The global spending spree on cranking out the next generation of semiconductors envisages a showdown with China for chip supremacy.
It’s also fuelling rivalries among the US and its allies in Europe and Asia, all chasing a piece of the growing demand for devices powering advances in AI and quantum computing.
Computer chips are the engine room of the digital economy, and their growing capabilities are enabling technologies such as generative artificial intelligence that promise to transform multiple industries.
Their critical role was highlighted when the coronavirus pandemic disrupted chip production in Asia, tipping global technology supply chains into chaos.
The devices are now the focus of intense competition between the world’s economic superpowers.
The US and European Union have funnelled nearly $81bn towards future-ready chips. It’s the first wave of close to $380bn earmarked by governments worldwide for companies like Intel and Taiwan Semiconductor Manufacturing Co to boost production of more powerful microprocessors.
Chips are needed to process and understand the mountains of data that have come to rival oil as the lifeblood of the economy.
Memory chips, which store data, are relatively simple and are traded like commodities. Logic chips, which run programmes and act as the brains of a device, are more complex and expensive.
But access to components such as Nvidia’s H100 AI accelerator has been linked to both US national security and the fortunes of giant companies such as Google and Microsoft as they race to build out giant data centres and steal the lead in what’s seen as the future of computing.
Across the Atlantic, the EU has forged its own $46.3bn plan to expand local manufacturing capacity. The European Commission estimates that public and private investments in the sector will total more than $108bn, mostly in support for large manufacturing sites.
Emerging economies are also looking to break into the chips game. India in February approved investments powered by a $10bn government fund.
In Saudi Arabia, the Public Investment Fund is eyeing an unspecified “sizeable investment” this year to kick off the kingdom’s foray into semiconductors as it seeks to diversify its economy.
In Japan, the trade ministry has secured about $25.3bn for its chips campaign since its inception in June 2021.
In semiconductors, the South Korean government plays a supporting role in an estimated $246bn of spending — part of a broader vision for homegrown technology from electric vehicles to robotics.
The amount of money Beijing is pouring into the sector likely dwarfs US spending. China was on track to spend more than $142bn, the Washington-based Semiconductor Industry Association recently estimated.
Most of the world’s leading semiconductor technology originates in the US, but today it’s Taiwan and South Korea that dominate chip manufacturing. China is the biggest market for the electronic components and has a growing desire to make more of the chips it uses itself.
That’s made the industry a focal point for Washington as it tries to limit the rise of its Asian rival and address what it says are national security concerns.
The US is deploying export controls and import tariffs to contain China’s chip ambitions. It’s also set aside huge sums of government money to bring back physical production of the components, reducing what it sees as a dangerous reliance on a few facilities in East Asia.
Several other nations including Germany, Spain, India and Japan are following its lead.
Chipmaking has become an increasingly precarious and exclusive business.
New plants have a price tag of more than $20bn, take years to build and need to be run flat-out for 24 hours a day to turn a profit.
The quest for control in this industry is predicted to significantly influence the technology of future times.
