US, Canada, Mexico Ponder Some Sort Of Chip Supply Collab

The US, Mexico, and Canada have renewed talks on semiconductor manufacturing supply chains during the North American Leaders Summit (NALS) in Mexico City which kicks off today.

In a fact sheet, the White House laid out a trilateral partnership that would see the three countries work together to address several challenges ranging from drug trafficking, immigration, and climate change. However, the first item on the agenda was an initiative designed to bolster North American semiconductor manufacturing capabilities.

The effort is expected to kick off at a semiconductor forum early this year, during which the Biden Administration hopes to discuss opportunities for investment across each of the three countries.

The plan closely aligns with US efforts over the past two administrations to reduce reliance on Asian Pacific foundries and foster domestic chip production. Last summer, the US passed a $280 billion CHIPs and Science Act, which allocated more than $50 billion to the construction of domestic fabs.

Numerous fabs are now under construction across the US with many more planned for the coming years. However, fabs are only one piece of a larger semiconductor manufacturing puzzle that relies on a complex network of resources and services to function.

Mexico reportedly hopes to capitalize on the explosion of US chip fabrication with packaging, testing, and design facilities of its own.

Attempts to integrate Mexico into the US semiconductor supply chain have been going on for a while, but it has been slow progress. Last September, US Secretary Antony Blinken and Commerce Secretary Gina Raimondo met with Mexican President Andrés Manuel López Obrador to discuss aligning US chip production with the nation's lithium industry with the goal of bolstering North American EV production.

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Mexico is home to the 10th largest lithium deposits globally and recently moved to nationalize the mining of those resources.

However, as Reuters reports, disputes over Mexican energy policies have derailed talks up to this point. The US and Canadian leaders have taken issue with López Obrador's decision to prioritize its struggling state energy companies, which remain heavily reliant on fossil fuels. This has reportedly made investment in Mexico a tricky affair for companies trying aggressively to reduce their carbon footprints.

To this end, the three countries committed to several clean energy initiatives during this week's summit. Chief among them are measures to cut methane emissions — a potent greenhouse gas — by 15 percent by 2030 from 2020 levels, establish a North American clean hydrogen market, and install EV charging infrastructure along international borders. But whether these efforts will be enough to assuage the US and Canada's concerns remains to be seen.

The summit's focus on semiconductor supply chains comes as the US pressures Japan, South Korea, and the Netherlands to blockade the supply of chipmaking equipment and resources to China.

Having met with Canadian and Mexican leaders during the NALS this week, Biden's next stop is Japan, where the US leader is expected to discuss several issues including security and a chip industry restriction deal. ®