November 27, 2022
Trending Tags

How ‘Chip War’ Puts Nations In Technology Arms Race

Read Time:4 Minute, 28 Second

The incredibly complex, high-stakes business of making semiconductors has always been a battle between global giants. Now it’s also a race among governments. These critical bits of technology — also known as integrated circuits or, more commonly, just chips — may be the tiniest yet most exacting products ever manufactured. And because they’re so difficult and costly to produce, there’s a worldwide reliance on just a handful of companies — a dependence that was brought into stark relief by shortages during the pandemic. At the same time, the US has been ratcheting up curbs on chip companies’ exports to China to contain the rise of a geopolitical and economic rival. Tens of billions of dollars have been committed in a dash to expand production in the coming years — just as a looming recession began to drastically curb global demand.

1. Why the war over chips? 

Chipmaking has become an increasingly precarious business. New plants have a price tag of up to $20 billion, take years to build and need to be run flat-out for 24 hours a day to turn a profit. The scale required has reduced the number of companies with leading-edge technology to just three — Taiwan Semiconductor Manufacturing Co. (TSMC), South Korea’s Samsung Electronics Co. and Intel Corp. of the US. Chipmakers are under increasing scrutiny over what they sell to China, the largest market for chips. Shifts in the global supply chain and recent shortages has governments rushing to subsidize new factories and equipment, from the US and Europe to China and Japan. 

2. Why are chips so critical? 

They’re the thing that makes electronic items smart. Made from materials deposited on disks of silicon, chips can perform a variety of functions. Memory chips, which store data, are relatively simple and are traded like commodities. Logic chips, which run programs and act as the brains of a device, are more complex and expensive. And as the technology running devices — from space hardware to refrigerators — is getting smarter and more connected, semiconductors are more pervasive in the modern world. That explosion has some analysts forecasting that the industry will double in value to become a trillion-dollar market this decade.

3. Is the world short of computer chips? 

Pandemic lockdowns and supply-chain shortages made many types of chips scarce for a period of about two years. That event helped usher in this new era, with an increasing realization of their strategic importance. Now that PC and phone demand is cooling off post-pandemic — and much of the world is falling into a recession — the cycle has turned. Chipmakers are warning of a glut in certain areas, though some customers including carmakers are still struggling to get enough. Yet for political reasons chipmakers were still poised to add capacity at a time of shaky demand – which could further upend the industry. 

4. How’s the competition going?

• In October, the US imposed tighter controls on exports of some chips and chipmaking equipment to China to stop it from developing capabilities that could become a military threat, such as supercomputers and artificial intelligence.

• China is pushing hard to catch up but is facing more US moves to restrict access. Notably, China’s Huawei Technologies Co., which once led the market for mobile phone infrastructure and rivaled Samsung as one of the biggest smartphone makers, was cut off from its primary suppliers. In any case, China has a long way to go and its task is getting harder.

• TSMC had been unveiling bigger budgets, while Samsung was introducing cutting-edge technology ahead of its rivals. TSMC’s revenue is expected to surge 40% this year. In 2021, Samsung overtook Intel to become the world’s largest chipmaker; this year, TSMC is on course to overtake Intel.

• US politicians have decided that they need to do more than just hold back China. The Chips and Science Act, signed into law Aug. 9, will provide $50 billion of federal money to support US production of semiconductors and foster a skilled workforce needed by the industry.

• European Union officials are exploring ways to build an advanced semiconductor factory in Europe, with assistance from Intel and possibly TSMC, as part of its goal to double chip production to 20% of the global market by 2030.

5. How does Taiwan fit into all this?

The island democracy emerged as the dominant player in outsourced chipmaking partly because of a government decision in the 1970s to promote the electronics industry. TSMC almost single-handedly created the business of building chips for others, one that was embraced as the cost of building plants skyrocketed. Large-scale customers like Apple Inc. gave it the massive volume to build industry-leading expertise and now the world now relies on it. Matching its scale and skills would take years and cost a fortune. Politics have made the race about more than money, though, with the US signaling that it will continue efforts to restrict China’s access to American technology used in Taiwan’s foundries. China has long claimed the island, just 100 miles off its coast, as a renegade province and threatened to invade to prevent its independence. Recent military exercises by China have reignited concerns about the world’s dependence on Taiwan for chips. 

More stories like this are available on bloomberg.com



Source link

Happy
Happy
0 %
Sad
Sad
0 %
Excited
Excited
0 %
Sleepy
Sleepy
0 %
Angry
Angry
0 %
Surprise
Surprise
0 %
Previous post FEMA, other federal agencies help heal wounds of Ian through politics and fraud concerns
Next post MLB Division Series top plays: Braves top Phillies; Padres-Dodgers