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Monday, October 3, 2022

Faced with China, US wants to resume semiconductor production

US President Joe Biden signed into law Tuesday a bill that provides $52 billion (49 billion francs) in subsidies to revive semiconductor manufacturing in the United States, which is now at the center of the Sino-American rivalry.

Joe Biden assured that this investment in these parts, which are at the heart of modern electronics, will help his country win “economic competition in the 21st century.” The text, passed by Congress in late July, also provides for tens of billions of dollars in research and development.

The law “strengthens our semiconductor manufacturing efforts here in America,” Joe Biden said, praising entrepreneurs who are “the reason I’m optimistic about the future of our country.”

Demand for semiconductors skyrocketed during the pandemic, leading to global shortages exacerbated by Chinese factory closures in the face of a Covid-19 resurgence.

The United States, whose share of world production has fallen sharply in recent years in favor of Asia, has suffered from this deficit. This markedly slowed down the production of new cars last year, which led to higher prices in the automotive industry.

Taiwanese quasi-monopoly

American, South Korean, and Japanese manufacturers are at the forefront of manufacturing semiconductors ranging in size from 5 to 7 nanometers (read in a frame). South Korean Samsung has even recently begun producing high-tech chips as small as 3 nanometers, or 20,000 times thinner than a hair. A feat that should be surpassed by Taiwanese company TSMC, which plans to produce 2nm wafers by 2025. A feat of extreme technical complexity.

TSMC is also a key player in the sector: the pearl of Taiwanese industry, the company produced 90% of the latest generation chips worldwide in 2021. Favorable quasi-monopoly situation in relation to China, which entered the field very late.

Five to ten years behind

Chinese manufacturers operate in less complex segments. Overall, China is estimated to be five to ten years behind its competitors. This is a gigantic figure in this highly competitive sector, and the hundreds of billions of francs gobbled up by the Chinese government in recent years have produced disappointing results.

In addition to complex know-how problems, China suffers from restrictions imposed by American, Japanese, South Korean and Taiwanese allies that limit access to their technology.

So the United States is preparing to give a major boost to research and innovation with the Joe Biden Industrial Plan.

“A skyscraper built on sand”

If China fails to catch up, it may never fulfill its dream of becoming a self-sufficient technology hub, seeking to transition from a manufacturing economy to an innovation economy independent of its competitors.

If semiconductors are already at the forefront in various sectors such as facial recognition, they represent a dangerous Achilles’ heel. Pony Ma, founder of Chinese tech giant Tencent, acknowledged this in 2019: Chinese tech is “a skyscraper built on sand.”

Michael Peuker/Wajo with Agencies

World Nation News Desk
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