Semiconductors: A New War Front

Updated: Feb 9

The competition bill in the US aims to infiltrate the Semiconductor manufacturing market with money and confrontation with China in the realm of research and technology rather than Hard-hand. However, this could affect its own allies’ interest because the current chip market's major players are Japan, Taiwan, and the EU.

Semiconductors are the key element in the technology, which are used in a range of things: smartphones, cars, weapons. Moreover, these are the core for future technology such as Advance weaponry, 5G, and AI. Due to Covid-19, the supply chain of semiconductors had badly disrupted which caused soaring price and Inflation. Almost, all the important industrial felt the potent shock including technological and raw material. The countries, that are in the race of technology, have realized the importance of a resilient supply chain. So, the risk of Hyper-Inflation, in the future, could be deterred.

The US, which has a wide input of technological exports, suffered a lot from the shortage. The stock market share price of major US companies saw an extreme downturn. Resultantly, the policy-makers decide to secure the manufacturing capacity first, to aim to make smooth flow of the economy. The product of the analysis is the competition bill, which will subsidize the semiconductor industries.

Intel, a giant semiconductor manufacturer, is going to invest $20 billion for the new factory in Ohio. Along, Samsung, a Japanese company, is also planning to build a new factory in Texas with an investment of $17 Billion. These would impact the surge in production and export of the US.

However, the outlook of the bill is seeming like to counter China’s growing manufacturing capacity of Semi-conductor, but the underlying effects are way deeper. Biden, who recently, urged the countries (mentioning China especially) to play with the same rules, indicates the paradigm shift of the US foreign policy from direct military confrontation to technological and innovation with China. However, this would trigger an adverse effect on its allies as well.

The current top semiconductors-making countries along with the EU are the US, Taiwan, Japan, Korea, Singapore, and China. Despite countering China is being focused, it only accounts for only 7 percent of manufacturing. Japan, EU, and Taiwan all are above in the list. It would obvious if the US would have increased its capacity, the effect would majorly felt by its allies rather China.

Already the Japanese officials have raised their concerns seeing the US moved because it is being estimated that, in the future, their local industries would have to shut down owing to the competition and lead edge of the US in the race. Thus, Japan is also planning to protect local industries. The foreseeable solution would be that she would also subsidize its own industry and boost capacity. On the other hand, witnessing the new tough competition, the EU has decided to inject around $150 billion into the semiconductor industry.

China, which is the main target for the competition, is also making its prudent move. Despite its semiconductor industry still not that much big as its rival’s, China is also going to invest a huge amount to retained in the competition. According to news, around 30 percent subsidy increase will be seen in China’s coming policies – which is the sign of a tough fight – China vs the US.

Taiwan, the China trigger point, will also not remain behind in the Race. One of the world's biggest Taiwanese companies “TCMC” has planned a budget of $44 billion for the expansion of its semiconductor infrastructure.

All above developments are enough to conclude that the new spell has begun, and the semiconductor production is at the center of the politics. Nearly, all the countries are playing hard to fit into the race which makes it obvious that huge money will be stormed to semiconductor companies. Already, the share price of semiconductor companies is high and it would rise.

However, one cannot exactly be estimated the impact of the race, but the prediction can be made. The US shift from military confrontation to research and technology is welcoming, but states' tactics and maneuverability in the economic realm may produce negative effects. The world has witnessed the ramification trade war between US and China. However, one thing is clear the technological innovations and research of making more advanced chips will be speeded, and it would have a significant positive impact on the world's future technology face.