semiconductor wars

Microchips and the Macro World: Semiconductor Shortage Ushers in East-West Tech War
Raul Diego, MintPress News, Feb 26 2021

WASHINGTON — A world-wide semiconductor shortage has upended the best-laid plans of several major industries, including automobile, TV and laptop manufacturers, which have been forced to cut back on production and delay shipments as they try to weather the storm hitting one of the cornerstones of the global supply chain. On Wednesday, Biden announced a 100-day review of “key products including semiconductors and advanced batteries used in electric vehicles” as part of an executive order signed one day after Schumer directed the relevant Senate committees to “start drafting a legislative package to outcompete China,” based on a bill he introduced in May of last year called the Endless Frontiers Act. Earlier this month, General Motors was forced to shut down three plants and slow down production at a fourth as a result of the semiconductor crisis. Automakers across the globe are facing similar problems, with Ford, Honda and Volkswagen, the world’s largest car-maker, all slashing production as they try to find alternative suppliers of the critical piece of technology, which has been dominated by Taiwan since it overtook Intel as the largest manufacturer a few years ago.

Some have laid the blame for the $60b shortfall in chips on Covid, attributing the bottleneck to pandemic-related issues like remote-work logistics at car manufacturing plants and the diverting of chip production capacity to consumer electronics. That shift came in response to rising demand in the wake of “virtual working patterns” resulting from lockdown policies, according to Ford’s chief product platform and operations officer Hau Thai-Tang. This narrative conceals the deeper realities of Washington’s pernicious influence in Taiwan and the impact of Trump’s trade war with China, with its direct attacks on Chinese technology company Huawei in particular, which set the stage for the shortage itself and possibly undermined America’s own position of strength in the Taiwanese semiconductor industry. The Taiwan Semiconductor Manufacturing Corporation (TSMC) controls “half of the world’s foundry chip capacity” and maintained a position of dominance in the sector even before surpassing Intel, according to China-US policy expert Peter Lee, who spoke to MintPress for this piece and whose semi-weekly podcast “China Threat Report” offers crucial insights into the relationship between the US and the Asian superpower.

In a recent edition titled “Taiwan’s Silicon Shield Collides with its Silicon Lance,” Lee delves into the nuances of the semiconductor saga, which began with Trump’s 2018 ban on Chinese telecom giant ZTE for shipping telecoms equipment to Iran and North Korea in violation of US embargo laws, a ban the Taiwanese government enforced through a license requirement on ZTE’s two chip suppliers. It was among the first salvos in a continuing “tech war” between the US and China, which has included accusations of intellectual property theft against Chinese DRAM chip manufacturer Fujian Jinhua. That manufacturer’s production of low-end chips for domestic (Chinese) consumption was shut down by US sanctions, after a joint operation between Taiwanese law enforcement and the FBI against the company’s technical partner and second-largest foundry in Taiwan was used to declare Fujian Jinhua’s DRAM chips a threat to US national security. The result was the loss of a $5.6b investment by the Chinese company and heightening tensions between China and the US According to Lee, the “mainland semiconductor technology drain,” which had been growing under the previous, more China-friendly Taiwanese government, was halted and coupled with the ensuing ban on chipsets furnished to China’s technology giant Huawei, produced by Taiwan’s semiconductor behemoth TSMC.

While Washington’s bullying tactics had a major impact on curbing Huawei’s growing domination of the smartphone manufacturing business and set back China’s own lower-end semiconductor production by a few years, US actions have spurred massive investments by China into its domestic chip manufacturing sector, such as the National Integrated Circuit Industry Investment Fund recent $32b addition to enhance its domestic chip production capacity, in order to circumvent the tech-war sabotage. More significantly, according to Lee, is the spotlight now being shone on Taiwan as the world’s sole-source supplier of high-end semiconductor technology, as a result of the global drought putting so much strain on the world’s industrial supply chain. This has predictably led other nations to look into developing self-sufficiency in the sector. The question remains as to how such a shift will affect the geopolitical realities surrounding the volatile US-Taiwan-China relationship. If the key element of Taiwan as the center of the semiconductor manufacturing universe were to be removed from the equation, would the US relinquish its influence over the island or would it continue to use Taiwan as a pawn against the country that is increasingly being cast as the next global nemesis of the “free world”? As a result of the US’s very public attack on Huawei and other Chinese tech firms, these companies and every other company with product lines that rely on the semiconductors produced in Taiwan, such as Apple and virtually every processor firm in the world, began trying to get ahead of the game by placing advance orders, which had the inevitable consequence of tying up production for months on end.

Lee concludes that the resulting chip shortage was one of the unintended consequences of Trump’s trade war against China. But he add that in light of the increasingly aggressive rhetoric coming out of Washington, which looks to blame China for the pandemic, the fact that the semiconductor shortage is being tied to Covid in US mainstream media outlets seems like the perfect storyline to buttress the Cold War revivalism currently unfolding in the United States, whose proponents are chomping at the bit to build China up to be the next Soviet Union. Speaking to MintPress, Lee reflected that, given the fact that these production plants take years to construct, Taiwan’s preeminence in semiconductor manufacturing “can remain a vital strategic resource for the world for the next 5 to 10 years,” which he believes will suit the Pentagon “just fine.” Nevertheless, Trump’s late-term decision to bring a TSMC plant to Arizona may point to more long-term bipartisan policy goals. In terms of Schumer’s initiative in the Senate, time will tell whether he’s simply angling to procure quick funds for his chip-manufacturing friends in upstate New York or whether the legislation that ultimately comes out of the forthcoming committee sessions will represent a more permanent shift towards the much-heralded “self-sufficiency.” In the meantime, Biden’s executive order will look into whether the “US should incentivize new semiconductor manufacturing plants,” as the burgeoning “green revolution” promises to exponentially increase demand for this critical component.

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