The Chip War: A New Flashpoint in US-China Relations

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The Russia Ukraine war has ushered in a new era of economic statecraft. The war is continuing with US’s support for Ukraine and using sanction as a tool against Russia. With the ongoing war, US President Joe Biden has signaled that technology export controls will be the first line of defense against rival superpowers like China and Russia. So, the globe is currently experiencing a new conflict highlighted as the chip war. This new war is similar to the conflict between Ukraine and Russia. The United States and China have been engaging in fierce competition over the chip industry. The US and Chinese defense systems are heavily reliant on semiconductors for future conflict. So, the ongoing fierce competition over semi-conductor industry between U.S.A and China has long-term repercussions in geo-politics.

The semiconductor industry has over $500 billion business, which is anticipated to grow by 2030. It is centered on small silicon electronic chips and has a strong hold on global economy and supply chain. So, the secret to remain a superpower or becoming a superpower would lie within managing the supply chain in this industry. As technology advances, more and more chips are being used in contemporary technologies. In this industry, 87% of the world market is dominated by Taiwan, China, and South Korea. And with the ongoing rise in technology, silicon market is anticipated to reach $70 billion by the end of 2027.

US is identifying the significance of memory chips, military technology. In terms of semiconductor exports, the US is in top position. US is currently controlling 50% of the global market, and the United States of America’s main export is semiconductors. China is increasingly becoming a significant player in the fight for semiconductors. Since 2015, its semiconductor industry has been growing. The Semiconductor Industry Association anticipates that with a 24% market share and the assistance of its “Made in China 2025” project, China will surpass Taiwan by 2030. Despite United States have upper hand in this chip war with China, but the later has the potential to drastically alter the world economy.

Additionally, China has made chip development a priority and is making significant investments in AI and supercomputers. China has been following up over the past ten years, notably in terms of its chip design skills, even though it is still a long way from becoming a sole distributor. In order to prevent high-end processors from powering China’s tech applications, including military use, artificial intelligence, and high-performance computing, the US is restricting Beijing’s access to microchips. This is because China wants to dominate the chip technology in the Asia-Pacific region. Also, there is an ongoing arms race between the two nations.  The number of ships or missiles produced by these two countries is also taking place in terms of the accuracy of Artificial Intelligence (AI) methods that may be used in military systems. As a result, Biden’s CHIPS Act including impressive financial assistance for research and technology to provide competitive advantages over China, was passed by the United States. The Biden Administration strengthened its limits on the shipments of inputs and machinery used in semiconductor manufacturing to China on October 20, 2022.

– Aishwarya Sanjukta Roy Proma is a Research Intern at the KRF Center for Bangladesh and Global Affairs (CBGA).

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