With the US’s new “Chip and Science Act” the $550 billion global chip industry is becoming more and more politicized, and political competition within the sector has been increasing. The USA placed Yangtze Memory Technologies (YMTC) -one of the top chip manufacturers in China- and 30 more Chinese businesses to the “black list” with the new bill. The country had already blocked chip supplies to Huawei and announced comparable restrictions for Russian enterprises during the war.
US President Joe Biden intends to expand domestic semiconductor production in the USA and anticipates governmental support of $52.7 billion for the industry. He said, “We invented the computer chip. We invented it here in the United States. We used to have — just 30 years ago, we had 40 percent of the market. Now we have virtually no percent of the market, and we’re in a situation where we, in fact, don’t have the ability, up to now, to deal with so- — very sophisticated computer chips. We did all that technology. Well, it’s about time we take it back, and we’re doing that now. As I said, we’re talking about investments that are consequential but generating an awful lot of investment off the sidelines from all of you people around the wo- — the United States.”
Additionally, the act restricts the use of chips produced by American equipment by China. According to the statement released by the Ministry of Commerce, the goal was to “prevent China from purchasing these sensitive technologies that also have military applications.” Additionally, it forbids the sale of supercomputer systems made by US businesses such as Nvidia and AMD (Advanced Micro Devices).
One of the firms embroiled in the chip battles is Taiwanese TSMC, one of the biggest semiconductor producers in the world and a supplier to Apple. Taiwan, which is also the focus of a geopolitical dispute between the US and China, has indicated that it will abide by the new US sanctions regulations regarding the shipment of cutting-edge chips to China. In a statement released on Saturday, the Thai government claimed that “Taiwanese chip producers devote considerable emphasis to compliance.” By stating that “Taiwan’s chip sector has long served worldwide clients and attaches great significance to conformity with regulations,” the ministry of economy of Taiwan, on the other hand, has given the impression that its enterprises will behave in accordance with Western sanctions.
Around 75% of the world’s chip manufacturing capacity, according to data from the US Chip Industry Association, is located in China, Taiwan, South Korea, and Japan. On the other hand, only 13% of the world’s output is located in the United States. The size of the global semiconductor business will increase to 1.35 trillion dollars by 2030, predicts chip consultancy firm International Business Strategies, thanks to additional investments. IBS estimates that some chip types may be oversupplied in the upcoming two years, but chip bottlenecks are anticipated to return in 2025 and 2026. Data from Gartner indicates that in 2021, capital expenditures will total $153 billion.
Intel from USA intends to invest $20 billion in Ohio’s new chip manufacturing facility. A plant is being built in the USA by Taiwanese TSMC. Additionally, 11 new chip manufacturing facilities will open in Texas thanks to a $200 billion investment pledge by South Korean Samsung over a 20-year period. By 2030, China plans to invest $150 billion in the chip sector. It offers chip businesses financial benefits, loans with priority approval, and tax breaks. Chip producers intend to invest $120 billion in Taiwan. In the Tainan industrial park, TSMC has erected four new chip plants, and work is currently being done on four further 3 nanometer chip manufacturing facilities, each costing $10 billion. Over the next five years, South Korea intends to invest over $260 billion. On the other hand, European Union (EU) intends to make public and private semiconductor investments totaling about $40 billion. US Intel has also agreed to build a $5 billion chip factory in Italy. Japan will spend about $6 billion by 2030 to double domestic chip production. Even the financial center Singapore has received a $5 billion chip factory investment from Taiwan-based United Microelectronics.
The Chinese foreign ministry sees these long-standing unilateral moves as “steps taken by the United States to maintain its hegemony in technology,” but a growing number of experts believe the law could do more harm than good to the United States. In the article by Rakesh Kumar, a professor of electrical and computer engineering at the University of Illinois at Fortune, “Chip bans imposed on countries like China will do more harm than good for the United States. It won’t even work.” The September 29 article states that “The United States could theoretically allow the restriction of EUV (extreme ultraviolet lithography) equipment such as the Netherlands-based ASML, but these technologies have alternatives such as DUV (deep ultraviolet lithography), too. if at odds, prior to the law, US officials said “unilateral export controls will lose their effectiveness over time unless other allied countries join the US.” Also, according to Kumar, the US is currently trying to prevent ASML from even selling DUV equipment to China. On the other hand, it is noted that 10% of Taiwanese chip engineers have moved to China, and the country is looking for foreign engineers and managers with advanced chip manufacturing experience. Export controls, as well as nuclear and space technologies, artificial intelligence, quantum computing and advanced weapons technologies, are expected to make China independent in the field of chips in the long term. It is argued that export controls will not distract China from its goal of producing its own advanced chips, but may just slow this process down a little more.
Despite U.S. export restrictions aimed directly at China, China is the fastest growing chip industry, according to data collected by Bloomberg. As of June, 19 of the 20 fastest growing chip companies in the world over the past four quarters were in China. It is reported that this number was only 8 during the same period of 2021. It is reported that this number was only 8 during the same period of 2021. The sanctions imposed on Huawei Technologies have led China to make the chip industry one of its strategic sectors, and the sanctions Americans in this increasingly politicized sector have further accelerated China’s moves to end foreign reliance on chips. According to the China Chip Industry Association, the country’s orders from overseas suppliers of chipmaking equipment increased by 58 percent in 2021, and domestic chip factories are increasing their capacity. As a result, total revenue for China-based chipmakers and designers rose 18% to a record $150 billion. China’s top chipmakers SMIC and Hua Hong Semiconductor continued to operate at full capacity even under the most stringent quarantines. SMIC’s second quarter revenue grew 67%, outpacing the growth of Taiwanese competitors such as TSMC and GlobalFoundries. Revenues of Shanghai Fullhan Microelectronics, which manufactures video chips, increased by 37% due to increased demand for monitoring equipment. It is reported that Primarius Technologies Co, which develops chip design tools, has doubled its sales on average in the past 4 quarters and that the software it has developed can be used in the manufacturing of 3-nanometer chips. The rise of Chinese domestic chip makers is said to have attracted the attention of major buyers. It is also reported that Apple is one of the vendors Yangtze Memory Technologies has reviewed for iPhones.
