How does the US-China semiconductor conflict affect the supply chain?
21 Aug 20236 min read
Summary
- The semiconductor industry, valued at around $500 billion, has become the focal point of a global power struggle between the United States and China. The nation that gains control over the semiconductor supply chain will secure a decisive advantage in the global economy and technological dominance.
- Semiconductor innovation began in the US but manufacturing shifted to Asia for cost efficiency, leading to the rise of South Korea, Japan, and Taiwan as key producers. China became a major hub for assembly but remains dependent on foreign technology for advanced chip design and manufacturing.
- The US, through the CHIPS and Science Act, is restricting China’s access to advanced semiconductor technology to protect national security and maintain its lead in AI and Industry 5.0. China views these measures as attempts to limit its growth, while other nations like India are positioning themselves to benefit from this geopolitical and industrial divide.
Semiconductor chips, sized in nanometers, power nearly every electronic device. It is on smartphones, laptops, and even on the Internet of Things (IoT) and advanced military systems, among others.
Presently, the semiconductor industry, worth an estimated $500 billion, has become a battleground. It's in-between the United States (US) and China war. Wherein, the leading contender, may grasp significant control over the global supply chain. There is also the potential for a resolute position as the world's largest superpower economy.
The US is suggesting its supporters to decouple from China. Whilst, the latter is asserting its status as the biggest market for semiconductor chips. Hence, the future of this billion-dollar industry is now at a crossroads.
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"You cannot make a parallel system, the world is deeply interconnected, so nobody can live without others. Semiconductor is a very complicated (technology), they have a lot of linkages,” noted Ma Jia, Minister of the Chinese Embassy in India.
Semiconductor chips, originally from the US, were initially part of the country's space missions at NASA. They were exclusively for only the US.
As the number of transistors held in a single chip doubled every two years following Moore’s Law, its civilian use in everyday devices increased. The high demand for these chips, combined with a need for manufacturing them at low cost, shifted the manufacturing industry of semiconductor chips to US allies in Asia. Such is comprise of South Korea, Japan, and Taiwan.
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