The Microchip War: A Short Geopolitical Analysis

 1/23/2022

         The US is Losing a Chip War With China: What Should We do?

The Chip War is a longstanding conflict between the US and China for dominance in chip production. At the heart of all technology lies one central component: microprocessing chips. They serve as the fundamental basis for all functions of technology. As the world has increasingly become electronic, with technology invading every available space, the need for these microprocessing chips has risen dramatically. With that, a new yet longstanding war has emerged between the US and China, a Chip War dominated by an intensification on both sides, leading to a shift in strategic US policy.

The Chip War is not an entirely new phenomenon. It has existed since the Cold War, originating as another proxy war between the US and USSR. Only in the post-Soviet era, when China began to emerge as a hegemonic power challenging the authority of the US, did the West begin to retaliate. In recent years, with the intensification of tensions between the US and China as they compete for global dominance, this Chip War faced dramatic changes, with China quickly gaining supremacy. In short, China is quickly winning this war. Due to their high levels of production facilities, and global dominance in trade with other nations, it is no surprise that the US is lagging. Additionally, in recent years the CCP has begun to push techno-nationalism. Fueled by longstanding conflict and sanctions placed by the US, China has increased funding into the science, technology, and education fields to advance their technological prowess against the US. As the US stopped attempting to invest in chips, China saw an opportunity to gain strategic advantages, and now the US is struggling to fight back, and in fighting back, they accelerate growing tensions between democratic and socialist governments.

Beginning in the 1990s, the US chip fab (fabrication foundries) began its decline, with America’s peak involvement being 37%. Today, it has dramatically declined to 12%, as China continues to rise, posing an issue to the world order. The US is well aware of their relative decline, which is why Biden is rapidly trying to fight it. As the world stage continues to shift and the US’s relative power in the world stage is questioned, China is more than willing to fill the role that the US had and establish themselves as this generation's global superpower. One way they are doing this is through chips.

Just last month, Biden made decisive efforts to take this war further. Backed by bipartisan support, this new act attempts to punish US companies and workers that invest or engage in chip business with China. The President made an extensive effort to create export blocks aimed at China, barring them from accessing advanced semiconductors comes as a shock to none. Biden has made it a national priority to fight this chip war and make gains towards new footholds, investing $52 billion in financing tech and fab operations, but it may be too late. This action comes years after Huawei was banned in the US. Its ban is two-fold: the threat of Chinese surveillance was high due to the company's ties to the Chinese government, and at the time there had been heightened chip competition between the US and China. It comes as another act in a long line of attempts to thwart Chinese chip potential, that all seem to dramatically fail.

However, what the US fails to acknowledge is the gradual rise of China’s chip operations that have occurred for decades. Companies like Huawei and LONGi continue to produce and export chips at rising rates, and this is in part due to government encouragement. Shortly following President Biden’s act, the CCP announced an increase in technological self-reliance, working to accelerate legislation and the production of AI, big data, and chips. Additionally, Chinese banks have begun producing special low-interest loans for tech firms creating avenues for technological advancement to soar. China already produces a quarter of all semiconductors in the market, and through their Belt and Road Initiative, they have the markets to sell them.

The US government's efforts to fight back in the Chip War are admirable, but they may be too little too late. In order to truly regain a foothold in the chip market, the US must invest heavily in chip production and research, as well as provide incentives for companies to bring their production back to the US. Additionally, the US must also work to improve relations with other countries, and create a more favorable environment for international trade. This will be a difficult task, as the US has been facing increasing competition from China not only in the chip market, but in other areas as well.

The Chip War is a complex and multifaceted conflict, with many different factors at play. The US must carefully consider its strategy and make sure that it is taking all of the necessary steps to regain its position in the chip market. While it may be a difficult task, it is ultimately necessary for the US to succeed in this war in order to maintain its position as a global superpower.

The Chip War is a critical issue that should not be taken lightly. The US and China are both major players in the chip market, and their competition is only going to intensify in the coming years. The US must take action now to ensure that it is not left behind in the chip market, and that it remains a dominant force in the world. The Chip War is not just about chips, but about power, trade, surveillance and innovation. The US must be aware of the long-term implications of its actions in order to make the right decisions to keep up with China and to maintain its position as a leading global power.

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