Opinion| Behind the scenes of the US-China conflict over Taiwan’s chips

Hatem Sadek
5 Min Read

A fierce war is currently taking place between China and the United States in the semiconductor industry, and this war involves imposing tariffs on semiconductor imports from China to the United States and vice versa. Of course, Taiwan comes at the center of this conflict, as it dominates the electronic chip industry in the world.

    This war comes in light of the increasing demand for semiconductors and their strategic importance in many industries, such as communications, computing, energy, and defense. Certainly, the semiconductor field is an important part of the policy of smart manufacturing and modern technology.

     The chip war between Beijing and Washington has widened since the United States last year imposed restrictions on China’s access to advanced chips, chipmaking equipment, and software used to design semiconductors. Washington also blacklisted Chinese companies, including Micron’s competitor Yangtze Memory Technologies.

    Washington justified its decision with national security concerns, and said it wanted to prevent the Chinese armed forces and intelligence services from obtaining “sensitive technologies with military uses.” A few days ago, the United States said it would work with allies to address the “distortion of memory chip markets due to China’s actions.” 

     In contrast, China’s cybersecurity watchdog announced that US chip maker Micron Technology had failed a national security assessment and asked operators of critical information infrastructure to stop buying its products.

    Indeed, chips are the lifeblood of the modern global economy, they are used to power everything from cars to smartphones, and they are expected to become a trillion dollar industry globally by 2030. In 2021, for example, China imported semiconductors worth $430 billion, which is more than what China spent on importing oil.

     Electronic chips are also of economic importance to the United States. For example, during the Corona pandemic, the American auto industry incurred a loss of about $210bn due to factories slowing down production due to the pandemic and supply chains faltering. That is why the United States passed the “Chip Act” under which programs worth $53bn were funded for the development of domestic manufacturing of semiconductors of competitive importance to the United States and its national security.

    This is why the United States fears China’s takeover of Taiwan, the world’s largest chipmaker. This is because in this case China will control the production and manufacture of these chips and may also consider destroying those factories. This is in addition to being also able to control supply chains. It is true that the United States is now already manufacturing chips, but it will not be able to compete with Taiwan’s supremacy in this field, which extends over forty years. The other and most important point is that American production will not be able to supply the United States with most of the types of chips that it currently needs.

   So far, China is far ahead of the United States in this industry. China is one of the largest producers and exporters of semiconductors in the world and seeks to develop its domestic industry to become more developed and advanced in the field of semiconductors, while the United States fears Chinese supremacy in this field and seeks to maintain control over the global industry of semiconductors through both Local production and protection of the island of Taiwan.

   This fierce war certainly casts a dark shadow over the global economic scene. This war causes a slowdown in the growth of the global semiconductor industry, increases tensions in trade relations between China and the United States, and leads to an increase in the cost of electronic and technological products in global markets. The most dangerous thing is that the continuation or escalation of this war contributes to the slowdown in global trade, in addition to the high cost of all products that depend on that industry, which, by the way, includes everything that even the simple citizen uses, from mobile phones to space technologies and military equipment.

   It is important to focus on finding solutions to ease tensions and enhance international cooperation in this important and vital field for the global economy. This must be done before the conflicts escalate into a global recession that will be far more difficult than what happened before World War II.

Dr. Hatem Sadek: Professor at Helwan University

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