The first video meeting of senior officials of the ‘Fab 4’ chip group took place on the 25th of February 2023. The semiconductor alliance, led by the U.S., focused on discussing supply chain resilience. The information came out in the media through the Foreign Ministry of Taiwan, which said, “the meeting took place after many months”.
It further commented on its role in the global semiconductor industry and urged the allies to stand united at a time when it is facing threats from China.
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The ‘Fab 4’ for semiconductors
Fab 4 or Chip 4 is a group of four countries- the U.S., Taiwan, South Korea, and Japan. The quad is considered to be the world’s top producer of semiconductors, neglecting the presence of China in the domain. The name ‘Fab’ is a short and simple expression of the fabrication plant where chips are made for various electrical devices.
The Chip 4 alliance was proposed in 2021 by the U.S. with the purpose to change the dynamics of the chip industry, globally. The country proposed the alliance to move beyond domestic production and to invite coordination and cooperation (in production and policy) from the other major producers across the globe.
The goal of the alliance is founded on the fact that it wishes to move away from the dominance of China in the semiconductor industry. The focus, henceforth, is on diversifying the manufacturing base, protecting the intellectual property (IP) of the member countries, formulating guidelines for export controls concerning China, and encouraging conducive distributive terms with nations that share a platonic relationship with the ‘Fab 4’.
The reason for establishment
With the advent of the Covid-19 pandemic in the U.S., the nation saw itself grappling with the production of various electrical equipments. It was due to the country’s excessive dependence on imports of semiconductors (chips) from outside.
This acted as an impetus and President, Mr. Joe Biden, ended up signing the ‘Chips and Science Act‘. The act set aside tens of billions of dollars to encourage various companies to establish their manufacturing and designing facilities in the U.S.
It is after the act that the grouping named ‘Fab 4’ became official.
Only 4, no one more
The reason behind having the aforementioned four countries is their specialty in different areas, aiding the fulfillment of the four major goals.
The U.S. has the most number of semiconductor fabrication facilities in the world along with, holding licenses for all the Electronic Design Automation (EDA) tools. Taiwan is already the largest producer of chips, accounting for 60% of worldwide manufacturing. It is also a hub for Assembly, Testing, Marking, and Packaging (ATMP) processes, enabling the smooth functioning of the targeted industry. South Korea owns prowess in both design and manufacturing capabilities and Japan is dexterous in the production of critical manufacturing equipment and materials.
In this manner, the four allies have the desired prerequisites to make it big in the global market.
The grouping, however, needs to speed up
The grouping needs to speed up its functioning as China has started to deal with the losses it incurred during the pandemic time and is now trying to pull the market forces towards it, like previously.
Fab 4 or Chip 4 has the potential to eliminate Beijing from the chip industry landscape, but they will have to toil for it harder and faster.