Global semiconductors battle deepens between EU & US; $81 billion subsidy surge

  • Industry News
  • May 17,24
The surge in semiconductor spending stems from mounting concerns over China's rapid technological advancements, particularly in key electronic sectors.
Global semiconductors battle deepens between EU & US; $81 billion subsidy surge

The global race for semiconductor dominance is heating up, with superpowers like the US and the European Union pouring close to $81 billion into advancing chip technology. This massive investment, part of a larger $380 billion global effort, aims to bolster production capabilities of companies like Intel Corp. and Taiwan Semiconductor Manufacturing Co. (TSMC) to secure an upper hand in the semiconductor industry. The intensifying competition between the US-led coalition and China underscores the critical importance of cutting-edge technology in shaping the future of the global economy.

The surge in semiconductor spending stems from mounting concerns over China's rapid technological advancements, particularly in key electronic sectors. The COVID-19 pandemic exacerbated these concerns, as chip shortages underscored the vital role of semiconductors in ensuring economic security. Now, the stakes are high, ranging from revitalising US tech manufacturing to asserting dominance in artificial intelligence and maintaining peace in the Taiwan Strait.

The US and its allies are ramping up semiconductor investments, challenging Beijing's decades-long industrial policies. This funding spree has further exacerbated tensions in the US-China trade war, while also revitalising companies like Intel. In the US, recent announcements of multibillion-dollar grants, including those for Micron Technology Inc., signal a concerted effort to revive domestic semiconductor production. President Joe Biden's Chips and Science Act, promising significant grants and incentives, forms the cornerstone of this strategy.

The investments by the US and its allies aim not only to counter China's semiconductor ambitions but also to catch up with leading chip producers like Taiwan and South Korea. However, these efforts have also sparked rivalries among allies, with Europe and Asia vying for a share of the growing semiconductor market.

In Europe, the European Union has committed $46.3 billion to expand local manufacturing capacity, with Germany hosting major projects from Intel and TSMC. Despite these efforts, challenges remain in achieving Europe's goal of producing 20% of the world's semiconductors by 2030.

Emerging economies like India and Saudi Arabia are also entering the semiconductor arena, fueled by government investments aimed at diversifying their economies and reducing dependence on fossil fuels.

Meanwhile, China is aggressively pursuing semiconductor self-sufficiency, with massive investments in chip manufacturing. Despite facing export restrictions and supply chain challenges, China remains determined to close the technological gap with the US and its allies.

The geopolitical stakes are high, with the looming threat of a Chinese invasion of Taiwan adding urgency to semiconductor production efforts. The race to build advanced chip factories has become intertwined with domestic politics, shaping reelection campaigns and strategic agendas.

As the semiconductor race intensifies, the US-China tech war shows no signs of abating, with implications for global supply chains, trade policies, and geopolitical stability. “Despite uncertainties, one thing is clear: the competition for semiconductor supremacy will shape the future of the global economy for years to come”, John Lee, Director, East West Futures Consulting, commented. “The US-China tech war is going to get worse, not better.”

(Source: Business Standard)

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