Is it just a chip war or is it the start to a new cold war?

Just six months ago, semiconductors were the rulers of the world, the driving force of almost every technological device in existence. Firms such as Intel were booming and expanding at an unbelievable rate, attempting to satisfy consumer needs and wants. Today, demand for these micro silicon pieces has become practically stagnant.


There are several reasons that explain such a transition, such as rapidly increasing inflation and the combination of lack and over supply of certain chips. However, the most notable driver of this is Biden’s recent implementation of new restrictions which limit China’s access to chipmaking programs and appliances. There are very few exceptions to this, with foreign companies that have facilities in China, such as SK Hynix, being allowed certain permissions to receive US imported apparatus.


It is important to note though that this whole technological rivalry really began under Trump, who imposed sanctions on China’s major tech corporation Huawei, banning exports of American microchips essential for its products, causing a shrinkage in revenue by 1⁄3. The continuation of this so-called ‘tech war’ has stimulated CCP’s drive to reach techno-nationalism in the PRC. This is further demonstrated by Xi Jinping mentioning ‘technology’ 40 times in his speech at the recent party congress, as well as the addition of science and technology as the central target of the development of China. The economy has played a key role in encouraging this growth, with the central bank creating low interest loans in order for scientific firms and labs to continue developing innovative research.


Despite China’s attempt to recover as rapidly as possible from this attack, there have been some inevitable implications on China. The precision in the etching of thin slices of silicon, essential in photovoltaics used for the creation of solar cells, has still not been perfected in China. This is an area that China used to be heavily dependent on imports for, however will now have to be self sufficient in. Until it achieves this, which is likely to be in a two or three year time frame, China’s industry concerning aspects of silicon wafers has consequently been halted. Furthermore, not only has the US banned its own market from exporting chips to China, it has also begun giving ultimatums to foreign firms, such as the Netherlands’ ASML. This firm could decide to either ban all exports to China or terminate any relationship with US markets. Similar decisions have already been conducted with other national manufacturers ranging from Japan to South Korea.


There is no denying that these ‘sanctions’ are having and will continue to have negative repercussions for the US too. So far, its main goal of slowing China as a nation and an economy seems to only be temporary. Many China-owned chip manufacturers are moving their facilities in order to bypass these restrictions. Subsequently, they are still able to import from foreign countries, hence rendering this attack ineffective. In addition to this, it is vital that the US be careful in its next moves concerning supply chain management. Due to its heavy reliance on imports for basic commodities, the US has to watch its political relationships, particularly in East Asia. China has significant boron reserves and Russia has crucial supplies of zinc, two materials essential in developing technology. Although this may not seem an urgent matter for the US today, as they import almost all necessary raw materials from Australia, they must manoeuvre the situation wisely, as it will determine their future financial security.


Surprisingly, this geopolitical conflict is one that has been rather silent in the past few weeks, but it is essential that it not be underestimated. This is more than a sanction; it is an admission of weakness on behalf of the US, recognising that in order to be superior to China in this race, it must rid them of their legs and therefore their capacity to overtake the US economically. This acknowledges the current strength of China as a rapidly growing nation, and its threatening position as a financial rival. Although an extreme comparison, one could argue that it resembles tensions present in the cold war, only with a modern twist. A technological cold war has essentially just begun.


Eva S, Year 12


By Ioan Sameli - https://www.flickr.com/photos/biwook/153056995/, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=1248592

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