The Quadrilateral Security Dialogue or Quad Alliance between India, the US, Japan and Australia has decided to work together to protect supply chains in critical technology areas like semiconductors and 5G.

"We are mapping the supply chain of critical technologies and materials, including semiconductors, and affirm our positive commitment to resilient, diverse, and secure supply chains of critical technologies, recognizing the importance of government support measures and policies that are transparent and market-oriented," says the statement issued by the White House.

This is significant because it comes at a time when all geographies are experiencing a massive chip shortage.

Figure 1: Precious metals: Can the Quad Alliance fix the global semiconductor supply chain?
(Source: Infralist.com on Unsplash)

Device consumption shot up during lockdowns due to the COVID-19 pandemic, even as the manufacturing came to a standstill. On top of this, geopolitical tensions between the US and China contributed to the breakdown of semiconductor supply chains.

What further adds to the uncertainty is that Taiwan, the largest chip manufacturing country, is geographically closer to China. Globally, the US is the market leader, while China is the biggest consumer of chips.

Go it alone

Several nations, including India, are trying to be self-reliant to reduce dependence on other countries for semiconductors. The Indian government has said it will provide financial support and other incentives to encourage chip manufacturers to set up here.

Similarly, Japan has increased output at existing units and is also planning to set up new manufacturing centers. Japan is a major supplier and exporter of raw materials required for chip manufacturing to Taiwan. This gives it an advantage over other countries.

Further, media reports suggest that India and Taiwan are in talks to help India set up a chip manufacturing unit in India. Chip manufacturing is a specialized area that demands a massive water supply, uninterrupted power and workforce resources. Even as the nations try to become self-sufficient, there is a growing realization that they need to collaborate because it takes years to develop the right competencies.

My enemy's enemy

Quad countries have other reasons to collaborate. For example, India and China indulged in clashes on the border last year, which eventually led to India banning several Chinese apps and restricting the use of Chinese equipment in communications networks.

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While Australia has recently signed a security pact with the US and the UK, largely believed to attempt to counter China’s influence in the region.

Since there are several areas of collaboration between the four countries - it is possible that together they will be able to have a parallel supply chain which will help bring down dependency on Taiwan as the supplier of chips.

— Gagandeep Kaur, contributing editor, special to Light Reading