Report: Chip 4 Alliance to develop semiconductor early warning system

01 March 2023
An early warning system would help to ensure there is enough chips and electronic components for the four member nations of the Chip 4 Alliance. Source: TSMC

After holding its first meeting last month, the Chip 4 Alliance said it will establish a warning system that will help to prevent supply chain disruptions specifically semiconductors and electronic components.

A furthering of the semiconductor arms race, the warning system would help ensure the supply of chips for cars and would cover chipmaking raw materials, manufacturing equipment and more. According to a new report from South China Morning Post, this could be up to 100 different materials needed from several sources.

The system will not affect mainland China and will help to avoid situations such as when multiple Chinese cities were put into lockdown during the outbreak of the COVID-19 pandemic. This showed the vulnerability in the supply chain, causing a semiconductor shortage globally that lasted more than two years.

First meeting

The so-called Chip 4, or Fab 4, Alliance met for the first time via video conference to discuss how to strengthen the supply chain and keep technology out of the hands of China.

According to a report from Reuters, the Chip 4 Alliance has four particular goals in mind including:

  • Geographically diversify manufacturing capacity away from China.
  • Protect intellectual property of companies from member nations.
  • Coordinate uniform export controls about China.
  • Encourage favorable distribution terms among friendly nations.

What is the Chip 4 Alliance?

The Chip 4 Alliance includes four of the world’s top producers of semiconductors: the U.S., Japan, Taiwan, and Korea. The semiconductor shortage impacted the global supply chain for more than two years after the outbreak of the COVID-19 pandemic.

The pandemic forced chipmakers to halt production in some instances and thrust Taiwan into the spotlight particularly Taiwan Semiconductor Manufacturing Co. (TSMC) and made supply chain management a bigger priority for governments.

Since companies are heavily reliant on subsidized skilled labor from China for manufacturing capabilities, there has been some resistance among semiconductor manufacturers to move capacity away from China. This is despite complaints from companies in the past focusing on everything from unfair trade practices, to forced exposure of IP to joint venture partners, and many instances of outright IP theft by Chinese companies.

COVID changed all of this, particularly China’s draconian COVID response measures, and underscored the need for sustainability over cheap labor. China’s COVID policies have directly impacted the supply chain by shutting down production in some of the largest Chinese factory regions. Couple this with China’s silent alignment with Russia over the Ukraine conflict, and the rest of the world has reached consensus on the need to move their production capacity closer to home. The Chip 4 Alliance was intended to spearhead this effort specifically within the semiconductor industry.

Maintain resilience

According to the report, the focus of the meeting was to maintain the resilience of the semiconductor supply chain as well as explore future cooperation efforts from all parties.

"As an important member of the Indo-Pacific region, our country also plays a key role in the global semiconductor industry, and has deep economic and trade relations with countries in the region," Taiwan's Foreign Ministry said in a statement.

The report did not indicate which officials were present at the meeting.

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