Speed Up Establishment of Stable Supply Chains for Key Materials

Shortages of semiconductors and other critical materials will disrupt people’s lives and society. Stable supply chains must be established.

Based on the economic security promotion law enacted in May last year, the government has designated 11 “specified important materials” for which it will support production and stockpiling. The materials include storage batteries, rare earths and other critical minerals, natural gas, and aircraft and ship parts, in addition to semiconductors.

Due to Russia’s invasion of Ukraine and the tension between the United States and China, the global supply of semiconductors used in automobile parts and other products has been crippled. The Ukraine crisis has made it difficult for countries to procure natural gas and other resources.

There is an enormous risk involved in excessive dependence on overseas or specific countries for critical materials.

The government will create plans to stabilize the supply of each of the 11 materials and provide financial support to companies that develop and stockpile them. The public and private sectors need to work together to steadily advance these efforts.

Japan relies on China for many goods that are essential in people’s daily lives.

Antibacterial drugs are one of the designated materials. The raw ingredient for beta-lactam antibiotics, which are widely used in the medical field, is an example of a material for which Japan is dependent on China. In 2019, operations were suspended at a Chinese factory that produces the raw material, and as a result, some Japanese medical institutions had to postpone surgeries.

China restricted exports of rare earths to Japan over an incident in which a Chinese fishing boat collided with Japan Coast Guard patrol vessels off the Senkaku Islands in 2010. There is a possibility that China could use again its critical materials as a source of pressure against Japan.

For resources that are difficult to procure domestically, such as natural gas, it is essential to make efforts to diversify procurement sources. Last year, the Economy, Trade and Industry Ministry asked Australia to increase production of liquefied natural gas. It is important for the Japanese government to take the initiative in efforts to secure resources.

At the Japan-U.S. summit in Washington in mid-January, an agreement was reached to cooperate in the development of advanced semiconductors. Currently, Taiwan accounts for about 90% of the world’s advanced semiconductor production. The agreement between Japan and the United States might have been reached in anticipation of a crisis in the Taiwan Strait.

Japan used to boast a 50% share of the global semiconductor market. Although its share is now around 10%, it still has an advantage in the production of semiconductor manufacturing equipment. Tokyo should aim to revive domestically produced semiconductors and build supply chains in Japan, the United States and elsewhere.

Some companies are concerned about the possibility of friction with China over Japan’s efforts to strengthen its economic security. It is important for the Japanese government not only to explain the significance of economic security, but also to pay heed to not impeding business activities more than necessary.

(From The Yomiuri Shimbun, Jan. 27, 2023)