For more than a century, the fight for oil has sparked wars, forced unusual alliances and led to diplomatic rows.
Now the world’s two largest economies are fighting over another precious resource: semiconductors, the chips that literally power our daily lives.
These tiny pieces of silicon are at the heart of a $500bn industry that is expected to double by 2030. And whoever controls the supply chain — the tangled network of companies and countries that make the chips — holds the key to being an unrivaled superpower.
China wants the technology to manufacture chips. This is why the US, which is the source of much of the technology, is undercutting Beijing.
The two countries are clearly engaged in an arms race in the Asia-Pacific, says Chris Miller, author of Chip War and an associate professor at Tufts University.
But, he adds, there’s more to the race: “[It] happens in traditional areas, like the number of ships, or missiles produced, but increasingly, it’s the quality of artificial intelligence (AI) algorithms. being employed in military systems.”
For now, the U.S. is winning — but the chip war it has waged against China is reshaping the global economy.
Chip makers
Semiconductor manufacturing is complex, specialized and deeply integrated.
An iPhone has chips that are designed in the US, manufactured in Taiwan, Japan or South Korea, then assembled in China. India, which is investing heavily in the industry, can play a bigger role in the future.
Semiconductors were invented in America, but over time East Asia emerged as a manufacturing hub, largely due to government incentives including subsidies.
It allowed Washington to develop business ties and strategic alliances in a region threatened by Russian influence during the Cold War. It is even more useful given Beijing’s growing influence in the Asia-Pacific.
The race is on to build the best and most efficient chips at scale – and the smaller, the better. The challenge: How many transistors – tiny electrical switches that can turn current on or off – can you fit on the smallest part of a silicon wafer?
“It’s what the semiconductor industry calls Moore’s Law, essentially doubling transistor density over time, and it’s a difficult goal to achieve,” said Jue, a Silicon Valley partner at Bain & Company. Wang said.
“It’s what enables our phones to become faster, our digital photo archives to grow, our smart home devices to improve over time and our social media content to become richer.”
