The semiconductor industry is the technology sector in which companies conceive and manufacture microchips, a silicon wafer that contains an integrated circuit with small band gap insulators that enables conductivity for most electronic products. Those microchips are essential for advances in artificial intelligence, transportation, healthcare, the military system, and communications.
Thus, a semiconductor is a substance that lies between a good conductor and a bad conductor, or insulator. Together with lithium-based batteries, common semiconductor materials include germanium and gallium arsenide.
The global semiconductor production system is a complex, inter-dependent network: export countries are also large chip importers. Not all chips are equal, and no producer specializes in every chip category.
•US chip exports are the most expensive, with an average price of $2.16 per chip in 2021, reflecting its specialization in more sophisticated chips. The United States possessed around 12% of the world's global chip manufacturing capacity by 2021, and US-based companies held approximately 46% of the total semiconductor market share.
•Taiwan is the world's leader in raw semiconductor manufacturing. Taiwan Semiconductor Manufacturing Co. (TSMC) is the biggest company in the country, is owned in majority by foreign investors (95%) and the central government of Taiwan is the largest single shareholder (5%). TSMC manufactures around 50% of the world's semiconductors.
Unlike semiconductor manufacturers such as Samsung or Intel, which produce semiconductors for use in their own products, TSMC has a foundry model that supplies semiconductors to many other companies, like Qualcomm, Apple and AMD.
•China is expected to produce up to 25% of the world's semiconductors by the year 2030 as the Chinese government has set out to expand the country's manufacturing capabilities to the point that China becomes self-reliant.
•In addition to these countries, South Korea, Japan, Israel, the Netherlands, Malaysia, the United Kingdom, and Germany complete the list of big producers in the world.
Global semiconductor sales reached $574 billion in 2022, an increase of 3.3% from 2021, and the market growth has been evenly distributed among Europe, USA and East Asia. However, there is a growing protectionist approach regarding the production of semiconductors: In July 2022, the US Congress passed the CHIPS Act to respond to China's nationalist policy on the matter and the dangers of depending on imports from Taiwan should a war erupt there.
Indeed, the share of modern semiconductor manufacturing capacity located in the US has decreased from 37% in 1990 to 12% today. The CHIPS Act of 2022 includes semiconductor manufacturing grants for artificial intelligence, healthcare and military (the so-called critical supply chains) research investments, and an investment tax credit for chip manufacturing.
Currently, western powers have established a clear strategy aimed at limiting China’s development in the microchip industry by imposing licences and export restrictions on this technology.
Certainly, those Chinese chips can be used for intelligence collection in any country of the world. As a response to this threat, the EU and the US have taken a more pragmatic stance by combining economic development via boosting trade with China while protecting national security.