Kishida, Biden Agree To Deepen Economic Security Ties Amid Supply Disruptions & Chip Shortage

Japanese Prime Minister Fumio Kishida and US President Joe Biden agreed on Monday to deepen bilateral economic security cooperation to bolster supply chains for critical commodities like semiconductor chips, amid global shortages that has even hit automobile and electronics industries in countries like India.

With the world facing a supply crunch amid the COVID-19 pandemic that has been exacerbated by Russia's invasion of Ukraine, a stable supply of chips during disruptions, such as conflicts and natural disasters, has become a matter of urgency.

Kishida and Biden during their meeting here confirmed bolstering semiconductor manufacturing capacity and diversification, as well as collaboration on advanced battery supply chains and resiliency of those for critical minerals, Kyodo news agency reported.

"We were able to reach an agreement on economic security cooperation, including the development of cutting-edge semiconductors," Kishida told a joint press conference after the meeting.

The two countries aim to build production structures in their own countries while sharing necessary components, as they recognise the importance of reducing reliance on outside nations for semiconductors, the report quoted Japanese officials as saying.

The two allies aim to make up ground after other economies such as Taiwan and South Korea have led semiconductor production, they said.

"Japan eyes someday building a research and development centre or a production site for next-generation semiconductors that are more advanced than 2-nanometer chips," it quoted a Japanese industry ministry official as saying.

The automobile industry across the world has been hit hard by the semiconductor shortage that erupted during the pandemic as demand for consumer electronics surged. The auto industry accounts for around 10 per cent of the global demand for chips.

In India also all the major manufacturers, including Maruti Suzuki, Hyundai, Mahindra & Mahindra and Tata Motors, all have been impacted.

For India's largest carmaker Maruti Suzuki, the company had a production loss of around 2.7 lakh vehicles in FY22 due to the chip shortage.

In early May, Japan's Economy, Trade and Industry Minister Koichi Hagiuda and US Secretary of Commerce Gina Raimondo released what they dubbed basic principles of semiconductor cooperation, after their meeting in which they highlighted the importance of emergency response coordination to tackle chip shortages.

Kishida at the press conference said both sides confirmed they will coordinate further and hold a ministerial-level meeting of the Japan-US Economic Policy Consultative Committee in July from the standpoint of ensuring economic security.

Among the other pledges that emerged from Monday's meeting involving advanced science and technologies, the two countries will accelerate civil space cooperation, such as human and robotic lunar surface missions, the Kyodo report said.