Many are surprised that semiconductors are by far China’s top import item. The country’s vulnerability in this area was perceived in Washington as an opportunity.
The USA and China are currently leading a battle of chips, emblematic of the technological, economic and geopolitical competition of the contemporary world. Limiting Chinese access to advanced semiconductors and the inputs and machinery to produce them was the line endorsed by the US.
The suffocation strategy was popular with the American hawks, and giving it up would be seen as a sign of weakness. This Friday (7), Washington adopted another wave of restrictions on exports to China with this objective.
Semiconductors underpin all technologies of the present and the future, from your next cell phone to artificial intelligence and quantum computing. These products involve complex production chains, whose critical links, however, are concentrated in a few companies and markets.
The center of geopolitical attention, Taiwan concentrates 90% of advanced semiconductor production — and in a single company. Taiwanese TSMC, however, depends on the design of these semiconductors, a high-tech segment dominated by American companies such as Qualcomm, Nvidia and Apple. It also needs sophisticated equipment to produce state-of-the-art chips, and they basically come from a single company, the Dutch ASML.
The US Chip Act, enacted in August, seeks to stimulate the production of advanced semiconductors on American soil. The Korean Samsung and the American Intel also participate in this stage of production.
Biden seeks to coordinate positions both to increase the effectiveness of measures against China and to socialize the damage that his companies suffer from being deprived of the Chinese market. You want that cost to be shared. There is talk of creating a kind of OPEC of chips.
China has been looking for years to join the first semiconductor championship league. It has already invested hundreds of billions of dollars in the sector and intends to produce 70% of the chips it needs. Several of its companies have made strides at different links in the chain — but they are still a long way from Taiwan’s most advanced chips. They produce the commodity chip.
When Beijing designed yet another incentive package for the sector in 2020, the announcement was accompanied by a set of three “no’s”: companies without experience, without technology and without talent in the area should not venture with public resources. Even so, that year, it is estimated that more than 50,000 companies were created in the sector, several of them evidently just for the benefits.
Many point to the semiconductor sector as the great failure of Chinese industrial policy. The conclusion is hasty. The largest producer in the country, SMIC, has just announced an important technological leap and has done so in less time than its competitors. During the strict lockdown in Shanghai this year, the company did not stop. It obtained special authorization so that two-thirds of its employees could sleep at the factory, which operated on a closed circuit to the rest of the city.
It is only a matter of time — of resources, talent, investment in research and development — for China to join the fray of the big ones. The coordinated suffocation strategy makes the country convinced of the need to double down on self-sufficiency. Gradually, along with signs of failure, there are signs of progress.
In China’s decades of efforts to enter the elite group of semiconductors, nothing has served as a more powerful incentive than the measures of those who want to contain it.
With a wealth of experience honed over 4+ years in journalism, I bring a seasoned voice to the world of news. Currently, I work as a freelance writer and editor, always seeking new opportunities to tell compelling stories in the field of world news.
