Microchip Tech War

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     Starting in 2022, and growing ever since, tensions between the US and China dominate the microchip industry. The US is ultimately worried about China's economic power growing representing a stepping stone towards a more dominant Chinese (PLA) military. Aside from economic development, China plans to further benefit off of chips, specifically in the realm of AI, in order to autonomize their military devices. 

    Although China has optimistic plans for the use of microchips in various sectors, as of late 2023, they were not yet able to produce the most advanced semiconductors that power AI. That is why they relied heavily on imports to acquire advanced chips. The measures by the US government that have been highlighted in the news are mainly focused on cutting off the exports to China, in order to indirectly limit their military and economic capabilities. In October of 2022, the Biden administration implemented a wide set of export controls that limited China's access to US-origin semiconductors. Chinese business owners and individuals were no longer able to buy chips from the US, but the Biden administration did not stop there. The US strengthened their control by persuading Japan, as well as the Netherlands, to also cut off microchip exports to China. These actions obviously saw critical backlash from Xi and the Chinese government, and caused tensions to continue to rise over the last year. 

    Unfortunately for the US, there was an initial adverse effect, as the American microchip industry took a big hit. This stemmed from the fact that a large portion of US-origin semiconductor buyers were based in China. Evidence of the shock to the American microchip industry, and economy in general, was the 20% decrease in Nvidia's revenue from China in the first 12 months following the implementation of the policies.

    Predictably, China responded swiftly. Beijing has since banned chips made by US company Micron, which was seen as a policy of direct retaliation. Despite the regulations, many Chinese businesses are still finding ways to get their hands on high-end semiconductors, either by renting them or acquiring them on the black market. 

    It is clear that tensions will not settle any time soon, as now in 2024 the Biden administration is still taking action to control the microchip industry. Directly quoted from a White House statement on January 4, 2024, "President Biden signed the CHIPS & Science Act to restore America’s leadership in semiconductor manufacturing and ensure America’s consumers, businesses, and military maintain reliable access to the chips that underpin nearly every aspect of our economy." This act included over $162 million in funding to support the onshoring of the semiconductor supply chain.


Microchips and monopoly: a new front in the global struggle | The Communists


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