Smartphones, computers, cars, data centers, telecom equipment, weapon systems… semiconductors represent a key element of our digital life. Various reasons have caused a global shortage of these components which could last until 2023. Being able to continue to access these electronic chips is therefore an essential asset.
It is in this context that Donald Trump’s United States has gradually cut off access to Chinese companies. The latter have been trying for several months, with the help of their government, to develop a growing strategic autonomy in response. A global economic and political battle, the outcome of which remains uncertain today.
A vast Asian market
In a fascinating study, the American economist Chad P. Bown deciphers the dynamics of the semiconductor market. World leaders in the sector, American companies began by reducing costs by relocating their production to South Korea and Taiwan in the 1960s. The governments of the two countries were able to take advantage of this movement to transform assembly factories into multinationals. innovative in the field, like the Korean Samsung or Hyundai and the Taiwanese TSMC.
With the development of China, demand has continued to grow, the country becoming in 2005 the world’s leading consumer of the component. Between 1995 and 2019, its share in world semiconductor imports increased from 1% to 23%. The country has also become a producer and exporter, capturing 20% of the world market.
But when China imports the most sophisticated products, it exports basic chips that are a technology generation or two behind. All this for the happiness of the American industry, of which 20% of export revenues came from sales of semiconductors to Chinese companies.
Banning Chinese Huawei or SMIC access to American microprocessors deprives American multinationals of the sector of substantial revenues
–
Until Donald Trump decides otherwise. One of the main customers of the United States is the Chinese firm Huawei, a leader in telecoms, 5G and artificial intelligence that the United States accuses of spying. They are especially worried about seeing him take a global advantage. The tension mounts between 2018 and 2020 when Donald Trump prohibits the company from accessing American microprocessors and then those produced in the world with American equipment, that is to say everywhere! And to repeat in December 2020, with the Chinese company SMIC (Semiconductor Manufacturing International Corporation), a local producer, cutting it off from the possibility of buying high-end products.
Obviously, these bans deprive American multinationals of the sector of substantial income. This is why the former tenant of the White House has set up a mechanism to help finance their research and development, while at the same time encouraging the leading Taiwanese company TSMC to come and set up a production plant in the States. – United, Arizona – An initial investment of $ 12 billion is underway, five more factories are already in the pipeline.
Joe Biden has so far maintained the defensive policy of his predecessor but adding two elements: $ 50 billion for the sector to boost the technological advance of the United States; agreements with Japan and South Korea to surround China and delay its development in the field as much as possible.
The impossible decoupling
China did not wait for the threat and actions of Donald Trump to react. From 2014-2015, the political authorities set a clear objective of reducing the country’s dependence on foreign imports of semiconductors. The events of 2018-2020 prompted them to step up the pace. Could China rapidly increase its autonomy in this area? According to the survey published by Nikkei Asia, the progress is spectacular.
Yangtze Memory Technologies Co. (YMTC), a local producer, is a case in point. Over the past two years, no less than 800 people have worked to study step by step their production chain, those of their suppliers and suppliers of their suppliers … in order to determine where products related to the United States come into play. . Located in the heart of the epidemic in Wuhan, the factory has not yet stopped running.
Despite its rapid progress, China is still far from being able to become independent
–
While the city was in quarantine, trains continued to move workers and trucks with needed materials. Many small local businesses have sprung up, mirroring each American firm producing such and such a necessary component. And YMTC continuously brings together hundreds of engineers, in three-shifts, to build a fully national production line. All with massive financial assistance from the government. The results are impressive: after producing 64-layer integrated circuits, YMTC has just launched massive 128-layer productions and is reportedly in the process of developing 192-layer circuits, a world record, which would make devices equipped with them ‘unprecedented efficiency.
However, despite its rapid progress, China is still far from being able to become independent. YMTC’s value chain audit showed that several key components are still made in the United States, or Japan, or Europe, but with American material or components. If it wants to quickly develop its domestic industry, the Middle Empire always needs the best foreign technologies, otherwise it will waste a lot of time.
Opposite, American companies want to continue selling their products to a booming Chinese market. And they need raw materials, especially rare earths, of which China remains a major producer.
Everyone therefore has an interest in getting along. Joe Biden’s United States seems to maintain a firm stance. And, on the Chinese side, as Miin Wu, founder of the Taiwanese Macronix International, cited by Nikkei Asia, says: in terms of semiconductors, “Seen from China, the hope remains to build a competitive industry in the long term. It’s a trend that is hard to resist, and there will be no turning back ”.
–
