Digital Iron Curtain Begins to Separate U.S.-China Chip Supply Chains

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In light of the integrated circuit board (known as a chip) shortage, the chip industry is busy trying to fix its supply chain issues, but the technology struggle has undertones of the greater geopolitical situation, according to IEEE Spectrum. U.S. companies dominate the design of the chips, while the chip-making supply chain is controlled by companies in Asia, namely Taiwan Semiconductor Manufacturing Co. (TSMC). The United States is now going back into manufacturing and China is getting into design, so “fixing the supply chain” looks a lot more like the latest battleground between the East and the West.

The U.S. government is committing billions of dollars to bringing chip manufacturing back to this country, including $52 billion in the U.S. Innovation and Competition Act. “The United States, alarmed at China’s campaign to bring Taiwan under its control, has also begun an ambitious program to ‘reshore’ its semiconductor manufacturing after allowing much of it to migrate to Taiwan,” IEEE Spectrum said.

But even as chip making plants are planned in places like Arizona and Texas, China is endeavoring to bring the design of the chips to the East, according to  IEEE Spectrum. One such company, tech giant Alibaba, has announced the design of a 5-nanometer technology server chip. Further, it plans to share its research with other Chinese companies. 

Driven, partially, by U.S. tech sanctions, China is intent on developing semiconductor independence, both in design and manufacture of state-of-the-art chips, according to IEEE Spectrum. “The biggest Chinese technology companies like Alibaba, Baidu, and Huawei are developing their own chips rather than banking on those from Intel, Nvidia, and other United States-based companies,” the publication said.

The U.S. government’s efforts to bring chip manufacturing back on-shore may be flawed, as well, according to a Time Magazine article that interviewed TSMC Chairman Mark Liu. TSMC is currently building a plant in Arizona. Liu argues that the Arizona plant will be able to produce 5-nm chips, which are state-of-the-art today, but will be two generations behind by the time the plant is completed in 2024. 

“These technologies are so advanced that it’s impossible to catch up without pumping in vast sums of money,” Time wrote. “Instead of futilely chasing and localizing aspects of the semiconductor supply chain, Liu suggests the U.S. plow that same money into developing the next great leap…focusing on its strengths in system design, artificial intelligence and quantum computing.”

By J. Sharpe Smith Inside Towers Technology Editor

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