Chip 4 or Fab 4 Alliance

Chip 4 or Fab 4 Alliance

“Chip 4” alliance:

  • The “Chip 4” or “Fab 4” alliance includes four of the world’s top producers of semiconductors: the U.S., Japan, Taiwan, and Korea.
  • It represents more than 70 percent of the value of the global semiconductor industry.
  • It was first proposed by the US in March 2022 as part of wider plans aimed at enhancing the “security” and “resilience” of semiconductor supply chains, including by reducing the world’s reliance on chips made in China.
  • It is intended to cooperate on policy implementation that would support sustainable semiconductor manufacturing in the member states’ home countries.


  • Support industry efforts to diversify their manufacturing base in semiconductor production.
  • Protect the Intellectual Property (IP) of companies in member countries.
  • Develop policies regarding the export of the most advanced semiconductors and equipment.

What is a Semiconductor?

  • Semiconductors are materials that have a conductivity between conductors (generally metals) and nonconductors or insulators (such as most ceramics).
  • They can be pure elements, such as silicon or germanium, or compounds like gallium arsenide or cadmium selenide.
  • Due to their specific electrical properties, semiconductors serve as a foundation for computers and other electronic devices.
  • Semiconductors are used in many electrical circuits because of the ability to control the flow of electrons in this material, for example, with a controlling current.

What are the Challenges for India?

  • High Investments Required: Semiconductors and display manufacturing is a very complex and technology-intensive sector involving huge capital investments, high risk, long gestation and payback periods, and rapid changes in technology, which require significant and sustained investments.
  • Minimal Fiscal Support from Government: The level of fiscal support currently envisioned is minuscule when one considers the scale of investments typically required to set up manufacturing capacities in the various sub-sectors of the semiconductor industry.
  • Lack of Fabrication Capacities: India has a decent chip design talent but it never built up chip fab capacity. The ISRO and theDRDO have their respective fab foundries but they are primarily for their requirements and are also not as sophisticated as the latest in the world.
    • India has only a government-owned semiconductor fabrication unit- it can be added as there might be other private fabs that are located in Mohali, Punjab.
  • Extremely Expensive Fab Setup: A semiconductor fabrication facility (or fab) can cost multiples of a billion dollars to set up even on a relatively small scale and lagging by a generation or two behind the latest in technology.
  • Resource Inefficient Sector: Chip fabs are also very thirsty units requiring millions of liters of clean water, an extremely stable power supply, a lot of land, and a highly skilled workforce.

Where does India Stand in the Semiconductor Market?

  • India currently imports all chips and the market is estimated to touch USD 100 billion by 2025 from USD 24 billion now. However, for the domestic manufacturing of semiconductor chips, India has recently launched several initiatives:
    • The Union Cabinet has allocated an amount of Rs 76,000 crore in 2021 for supporting the development of a ‘semiconductors and display manufacturing ecosystem’.
    • Consequently, a significant number of incentives would be provided to design companies to design chips.
    • India has also launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) for manufacturing of electronics components and semiconductors.
    • In 2021, India announced its roughly USD 10 billion Production-Linked Incentive (PLI) scheme to encourage semiconductor and display manufacturing in the country.
    • In 2021, MeitY also launched the Design Linked Incentive (DLI) Scheme to nurture at least 20 domestic companies involved in semiconductor design and facilitate them to achieve a turnover of more than Rs.1500 Crore in the next 5 years.
  • India’s semiconductor consumption is expected to surpass USD 80 billion by 2026 and USD 110 billion by 2030.

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