The Race for Semiconductor Market Domination

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Semiconductors, otherwise known as chips, have revolutionized how the world operates. From smartphones, PCs, pacemakers to the internet, electronic vehicles, aircrafts, and hypersonic weaponry, semiconductors are irreplaceable in electrical devices and the digitization of goods and services. They are at the heart of economic growth, security and technological innovation. Having such an importance in todays world has skyrocketed their demand and world Powers are now in the race to dominate their market.

How are Semiconductors Created ?

Semiconductors have a really unique property. They can act both as conductors and insulators, based on the voltage they are provided. This makes them extremely useful in computer chips. Silicon and Germanium are the two main naturally occurring semiconductors that are used to create chips. The process of getting these metals is simple enough. Sand is mainly made up of silicon. Silicon then needs to be injected with impurities, a process known as doping, to enhance its conduction properties. The doped silicon then goes into a complex process to become its final form of chips. Huge automated facilities costing billions of dollars are required to created the latest computer chips.

The complex nature of chip formation has been perfected by only a small number of companies around the world: INTEL in USA, Samsung in South Korea and Taiwanese Semiconductor Manufacturing Company (TSMC) in Taiwan. None of the other major world powers have been able to create a production facility that is at par on the above three. As it stands, TSMC is the leader of the semiconductor market and holds 51 percent market share.

International Friction over Taiwan

US and China contesting the Semiconductor Market

The expertise of making computer chips makes Taiwan a hotspot for international friction. China does not recognize Taiwan as a sovereign state and claims Taiwan as its own territory. US on the other hand does not want China to conquer the semiconductor market and thus sides with Taiwan and supports their claim of sovereignty. In the last decade, with the increasing strength of Chinese military and navy, China has started to flex its muscles. Regular air and naval missions are conducted near and Above Taiwanese air spaces in an attempt to intimidate the Taiwanese people. US, meanwhile continually patrols waters near Taiwan in an attempt to thwart any attempt of takeover of Taiwan by China.

QUAD- an Alliance Repurposed

US has adopted another approach to counter the possible Chinese takeover of Taiwan. QUAD, a strategic alliance between Japan, Australia, India and US had been dormant for over 15 years. Last year it was revitalized with an aim to curb the Chinese takeover of the semiconductor market. Most of the raw materials for computer chip manufacturing is imported from the outside of China. If the supply chain of these materials is cut, the production would automatically be halted. The idea seemed promising but strong trade ties between QUAD members and China makes its difficult for the idea to be implemented effectively.

Electric Vehicles

The advent of electric cars has heated up the environment even more. In just a few years , the electric car industry has reached upwards of $1 Trillion. The heart and brain of these vehicles are complex computer chips which are only created by TSMC. This makes both China nd US extremely dependent on the Taiwan for these cutting edge technology. The acquisition of Taiwan facility could give China the monopoly over the entire Electric Vehicle Industry.

Impact on the Electronics Industry

COVID as well as the constant tug of war between US and China, has vastly affected the supply chain of semiconductors. The facilities to create the chips are limited whereas the demand is massive. PlayStation 5, having been launched 2 years ago, is still not available on online stores due to chip shortage. Electric car companies, like TESLA, have had to massively scale down their operations.

The fear of the world powers, that one will dominate the others, has stunted innovation in the tech industry. Instead of working together to created cutting edge technology, US and China are constantly in the search to secure their own supply while minimizing the others. If the world is to become a better place, both the countries need to set aside their grievances and use their combined knowledge to advance the electronics industry.

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talha farhat
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