Beyond Boundaries : CHIP RIVALRY

New American rules, imposing further restrictions on the export, re-export, and retransfer to/within China of certain semiconductor manufacturing equipment, semiconductors, and other advanced computing items as well as related software and technology for each category of items, became fully effective on October 21. These rules also include measures to cut China off from certain semiconductor chips made anywhere in the world with U S equipment. In addition, US citizens have been barred from supporting certain China-based chip companies without a licence from the US government.

U S government justified that the export controls were part of the ongoing efforts to protect national security and foreign policy interests. Latest restrictions, simply translate in the denial of advanced, high-performance computing chips and semiconductor manufacturing equipment to China. A set of new license requirements for the items that could be used in a supercomputer or for semiconductor development in China, has also been promulgated.

Semiconductor related enterprises are part of significant worldwide industry which reported trade value of $555.9 billion in 2021. According to data collated by Semiconductor Industry Association, in 2021, the U S accounted for 46% of the global semiconductor market share, followed by South Korea with 21%., Japan and the European Union cover 9% of the market each, while Taiwan and China maintain 8% and 7% share respectively. The semiconductor value chain is divided amongst several countries and regions, which cover different parts of the chain, based on geographic specialisation. U S dominates the R&D-intensive activities which are related directly to the semiconductor design. Manufacturing, on the other hand, is dominated by the East Asia region. Specifically, raw materials and wafer fabrication, the front-end manufacturing, are dominated by Taiwan, while China dominates the back-end manufacturing with assembly, packing, and testing.

America manufactures approximately 10% of the produced semiconductors.    U S has already attempted to address this vulnerability in August 2022 by adopting CHIPS and Science Act of 2022, a legislation which sets aside USD 52 billion specifically to bolster the US computer chip sector. Most advanced semiconductors (below 10 nm), which are crucial for the defence industry, are manufactured exclusively in Taiwan (92%) and South Korea (8%). However, it should be noted that, both the US and China are the largest semiconductor consumers.

Despite whatever narrative, U S has tried to convey regarding avoidance of cold war, in National Security Strategy 2022, by applying systematic restrictions which target growth of Chinese Semiconductor ecosystem, America has raised the level of their rivalry to cold conflict. And that too, when the world is yet to recover from the COVID shutdown induced chip shortage. Who says this is not the era for war.

The Cold War experience showed that export controls are far from perfect. Such restrictions are inherently leaky, and countries can often find a way around them through smuggling, espionage, or by routing deliveries through third countries. The Soviet Union still developed advanced nuclear and other weaponry despite all the technology restrictions.

Complexly integrated supply chains of the 21st century, enhance the U S capacity to harm Chinese efforts at the high-end technology development, which will weaken both its commercial competitiveness and military capabilities. But it would be naïve to assume that China will not use its extensive BRI network to offset the adverse impact of these restrictions.

India has also initiated concrete efforts to boost semiconductor production in the country. It has launched the Semicon India programme with a total outlay of INR 76,000 crore. This programme aims to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystem. In September, Indian mining company Vedanta and Taiwan’s Foxconn have expressed the intension of investing 1.54 trillion rupees ($19 billion) for developing a semiconductor manufacturing plant in India. A small but positive step, in tune with the current geopolitical realities. During her recent visit to India US deputy assistant secretary, South and Central Asia, Afreen Akhter offered US help to India for boosting its semiconductor manufacturing capacity. How and in return for what is yet to unfold.

Signing off for the week, by quoting Noam Chomsky, “Resistance is feasible even for those who are not heroes by nature, and it is an obligation, I believe, for those who fear the consequences and detest the reality of the attempt to impose American hegemony.”

Brigadier Rajiv Mahna YSM, SM, VSM is an Indian Army Veteran who has chosen to remain a student for the lifetime


“We Said It”

  • Pak Institute for Peace has published a report that there has been 51% rise in terror attacks in Pakistan since Taliban takeover of Afghanistan
  • Threats posed by various terrorist groups based in Afghanistan were discussed in the article titled; ‘One and a Half Step’ published in ‘Beyond Boundaries’ column on 13 June 2022.