Issues & Insights Vol. 23, SR 10 – Friend-shoring in the Indo-Pacific

Introduction

The COVID-19 pandemic and Russia’s invasion of Ukraine highlight the challenges of increased economic interconnectedness with adversarial states. The shortages in critical sectors such as pharmaceuticals, semiconductors, and other industries significant for technological advancement in the fourth industrial revolution have revealed the importance of select supply chains to the American public and the broader global community. As the strategic competition between the US and China accelerates, understanding of their importance will only grow.

The Biden administration, to its credit, realized early on the importance of four critical sectors for the future of US supply chain security: pharmaceuticals, critical minerals, large-scale batteries, and semiconductors. Alarmingly, through the research presented here by Akhil Ramesh and myself, we see that the People’s Republic of China has deeply embedded itself in three of these four sectors, and still seeks to strengthen its position in the fourth (semiconductors). Also, one of the recurring problems highlighted in this research is the tendency of the administration to consider the job done once it sources a critical technology from somewhere other than China—not realizing that the PRC serves as a source for that country elsewhere in the supply chain.

A deeper set of solutions to this problem is required. The United States cannot onshore each of these products and services—it simply does not have all of the natural resources required. That is why the concept of “friend-shoring” is essential. In these papers, we identify alternative markets for all four sectors the US can support:

• For pharmaceuticals—India
• For critical minerals—Australia, Canada, and Chile
• For electric vehicle batteries—Japan and South Korea
• For semiconductors—Japan, Malaysia, and South Korea, as well as taking steps to increase domestic production.

We are indebted to the Hinrich Foundation for their support for this research, and for publishing the first versions of each of these papers earlier in 2023:

• Friend-shoring pharmaceutical supply chains: The road to India, on Feb. 21
• Friend-shoring critical mineral supply chains, on April 4
• Friend-shoring battery supply chains, on June 20, and
• De-risking semiconductor supply chains on Sept. 26

Through them, we hope that a clearer picture of the challenge ahead has emerged, as well as the necessary steps to meet them.

Rob York
Director of Regional Affairs
Pacific Forum

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