Friday, January 27, 2023

The chip war between the United States and China affects companies around the world

The trade war between the US and China has intensified. More so with US President Joe Biden’s decision to extend the ban on chips. hence, Companies from various economic sectors around the world are caught in the struggle between these two forces.

The new rules come at a time when the US is deeply concerned about the growing geopolitical power of the Asian giant, which will affect not only computer equipment, but also many consumer products based on semiconductor technologies. on the other hand, heExperts also signal the end of an ever-increasing era of globalization, Therefore, organizations of all types need to analyze their supply chains and determine how they may be affected.

“The days of the fully streamlined value chain are over”says Alex Capri, a researcher at the Heinrich Foundation. “And it matters for any strategic product, not just chips.” In early October, the Biden administration issued new export controls that prevent companies in the country from selling advanced semiconductors and equipment to Chinese manufacturers unless they receive a special license. Later, In mid-December these measures were extended to chips used in artificial intelligence (AI), such as GPUs, TPUs and other advanced ones.

The stated objective is to deny China access to advanced technology for military modernization. Sanctions could be lifted on a case-by-case basis if the United States can verify that Chinese companies are not using the products for defense purposes or to restrict human rights.

Export rules already in effect

These measures are already echoing around the world. For example, Apple plans to work with YMTC for iPhone 14 flash memory, Other large firms to be affected include Nvidia and AMD, which make GPUs and do business with Chinese companies. Although, Not only is the region affected in the North American country; The new rules also bar US companies from doing business with other companies outside the region that export restricted technology to China., It has caused friction with the country and some of its allies, but globally the most affected companies appear willing to play by the rules.

As a result, Dutch semiconductor equipment maker ASML will no longer be able to serve one of its largest markets. Similarly, Britain’s ARM recently announced that it would not sell its high-performance chips to China.

The result is that many Asian suppliers such as Alibaba, Baidu or Huawei, among others, will have a hard time getting advanced semiconductors to run their AI workloads, “They won’t be able to buy from Nvidia or AMD anymore, and they won’t be able to make their own products because even foundries like TSMC follow this restriction and the Chinese are still not able to make anything under 14 nanometers.”

Trade war will affect the variety of products

“In addition to chip and semiconductor makers in China, all companies in the advanced chipset supply chain, such as e-vehicle makers and HPC makers in China, will be affected,” said director research Charlie Dai. At market research firm Forrester. “YouThere will also be collateral damage to the global technology ecosystem in all areas such as chip design, tooling and raw materials.,

Companies may not feel jittery right away, as interdependencies between China and the US will be difficult to resolve immediately. For example, bowing to pressure from American companies, in early December the US Department of Defense said it would allow its contractors to use chips from banned Chinese chip makers until 2028.

except, The sanctions are unlikely to have a direct impact on the ability of global chip makers to make semiconductors.According to Parekh Jain, CEO of Parekh Consulting, since they are not investing in China to make chips there. However, the new rules will have a knock-on effect on chip makers and other manufacturers.

,China, being the world’s second largest economy, is a huge market for many global semiconductor companies and will affect their revenue and growth plans.Jain explains. “They may scale back their chip production plans, which require large investments, due to cash flow problems in the short term. In the long term, this could lead to local chip manufacturing in India, Vietnam, Malaysia, Singapore and other countries. will speed up.

Nations strengthen chip manufacturing capabilities

Taiwan has long been a leader in the manufacture of semiconductor chips used in PCs, servers and equipment used for advanced research. However, now many countries including India, France, UK, Japan and even AustraliaIncentives are being implemented to attract investment in semiconductors. Trade restrictions are likely to cause other long-term changes to global manufacturing and trade.

“These sanctions will encourage more investment in the manufacture of phones, cars, electronics, other home appliances, machines, telecommunication equipment, etc. outside China, including India, Vietnam and other countries,” Jain said. “Currently, this manufacturing shift was taking place in India due to a diversification strategy to minimize local market and supply chain disruptions. But the chip ban will act as an incentive to promote export manufacturing from India and other countries as well.”

Meanwhile, the US Congress passed the CHIPS Act, legislation that provides billions of dollars in subsidies for companies building chip factories in the country. China is too To invest $143 billion to boost its domestic chip manufacturing in the face of trade sanctions.

Morris Chang, founder of TSMCRecently warned that globalization is “almost dead”., many countries are trying to set up their own semiconductor manufacturing plants. While this may sound like a good strategic move by many governments, the excess capacity, as seen in the past, could create viability problems for chip makers, potentially causing another supply chain chaos in the global market. Could

Nation World News Desk
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