The Chips War represents the current focus of the US and China for the dominance of the world’s semiconductor industry, which enables numerous technologies, ranging from communication devices to military equipment. For this industry the US has been the leading producer, but China is injecting a lot of capital to become an independent producer and not rely on America’s technology. It has led to the tensions in trading, tariffs, and limiting the sales of chips due to the security reasons and the efforts of obtaining the better chips for 5G, AI, and Quantum computing. The future of international relations after this contest will in many ways define global commerce, technological advancement, and security affairs.
The semiconductor industry that is involved in the production and manufacture of microchips or popularly known as a chip plays an important part in today’s world. These are some of the small yet important components found in smartphones, computers, cars, health devices, and military instruments. It consists of several players that are involved in the designing, manufacturing as well as system incorporation of the products. On the international market, it is highly centralized with leading positions belonging to the United States, China, Taiwan, and South Korea. As of now, it is these companies which are based in United States specifically Intel; Texas Instrument and Qualcomm that have recorded the most innovation in chip products. Taiwan Semiconductor Manufacturing Company or TSMC for short founded in Taiwan is the largest contract chipmaker in the world for brand such as Apple & Google among others. Although, China leads in the consumption of semiconductors, it ranked low when it comes to producing it. Therefore, to reduce dependency on foreign firms and vendors to boost the technological industry in china has been investing in the domestic chip sector through programs such as “Made in China 2025”. This has created tensions with the USA who interprets the China advancement towards this status as a threat to the American military and technological superiority.
By analyzing the historical evolution of competition between the USA and China in the field of microchips, expressing geopolitical, economic and technological motives. Thus, leadership in the semiconductor industry for the US is a critical asset that is closely tied to its national security. Some of the companies that operate in this country are global leaders in the design and manufacture of modern chips like Intel, Texas, and Qualcomm. On the other hand, China intends to reside in controlling the new production of chips to cut on the use of foreign technology. According to the USA DoD report, with ‘Made in China 2025’ vision, china targets 70 percent made in China for all industries, and the main emphasis remains on result driven_CHIP DESIGN/ Chip manufacturing & research especially in 5G, AI, QUANTUM COMPUTING & CYBER TECHNOLOGY. There are various reasons that leads to the rivalry between the two super powers; the US and China. There has been a striking allegation by the US toward China concerning the crime of stealing chips intellectual property. Subsidies granted to Chinese domestic industries and support to Chinese chip industries are considered by the US as unfair competition. Also, there are some issues associated with the potential army use of Chinese chips or other issues that violate United States national security interests. Hence, America has locked out China in high-quality chip-making equipment and technology which have led to counteraction by China.
Sanctions and restrictions in trades within the field of semiconductors between the United States and China have been rising since 2018. The US began increasing tariffs by slapping a 25% on $34 billion worth of Chinese imports such as semiconductors in July, 2018. This was succeeded by, the inclusion of several Chinese chipmakers including Huawei and its affiliates to the entity list in May 2019, this limited their access to purchase technology and chips from the US. Moreover, in May 2020, the United States has added a new layer of export limitations concerning the following chip technologies: 5G and Artificial intelligence. In June 2018 in response to US tariffs on $50 billion in Chinese goods, China reciprocated with tariffs on $60 billion in US imports including electronics such as semiconductors. Although it was not explicitly banned in the earlier cases, China retaliated in May 2020 by placing several US chip makers such as Qualcomm and Intel on its Entity list that prevents them from access to China’s sophisticated technology and chip materials. Subsequently, in September 2020, China restricted some export activities with reference to chips’ technologies, which contributed to the escalation of the conflict. These trade tensions have had a severe effect of the world chip industry through disruption of supply chain, raising costs and slowing down the rate of innovation. Taiwan and South Korea for instance, import both from the US and China its key chips suppliers have also been impacted. The competition is expected to remain tight with both the nations increasing their spending for the production of chips.
However, going into details of the money spent on research and development (R&D), it can be pinpoint that the US chip industry has spent $43. 3. Five billion dollars for research and development for 2020 also, of number 23. Primarily, it is reaching 8 billion by the Chinese chip industry. Nevertheless, the size of China’s R & D expenditure is growing at the significantly higher rate and with CAGR of 21. It increased to six percent of the years 2015/2020 compared to 4percent. 6% for the US. This is an indication that aims at reducing the technological gap at a very fast rate. Other chips of modern technology are 5G and AI and they are mainly Amercian especially companies such as Qualcomm and NVIDIA. China’s HiSilicon, a Huawei company, increases competition; however, the technological market leaders are the US thanks to novelty. Presently, the US has a very large lead in semiconductor production; established companies like Intel and Texas Instruments are managing productive fabs. Even though China has been upping its fabs and supports like Semiconductor Manufacturing International Corporation (SMIC), the daily newspaper’s Chinese manufacturer is still highly dwarf by American counterparts not only in terms of capacity but also technology. For instance, in the year 2020, the US has filed 34,415 patents in the Chip technological field while the china has filed only 14,141. China is overall experiencing a growth in patent applications where it has Compound Annual Growth Rate of 24%. 5 out of 100 patients from 2015 to 2020, as compared with four patients previously. 3% for the US. This trend can be interpreted as the progressive establishment of China as one of the world’s capable players in innovation.
The Chips War means that there are some geopolitical consequences that are represented by competition of the US and China in the sphere of microelectronics and their impending fight for market domination. For instance, restricting Huawei as the American operator puts the company on the list of entitles in the country that were banned due to national security and stretch marks also applies to SMIC apart from export bans. It includes the Taiwan Semiconductor Manufacturing Company (TSMC) which is also actively participating in the debate that is initiated by US of less reliance on China for semiconductor products and at the same time also by China for more investment consideration in the manufacturing of semiconductor. It is with these changes that can be associated Characteristics of Chips War: They stand as revelation of entirely different dynamics of international semiconductor business. This is a highly personalized and essential intense rivalry that applies to nearly all components of technology, trading and security relations between or between the US and China. These companies were mainly spearheaded by the US for quite some time now but now China has also started growing rapidly. Multilateralism and other impediments to the accessibility of electricity and resources have distorted the supply chain and spurred innovation. The risks are rather high as far as geopolitical allegiances are concerned as both sides are keen on gaining full control over the industry in question. Again, the result will go a long way in determining the future of technology and global economy for a number of years to come and will also considerably affect many areas of life in many parts of the world.
The author is an independent researcher and can be reached at ru416247@gmail.com