Semiconductor Independence and the Failure of US Sanctions

July 28, 2022 Updated: July 28, 2022

Commentary

Unless you happen to live under a rock, you’re no doubt aware that the world is in the midst of an “everything” crisis. With global shortages of gas and grains, baby formula, and bananas, it’s time to add semiconductors to this ever-expanding, rather eclectic-sounding list. According to analysts at McKinsey, the semiconductor industry accounts for $450 billion dollars in direct annual revenues. To put that number in perspective, that’s almost the combined GDP of New Zealand and Finland. Semiconductors are the heartbeat of modern society; without them, no laptops, no phones, no health care, no military systems, no transportation. In other words, no life.

The chips are down; according to Intel’s Pat Gelsinger, and they’ll remain down for the foreseeable future. He expects the industry to suffer supply shortages until 2024. This is bad news for the United States. Although the current administration is planning to open up a host of new chip factories, these facilities won’t be ready in time to address the current crisis. Reactive in the extreme, the United States now finds itself closing the barn door long after the horse has bolted. Moreover, infrastructure projects take time; in the United States, they take an ungodly amount of time. The chips are coming, just not any time soon.

Meanwhile, 11,500 kilometers away, in China, the Chinese Communist Party (CCP) is attempting to achieve “semiconductor independence.” With huge companies like Baidu, Alibaba, Huawei, and Oppo all moving into the chip-making market, China is fast becoming the global leader in semiconductors. By 2024, when the shortage is expected to be addressed, China looks likely to control a huge portion of the global chip market. (Interestingly, Taiwan is home to TSMC and MediaTek, two of the biggest chip manufacturers on the planet, perhaps explaining why China is so obsessed with the island). As the United States struggles to strengthen its domestic chip industry, Chinese power moves ahead.

Interestingly, in an attempt to maintain its ascendancy and growing dominance, the CCP has zeroed in on Europe, a key player in the semiconductor sector.

The Netherlands is a country synonymous with a number of rather random things: windmills, vertically unchallenged citizens, cheese, bicycle lanes, and understandably irate farmers. In recent times, however, the Netherlands has become more synonymous with semiconductor chips—a fact that is not lost on China. The Netherlands is home to NXP, one of the largest chip manufacturing plants in Europe. In 2019, NXP executives announced that the company had signed a highly-lucrative deal with Hawkeye Technology, a Chinese company specializing in automotive radars.

The Netherlands is sandwiched between Belgium and Germany, two other countries also supplying chips to China. In 2019, the Interuniversity Microelectronics Centre (IMEC), headquartered in Leuven, Belgium, announced that it was building a new research facility in Wuxi National Hi-Tech District, close to the city of Shanghai. Besides researching and creating semiconductors, IMEC also focuses on microsystems, wireless communications, and bioelectronics.

When it comes to the manufacturing of semiconductor chips, Infineon Technologies, a German company, is perhaps the most important player in Europe.

Epoch Times Photo
An Infineon Technologies AG memory chip plant in Suzhou, Jiangsu Province, China, on Sept. 23, 2004. (Wu Niu/Bloomberg via Getty Images)

A little over a decade ago, Infineon opened a huge facility in the Beijing Economic and Technological Development Area. Since then, the company’s ties with China have only grown stronger. Last year, as the South China Morning Post reported, members of China’s Ministry of Commerce held extensive talks with Infineon, Intel, and STMicroelectronics, a Franco-Italian multinational semiconductors manufacturer, in the hope of facilitating” cross-border semiconductor investment.” Like Infineon, STMicroelectronics is a company with real clout. With a gigantic factory in Shenzhen, the Silicon Valley of China, the European manufacturer is fueling China’s tech-based dominance.

What does all of this mean for the United States?

Although the United States and China are not engaged in traditional warfare, they are engaged in a war of ideastrade, and technology. On all three levels, China appears to be winning. In an effort to stop its biggest rival from gaining even more chip-fueled momentum, the Biden administration has attempted to dissuade European partners from enabling China. Again, though, all of this smacks of desperation, a reactive measure that is a decade too late.

As author David P. Goldman recently noted, the “Biden administration’s belated attempt to suppress China’s semiconductor industry appears to have backfired.” He’s right. Last year, China produced 33 percent more chips than it did in 2020. Moreover, by strategically partnering with major European manufacturers and proactively focusing on the aforementioned idea of “semiconductor independence,” the CCP has “found workaround technologies that bypass the aging American IP that Washington has embargoed,” Goldman added.

To compound matters, despite U.S. sanctions, the Chinese are figuring out how to manufacture 7-nanometer chips. Intriguingly, the chips appear to be a very “close copy” of the ones manufactured by TSMC, the aforementioned Taiwanese company. The chips, we’re told, will likely be used to advance China’s military. The CCP found itself backed into a corner and appears to have responded in a highly-aggressive manner. In this game of high-stakes poker between the United States and China, there’s a real chance that the Chinese will be the ones holding all the chips.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

John Mac Ghlionn is a researcher and essayist. His work has been published by the New York Post, The Sydney Morning Herald, Newsweek, National Review, and The Spectator US, among others. He covers psychology and social relations, and has a keen interest in social dysfunction and media manipulation.