Why China is Losing the Microchip War: A Cold War for the Digital Age
In the rapidly evolving landscape of technology, the global race for dominance in the semiconductor industry has intensified, with China finding itself in a challenging position against the United States. The journey to this point involves a complex interplay of historical, geopolitical, and technological factors. One key episode in this saga is the case of Zongchang Yu, a former engineer at ASML, the sole company capable of producing a crucial machine for advanced semiconductor chip manufacturing.
The origins of the microchip industry trace back to the 1950s when engineers in the United States developed the first semiconductor chip. Over the decades, the industry experienced exponential growth, driven by pioneers like Intel’s founder, Gordon Moore, who predicted the doubling of computing power on a single chip every year. Initially, chip companies in the US served the government’s needs, particularly in military applications.
However, as the industry expanded, companies sought to maximize profits by designing chips for civilian products. This shift led to the relocation of manufacturing and assembly to countries like Japan, Taiwan, South Korea, and Hong Kong, with the encouragement of the US government. Simultaneously, strict controls were imposed on sharing technology with potential rivals, including the Soviet Union and China.
While the US and its allies advanced chip technology, China faced obstacles. During the Cold War, access to chips was restricted, and many of China’s top scientists and engineers had left the country. In the 1990s, as relations thawed, China enticed chip companies to establish assembly operations within its borders. By the 2000s, China dominated chip assembly but remained reliant on imported chips for its industry.
Recognizing the strategic vulnerability of relying on foreign suppliers, China invested heavily in domestic chip design and manufacturing, aiming for self-sufficiency. However, it faced challenges in accessing cutting-edge technology due to the global nature of the semiconductor supply chain.
In its pursuit of technological parity, China resorted to intellectual property (IP) theft, a strategy that did not go unnoticed. The Chinese government, at least passively supportive, sought to replicate key technologies, including those from companies like ASML. However, this approach backfired, causing tensions with the US government and other nations, which began viewing China’s actions through a security-focused lens.
The strained relations between the US and China escalated with trade disputes and targeted measures against Chinese tech companies like ZTE and Huawei. The US, perceiving the technological competition as zero-sum, implemented export controls to restrict China’s access to advanced chips, software, and manufacturing equipment.
The geopolitical implications of the microchip war extended to Taiwan, a vital player in the global supply chain. Taiwan, viewed as a breakaway province by China, owns key choke points in chip manufacturing. The US, vowing to protect Taiwan, implemented export controls that forced Taiwanese companies to choose between supplying China and complying with US restrictions.
As the US and China continue their semiconductor rivalry, the world finds itself on the brink of a new Cold War, with countries and companies forced to pick sides. The outcome of this digital power struggle will shape the future of technology and global geopolitics.
Written By:
Krrish Chhabra
