US-EU TTC to Launch Early Warning ‘Pilot’ on Chips Supply Chain Bottlenecks

U.S.-EU Trade and Technology Council negotiators, meeting over the weekend in Paris, agreed to set up an early warning “alert system” to share information about possible disruptions in the semiconductor supply chain, and “incentivize increased production” of chips, said the group in a joint statement Monday. The TTC also agreed to put a “mechanism” in place to avoid chip “subsidy races” among local governments, it said.

TTC negotiators on both sides of the Atlantic “share the view that a persistent mismatch of demand and supply is not expected to abate in the near-term mainly due to the main bottleneck of additional production capacity,” said the statement. They expect prolonged chip shortages “also as a result of constraints for sourcing materials and in assembly, test, and packaging capacity,” it said.

Promoting “transparency” in the semiconductor supply chain “is essential to our ability to anticipate shortages and mitigate their negative effects,” said the group. Transparency initiatives must take place “in partnership with industry and all relevant stakeholders,” it said. “We are also mindful that certain practices, such as overbooking, have a harmful effect on the entire supply chain.”

The TTC is “committed to working with industry to promote initiatives aimed at advancing transparency regarding demand for semiconductors, in order to help inform,” said the group. Future investments should be aimed at creating “a marketplace for semiconductors in short supply in order to help and alleviate bottlenecks in the supply chain,” it said.

TTC negotiators vow to “undertake a common project for promoting demand transparency” in the semiconductor supply chain, said the group. It plans a “dedicated workshop” before the summer for “stakeholders already engaged or interested” in transparency initiatives, it said. The workshop will be designed “to build further momentum and to discuss perspectives to advance the objectives and the next steps,” it said.

Identifying disruptions in the semiconductor supply chain “is key for mitigating their impact,” said the TTC. “We recognize that certain measures, such as requesting information from stakeholders for monitoring the supply chain, can assist in mitigating the effect of supply chain disruptions, while protecting business confidential information.”

U.S. agencies and their European counterparts plan to participate in a two-month “pilot” to develop the early warning system for semiconductor supply chain disruptions, said the TTC. The statement is silent on when the pilot will begin but says meetings will take place every other week to “discuss potential risks,” and “ad-hoc meetings” could be held “in case of unexpected scenarios.” When the pilot ends, “chairs may make recommendations for a permanent framework,” said the TTC.

To minimize the prospect of subsidy races, TTC negotiators “share the common goal to limit subsidies to what is necessary, appropriate and proportionate to achieve public policy objectives,” said the statement. “We intend to operationalize this goal in implementing our respective polices.” Consistent with World Trade Organization “core principles,” TTC members will give one another information on the purpose of the subsidy granted and in what form, plus monetary amount of the subsidy and who received it, said the group.