• The Financial District


A spiraling tech war between the United States and China has reinvigorated Beijing’s ambitions for semiconductor independence in recent months and turbocharged efforts in Washington to thwart its plans, leaving chip-making powerhouse Taiwan caught in the crossfire.

Tensions have escalated between the countries on multiple fronts this year, from the coronavirus pandemic to Hong Kong, but it is in the field of trade and technology where the Trump administration has worked most diligently to put pressure on Beijing, Jane Zhang and Sarah Zheng reported for the South China Morning Post.

“The current [US] administration is looking for a simple way to gain control over China’s industrial growth,” said Jim Handy, semiconductor analyst from Objective Analysis in California. “Since probably every semiconductor in the world is made using at least one tool from a US-based company, the US Department of Commerce expects to be able to use semiconductor trade restrictions to give it control over China’s participation in the electronics market.”

Even after several decades and billions of dollars of investment, China trails the US, South Korea and Taiwan in the fiendishly complex and capital intensive production of semiconductors. China imported $312 billion and $305 billion worth of chips in 2018 and 2019 respectively, exceeding the amount it spent on oil, data from the General Administration of Customs showed. “Taiwan is a very important link between these two major powers, and is a target that both China and the US are trying to draw over to their side,” she said. “There will be some short-term impact from the loss of Huawei, but Taiwanese semiconductor businesses will still take other Chinese companies’ orders.” China is estimated to be between 5 and 10 years behind Taiwan in the production of chips and its Semiconductor Manufacturing International Corp. (SMIC) could hardly match the capability of Taiwan and the US to produce 7 nanometer chips. Nonetheless, China wants to end its reliance on Taiwan and the US for microchips, vowng to cut such dependence to 40% this year.

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