UK and Japan Join Forces: A Groundbreaking Semiconductors Partnership to Reshape Supply Chains

The semiconductor industry is on the brink of significant transformation as countries worldwide strive to secure their chip supply chains and reduce geopolitical risk. In line with this endeavor, the UK is set to announce a groundbreaking “semiconductors partnership” with the Japanese government. This move is part of the UK’s strategy to diversify its chip supply chain and address the vulnerabilities posed by relying heavily on a few key supplier countries, including Taiwan. The partnership aims to foster ambitious research and development collaboration, promote skills exchange, strengthen domestic sectors, and enhance supply chain resilience and comes preceding the release of the British semiconductor strategy. The strategy, scheduled for publication on Friday, will emphasize the risks faced by the UK’s chip industry and propose measures to mitigate them. Recognizing the need for diversification, the UK’s strategy will promote closer collaboration with international counterparts and stress the importance of value-added areas such as research and design, compound semiconductors, and advanced packaging. With an allocated £1 billion of government spending over the medium term, the strategy acknowledges the critical role of semiconductors in powering modern technologies like smartphones and cars.

However, while the UK’s investment is significant, it pales in comparison to the funding initiatives undertaken by other major economies. For example, through its Chips Act, the United States has committed a staggering $52 billion in subsidies and incentives to encourage domestic fabrication plant construction. Similarly, the European Union has launched its “European Chips Act,” providing €43 billion in state aid. Against this backdrop, the UK seeks to leverage partnerships and collaborations with Japan to strengthen its semiconductor sector and reduce dependence on chip imports from geopolitically sensitive regions.

Following suit, India, a rising force in the global technology landscape, is positioning itself to become a significant player in the semiconductor industry. In partnership with Foxconn, the renowned contract manufacturer for Apple’s iPhones, Vedanta has unveiled plans to establish a state-of-the-art semiconductor manufacturing unit in Gujarat with an estimated investment of up to Rs 66,000 crore. This facility, part of a larger vision, envisions a total investment of Rs 1.54 lakh crore for the Dholera plant, including a display fabrication unit. Vedanta’s foray into chip manufacturing aims to leverage the government’s India Semiconductor Mission (ISM) and propel the nation toward becoming a global hub for semiconductor production.

The government’s prospective approval of the Vedanta-Foxconn joint venture’s chip-making plan under the ambitious $10-billion ISM initiative will signify a significant milestone. This strategic move will set the stage for India’s endeavor to establish a robust semiconductor ecosystem. Vedanta Foxconn Semiconductors Ltd (VFSL), a collaboration with a 63:37 stake held by India’s Vedanta Group and Taiwan’s Hon Hai Precision Industry (Foxconn), has already initiated technology transfer agreements with two prominent industry players, GlobalFoundries from the United States and European chipmaker STMicroelectronics. These partnerships have been submitted to the Ministry of Electronics and Information Technology (MeitY) for review.

To bolster the growth of domestic chip manufacturing, the government aims to provide substantial subsidies, offering close to 50% assistance to selected applicants under the ISM