5/15/2024

No way the USA is going to win the Chip War

 There is no way the USA is going to win the Chips war.

The backfiring is almost immediate, with Chipmakers in the 'Chip 4 Alliance' of USA, Japan, Taiwan and South Korea already losing market share and much money and achieving little. Two Companies, Huawei and SMIC, are already too hot to handle for the Alliance, and there are many others like them in China. Huawei is not an 'exceptional' company in China, just an ordinary company in China, according to some. Chinese technology companies are in an era of explosive innovation.

Biden can continue to push subsidies to those companies like TSMC and Samsung to continue their building programs in Arizona, but it does not solve their long-term problems. Suffice to say, it is even unsure whether such subsidies trotted out by Biden are in fact just benefiting USA chipmakers like Intel, Micron and AMD rather than TSMC and Samsung.

China still controls certain major semiconductor raw materials and refining facilities. Gallium is one element that China controls about 80 to 90% of its production. This alone is one big problem for the USA and its Chip Alliance to sort out. China has not yet banned completely its export of Gallium, but just enacted export controls over it.

As frequently pointed out, there is the Chinese market for Chips that is also going to play an important part for the Chips Alliance. Domestically, more and more Chinese products are using locally made chips. What does this hold for those foreign companies trying to sell in China?

With China putting all hands to the pump in trying to be self-reliant, what does the future hold for the Chips Alliance? Like the Europeans following the USA blindfolded against Russia, the Chips Alliance members will suffer the same sad fate. Do not mess with China is the best policy. 

Anonymous

1 comment:

  1. In order to win in anything, the USA needs to call in allies to help, even in the chips war. What does that indicate? By itself we can surmise that the USA already knew it will lose the chips war against China. It has to drag others in to give support to them to fight the chips war against China, like gangsters needing numbers to provide them the courage to engage.

    Forcing others to toe the line with coercion and subsidies does not inculcate a truly loyal following. What pulled foreign chipmakers into the alliance was the subsidies that were dangled in front of them, and TSMC and Samsung were therefore enticed to participate in the alliance, although they too were wary of the competition that China is going to pose. And TSMC, Samsung and others are going to suffer the consequences more than the USA chip manufacturers. The Chinese market will see to that, which they rely upon in a big way.

    TSMC and Samsung among others are fighting a proxy war in semiconductors on behalf of the USA against China. It is as clear as daylight. As with all proxy wars, the ultimate winner is the USA, the user of those proxies.

    If the Chips Alliance wins, most of the benefits will accrue to the USA, who may then likewise turn against TSMC and Samsung, a move still needed to help USA chipmakers corner the global semiconductor business outside China.

    If the Chips Alliance loses the plot, the USA will not be around to help TSMC or Samsung by providing them an alternative market as big as the Chinese market. They will be left on their own and competing with chip manufacturers in USA supported by the USA Government, and worse still, competing with the likes of Huawei and SMIC among others.

    Betting on the wrong horse can lead to the loosing of pants. Heads the USA wins, tails the other foreign players in the Chips Alliance loses.

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