The US and China are locked in a fierce competition over the production and use of semiconductors, the tiny chips that power almost every device and application in the modern world. The chip war has implications for the global economy, international relations, and technological innovation. Here are some of the key aspects of this ongoing conflict.
What are semiconductors and why are they important?
Semiconductors are materials that can conduct electricity under certain conditions, but not others. They are the building blocks of integrated circuits, or microchips, which are used in computers, smartphones, cars, satellites, artificial intelligence, and many other fields. Semiconductors enable faster, smaller, and more efficient devices and applications.
The semiconductor industry is worth about $500 billion and is expected to double by 2030. The US is the leader in semiconductor design and innovation, while East Asia dominates the manufacturing and assembly of chips. China is the world’s largest consumer of semiconductors, importing more than $350 billion worth of chips in 2020.
What is the US-China chip war and how did it start?
The US-China chip war is a strategic rivalry between the two superpowers over the access and control of semiconductor technology. The US accuses China of using unfair trade practices, intellectual property theft, and military coercion to gain an edge in the chip market. The US also fears that China could use its advanced chips for military purposes that could threaten US interests and allies.
The chip war started in 2018, when the Trump administration banned US companies from selling components and software to ZTE, a Chinese telecom giant, for violating sanctions on Iran and North Korea. The ban nearly crippled ZTE, exposing China’s dependence on foreign chip suppliers. Since then, the US has imposed more restrictions on Chinese companies such as Huawei, SMIC, and Hikvision, cutting them off from US technology and markets.
The Biden administration has continued the Trump-era policies, while also launching a $52 billion plan to boost domestic chip production and research. The US has also persuaded its allies such as Japan, South Korea, Taiwan, and the Netherlands to curb their exports of chips and chip-making equipment to China.
How is China responding to the US pressure?
China has been trying to reduce its reliance on foreign chips and develop its own semiconductor industry. It has invested billions of dollars in subsidies, tax breaks, research grants, and talent recruitment to support its domestic chip makers. It has also launched a license requirement for exporters of rare-earth metals, which are used in chip manufacturing.
However, China still faces significant challenges in catching up with the US and its allies in chip technology. It lacks the expertise, equipment, and patents to produce cutting-edge chips at scale. It also faces geopolitical risks such as trade wars, sanctions, and military tensions that could disrupt its supply chains.
China’s President Xi Jinping has called for a “new long march” to achieve self-reliance in science and technology. He has also vowed to defend China’s core interests and sovereignty against any external interference.
What are the consequences of the chip war for the world?
The chip war has far-reaching consequences for the world economy, politics, and innovation. Some of the possible outcomes are:
- A global chip shortage: The chip war has exacerbated an existing chip shortage caused by surging demand amid the Covid-19 pandemic. The shortage has affected various sectors such as automotive, consumer electronics, healthcare, and defense. It has also raised prices and disrupted production for many businesses and consumers around the world.
- A technological decoupling: The chip war could lead to a bifurcation of the global semiconductor industry into two rival camps: one led by the US and its allies, and another by China and its partners. This could create incompatible standards, systems, and markets that would hamper cross-border trade, cooperation, and innovation.
- A security dilemma: The chip war could escalate into a broader confrontation between the US and China over their respective interests and values. The competition over chips could spill over into other domains such as cyberspace, outer space, biotechnology, and artificial intelligence. The risk of conflict or miscalculation could increase as both sides seek to gain or maintain an edge over each other.
The chip war is not likely to end anytime soon. It will require careful management and dialogue from both sides to avoid a worst-case scenario. It will also require collaboration and coordination from other stakeholders such as governments, businesses, academia, civil society, and international organizations to ensure a stable and prosperous global order.
