The four-nation collective is likely to announce ways to work together to secure a chip-safe chain, hoping to counter the Asian giant
Ahead of the Quad summit in Washington scheduled for September 24, the leaders of the collective – the United States, Japan, India and Australia – decided to work together and create a secure supply for semiconductors.
According to a report published in Nikkei Asia, countries can confirm “resilient, diverse and secure technology supply chains for hardware, software and services that are of the utmost importance to their national interest.”
So what are semiconductors and how important are they to Quad nations?
Semiconductors are literally the “heart” of billions of products, ranging from smartphones, data centers, computers, laptops, tablets, smart devices, vehicles, home appliances, life-saving pharmaceuticals, agro-technology, ATMs and more. Again.
The list goes on.
Semiconductor chips are made from silicon because it is a good conductor of electricity. These chips are embedded in microcircuits that power many modern electronic products and components. It can be noted that all active components, integrated circuits, microchips, transistors and electronic sensors are constructed with semiconductor materials.
They activate key functions such as high-end computing, operation control, data processing, storage, input and output management, detection, wireless connection and more.
Therefore, these chips are an integral part of all emerging technologies such as artificial intelligence, quantum computing, advanced wireless networks, blockchain applications, 5G, IoT, drones, robotics, gaming. and portable devices.
Semiconductor chips are inexpensive parts that play a key role in the manufacture of modern technological products and components. Simply put, semiconductor chips are the building blocks of modern computing.
A shortage of semiconductor chips was felt for the first time after the COVID-19[female[feminine The pandemic devastated most countries around the world in 2020, resulting in widespread restrictions.
These lockdowns have resulted in the shutdown of crucial chip manufacturing facilities in countries like Japan, South Korea, China and the United States.
According to a Bloomberg report, which cited research from Susquehanna Financial Group, the chip delivery time – the gap between when a chip is ordered and when it is delivered – fell to 17 weeks in April, from around 12 weeks early 2020.
Countless industries around the world have been hit by the shortage. Globally, automakers have been hit the hardest by the chip shortage, with major automakers such as Volkswagen, Ford, Renault, Nissan and Jaguar Land Rover feeling the heat.
Not only the auto industry, but manufacturers of consumer goods and smartphones are also under pressure to meet the growing demand for products.
South Korean consumer durables and electronics giant Samsung said the chip shortage had affected its production of television and home appliances. Companies like Apple, LG and other Chinese electronics and smartphone makers have also been badly hit by the chip shortage.
In India, too, the effects of the shortage were felt when Maruti Suzuki recently raised car prices due to rising production costs.
Patrick Armstrong, CIO of Plurimi Investment Managers, said CNBC.comthat the chip shortage could last at least 18 months before the demand-supply equation normalizes.
Where does Quad work?
The Quad Nations have decided to focus on creating a secure supply chain for semiconductors. This implies that they are eager to expand their field of action against the manufacturing giant, China in the Indo-Pacific.
A joint statement has been issued which highlights the challenges currently facing with regard to the illicit transfer and theft of technology.
Therefore, Quad Nations believe that technology should be designed and developed in a way that can be shared and shaped by countries on democratic values.
The declaration also states that the use of advanced technologies should be based on the rule of respect for human rights.
The statement said the countries were preparing to launch a joint initiative to determine individual capacity and vulnerability in the semiconductor supply chain.
The four countries are also planning to build a supply chain to counter China’s dominant role in supplying these items, which are used in the manufacture of smartphones and even batteries for electric vehicles.
How does Quad’s decision affect China?
Beijing has really stepped up its chip production game.
The Asian giant consumed 143.4 billion chips in 2020, an annual increase of 9% and only $ 22.7 billion (15.9%) were produced in China.
China has set itself an ambitious target for domestically produced chips to account for 70% of total consumption by 2025, and is already making great strides in that direction. Reports say China produced 203.6 billion chips in the first seven months of 2021, a nearly 50% year-over-year jump from 2020.
China’s steps to put its chip industry on a secure footing have now prompted other great powers to sit down and take note, as the pandemic has made it clear that concentrated supply chains pose a risk to industry as a whole in the digital age.
This is where the Quad comes in.
According to an article published by the Institute of South Asian Studies at the National University of Singapore in April this year, “Each Quad member enjoys a comparative advantage in a specific sub-area of the semi- supply chain. conductors “and, therefore,” should make semiconductors an area of interest. “
The United States remains by far the world leader in this sector. However, its predominance is strongly biased towards R&D.
The Semiconductor Industry Association (SIA) reveals that while the US chip industry accounts for about 47% of global chip sales, the country has only 12.5% of chip manufacturing capacity.
During this time, Japan established a stronghold in semiconductor manufacturing materials and chemicals needed for chip making. The article shows that despite its strength in the semiconductor manufacturing segment, the Japanese semiconductor design industry declined after impressive growth in the 1980s. non-remunerative outsourced testing and packaging to Japan versus South Korea and Taiwan.
The article reveals that India’s advantage lies in “trained human capital”.
Semiconductor design requires a large number of skilled engineers and this is where India’s strength lies. Above all, Indian design centers have the expertise to handle the entire design cycle.
Australia, although not a major player in the chip industry, is a key source of essential minerals for the semiconductor chip industry, according to ISAS, advocating for the creation of an infrastructure supply across national borders which would ensure that no country or region is the backbone of the global chip supply ecosystem.
With contributions from agencies