The US latest move to persuade South Korea to join chip 4 alliance has left China worried. That’s because China has dreamt of becoming a leader in semiconductor production by 2030. It has been working overtime to enhance its capabilities and production so that it can leave US and others behind.
But US’s move to forge a chip alliancewill certainly curb Beijing’s growing capabilities as a chip maker. In March, the US had planned to create a Chip 4 strategic alliance of global chip powerhouses that includes South Korea, Japan and Taiwan. The US wants to build a cooperative platform for the semiconductor supply chain that will combine the US’ technological prowess, Japan’s materials and parts, and Korea and Taiwan’s manufacturing capabilities. However, the US government has asked Seoul to respond to its invitation to join the chip alliance but South Korea has still not responded.
Meanwhile analysts in China have been critical of US-led semiconductor alliance “Chip 4”. Tech experts urged South Korea not to not blindly follows the US as it can be counter-productive. “Its chip exports will suffer a huge blow, harming its 40- 50 billion US dollars chip trade per year with China”, Han Xiaomin, general manager of Jiwei Insights in Beijing, recently told the Global Times. South Korea’s chip trade with other countries is about 150 billion US dollars per yearand chip trade with China accounts for around 30 percent.
In fact, China has been progressing well in the semi-conductor field particularly in the last couple of years. According to latest news reports, China is moving a toward achieving more self-sufficiency in semiconductors that could eventually make some buyers reliant on China for many of the basic chips now in short supply.
As chip makers across the world race to boost production and ease supply shortages, no country is expanding faster than China, which is slated to build 31 major semiconductor factories, known as fabs, during the four years through 2024. Some analysts say China could someday add to potential overcapacity.
Right now, China’s main goal is to reduce its dependence on other countries for chips, especially as U.S.-China tensions rise. In 2017, Chinese chip makers used to produce about 13 per cent of the chips the country needs; this year, that figure is expected to rise to 26 per cent, according to Handel Jones, chief executive officer of International Business Strategies. Beijing aims to produce more than two-thirds of its own chips in 2025, according to the state media.
Why China is worried about chip business?
The semiconductors are the most essential part of any consumer electronics and technology equipments besides, the development of artificial intelligence and quantum technologies. They are needed by all Chinese tech sector enterprises, be it a tech major like Huawei Technologies Co. or be it one of the many Chinese cheap smartphone manufacturers. Semiconductors are like lifeline for the tech industry in China.
China is currently dependent on imports for sustaining its inflating semiconductors’ demand. This is why, US has decided to step in and curb China’s growing capabilities in chip making. The formation of Quad is a step towards that direction.
The US and Japan alone account for 30 percent of the world’s chipmaking capacity. Chipmaking powerhouses like Intel and Qualcomm are based in the US. Other chipmaking leaders like Taiwan and South Korea are China’s adversaries.
US President Joe Biden has been making efforts to be on the world stage with Japan and South Korea which are long-standing American allies, and both are technology powerhouses. The US administration has recognised that it needs to boost its economic relevance in Asia if it wants to play a central role in the geopolitics around semiconductors. In May, US Commerce Secretary Gina Raimondo met her Japanese counterpart, Koichi Hagiuda, in Tokyo and discussed “cooperation in fields such as semiconductors and export control.”
The onslaught against China on the chip issue had started way back in 2020 when Trump administration announced that it would “narrowly and strategically target Huawei’s acquisition of semiconductors”. Later, he blacklisted the Semiconductor Manufacturing International Corporation (SMIC), China’s largest semiconductor manufacturer. The ban on semiconductor supplies to SMIC was bigger than the one imposed on biggest smartphones maker, Huawei as it has left the entire Chinese tech industry impaired. China is dependent on American semiconductor designs for fulfilling its growing chip demand. In a bid to meet the growing demand, Chinese President Xi Jinping has tried to bring in local chip manufacturers and even launched the “Star startup project” to make China a chip powerhouse. However, Xi’s plans had backfired with local manufacturers dumping fake and refurbished chips.
China has set a goal to become the leader by 2030 in the semiconductor production field. However, it’s focus is on advancing semiconductor manufacturing within the country through investment, acquisition, and talent recruitment. …..It is to be seen how US and its allies curb China’s growth in semi conductor production?