandemic, CNA reported, citing unidentified officials from Taiwan’s Ministry of Economy . Going forward, the Fab 4 countries will inform each other through official channels about issues that may arise in the global supply chain, it added.

According to a Bloomberg report that quoted an unidentified Taiwanese official, officials in the meeting “kept off discussions” related to export controls and no companies attended the meeting.

Taiwan urges swift action on chip info exchange

According to the Bloomberg report, Taiwan suggested that the four countries should exchange information on various aspects of the supply chain as soon as possible. Taiwan and South Korea would focus on manufacturing, Japan on materials and the US on market issues, the report said.

Last September, the US held the first meeting of the Fab 4 countries to discuss ways to strengthen the semiconductor supply chain, after two years of global chip shortages, according to a separate report. report from Reuters.

However, the meeting earlier this month was the first formal meeting of the Fab 4 and comes as the Biden administration reaches out to its global allies to impose sweeping restrictions on the export of advanced chip-making technology to China, designed to advancements in various advanced technologies. The US is increasingly concerned about China’s growing geopolitical power, which rests in part on its manufacturing capabilities.

China, as the world’s second-largest economy, is a huge market for global semiconductor companies, and restrictions on exports will affect their revenues and growth plans. The export controls will affect not only computer equipment, but also many consumer products built on the limited semiconductor technology.

The administration of US President Joe Biden issued new in early October export controls that deter US companies from selling advanced semiconductors and equipment needed to make them to some Chinese manufacturers unless they get a special license.

Mid-December the administration expanded those restrictions to give 36 more Chinese chipmakers access to US chip technology, including Yangtze Memory Technologies Corporation (YMTC), the largest contract chipmaker in the world.

Countries are trying to bolster chip production

The export controls came in the wake of the CHIPS and Science Act of 2022, signed into law by President Joe Biden in August. The legislation provides tax breaks and funds to attract manufacturers to build factories in the US and boost semiconductor production in the country.

Now several other countries including India, France, UK, Japan and Australia are also expanding incentives to attract semiconductor investment. Taiwan has long maintained a lead in the production of semiconductor chips used in personal computers, servers and equipment used for advanced research.

In recent months, Taiwanese chip maker TSMC has announced several investments to build new foundries or inject cash into existing foundries. Earlier in February, the TSMC Board approved a capital injection of up to $3.5 billion into TSMC Arizona.

In December, the foundry giant announced plans to open a second chip plant in Arizona, tripling its U.S. investment to $40 billion. This represented “the largest foreign direct investment in Arizona history and one of the largest foreign direct investments in United States history,” according to the company.

TSMC also plans to set up a second semiconductor manufacturing facility in Japan with an investment of approximately $7.4 billion.