In the 21st Century, Semiconductors Will Determine Global Power
The Role of High Technology in Geopolitics
Far from traditional battlegrounds and resource competition, the future of global power lies in the realm of high technology. According to Agueda Parra, a Spanish expert in geopolitical analysis, technological innovation will shape the geopolitics of the 21st century and determine which countries can thrive in the new digital economy.
Parra emphasizes that in the midst of a shift towards a more technologically-driven economy, semiconductors, also known as chips, will play a crucial role in various sectors such as automotive, artificial intelligence, the Internet of Things, cloud computing, and 5G mobile technology.
Semiconductors: A Globalized Industry
The semiconductor industry is a key sector in the ongoing technological revolution. These highly complex products enable data processing, transmission, and storage in electronic devices. In 2021, the global sales volume of semiconductors reached $555.9 billion, with a record production of 1.15 billion units.
The industry’s supply chain consists of four major activities: design, manufacturing, assembly, and testing. While some companies focus on chip design, others specialize in manufacturing silicon wafers and transforming them into chips. This manufacturing segment is primarily located in the Far East, leading to a competition between China and the USA.
Taiwan and South Korea: An Asian Duopoly
A regional technological competition is unfolding in Asia. Taiwan, known as a “rogue province” by China, currently dominates the production of the smallest and most advanced chips, with sizes of 7 nanometers or less. Taiwan Semiconductor Manufacturing Company (TSMC), valued at $454 billion, is the leading player in this segment, with the US market as its main destination. South Korean company Samsung, controlling 8% of the microchip market, competes with TSMC and has China as a significant customer.
A study by the Boston Consulting Group (BCG) and the Semiconductor Industry Association of the USA (SIA) highlights the risks associated with the concentration of chip production in a single geographical area. Geopolitical tensions, export controls, and protectionist measures could disrupt the chip supply chain and impact the industry’s research, development, and investments.
China: Plans, Incentives, and Obstacles
China aims to achieve 70% self-sufficiency in semiconductors and reduce foreign dependence within the next five years. However, as of now, local production only represents 16.7%, and it is heavily reliant on foreign technology. Manufacturing chips smaller than 10 nanometers requires access to foreign technology, which could be hindered by trade sanctions.
The Semiconductor Manufacturing International Corporation (SMIC) is China’s largest company in the sector but still lags behind Taiwan’s TSMC in producing advanced chips. China has made significant efforts to recruit Taiwanese chip engineers to bridge this gap.
USA: Sanctions, Protectionism, and Alliances
The high-tech sector has been a target of the US in its trade war against China. The Department of Commerce imposed restrictions on SMIC’s access to US-designed semiconductors, citing national security concerns. The US also passed the CHIPS and Science Act, establishing a fund of $52 billion to stimulate local chip production. Additionally, the US seeks to form a strategic alliance with Taiwan, Japan, and South Korea to enhance chip supply chain resilience.
The feasibility of this alliance remains uncertain, particularly regarding Taiwan’s alignment with the US amidst escalating threats from China. Japan, as a major supplier of silicon wafers, aims to strengthen its position in chip production through public-private investments and the formation of a consortium called Japan Advanced Semiconductor Manufacturing (JASM). South Korea, heavily dependent on China for chip exports, faces hesitations in joining the alliance.
A Dispute for Global Hegemony
The technological competition between China and the US is not just a trade war but a battle for global power. The outcome will significantly impact the future of both countries. As Martin Rasser, director of the Technology and Homeland Security Program at the Center for a New American Security (CNAS), states, “Whoever controls the design and production of microchips will shape the course of the 21st century.” The next decades will be crucial in determining the winner of this competition.