China’s leading companies in computer chip design and manufacturing, HiSilicon and Semiconductor Manufacturing International Corporation (SMIC), have been gaining significant attention in Washington due to their recent advancements. Despite SMIC's previous reputation as lagging behind technologically, recent developments have challenged this perspective, indicating that China has the potential to compete strongly in the global semiconductor industry.
The launch of Huawei's high-end Huawei Mate 60 smartphone in August 2023 surprised the United States, showcasing the progress made by Chinese companies in semiconductor design and manufacturing. This surprise was a result of the unveiling of a chip that demonstrated Chinese self-sufficiency in HiSilicon's semiconductor design and SMIC's manufacturing capabilities, indicating a rapid catch-up with the technological frontier.
The reports of Huawei and SMIC's plans to jointly mass-produce 5-nanometer processor chips at new production facilities in Shanghai have raised concerns about China's growing prowess in next-generation semiconductor technology. Although these chips are currently a generation behind the cutting ones, they underscore China's progress in creating more advanced chips despite US export controls.
The US has traditionally maintained a leading position in chip design and has strategically allied with manufacturers for cutting-edge chip production. However, China's formidable advancement in semiconductor technology now presents substantial competition, carrying significant economic, geopolitical, and security implications.
Semiconductors play a crucial role in various industries, including telecommunications, defense, and artificial intelligence, with their compact nature resulting in lower energy consumption and faster speeds. The significance of maintaining technological distance has been emphasized for economic and security reasons, as evidenced by the fact that all major US defense systems and platforms rely on semiconductors.
Given the critical role of semiconductors in modern economies and national security, the US has implemented strategies to safeguard its technological supremacy and independence. These strategies include large-scale investments in domestic chip manufacturing facilities and the implementation of stringent export controls on advanced semiconductor manufacturing equipment and technologies to impede China's to critical components.
The US government has also pursued exclusionary measures, subjecting numerous investment and acquisition deals to review in the name of national security and inhibiting the export of advanced semiconductor manufacturing equipment and technologies to China. Additionally, efforts to restrict talent flows to the Chinese semiconductor industry have been enacted, reflecting concerns about potential transfer of know-how and connections that could strengthen's semiconductor capabilities.
The "chip war" between the US China encompasses economic and security dominance. China's emergence as a semiconductor player could disrupt existing supply chains, reshape the global electronics industry, and pose security risks related to vulnerabilities in Chinese-made chips. Furthermore, Chinese self-sufficiency in semiconductor design and could undermine Taiwan's position as a leading semiconductor manufacturer and have far-reaching implications for both superpowers.
With the high involved, it is evident that both Washington and Beijing are unlikely to yield easily, as the economic, geopolitical, and security implications of China's semiconductor advancements continue to unfold.
