The global semiconductor industry: Nations compete for chip supremacy
Tue 4 Apr 2023
Semiconductors are the lifeblood of modern electronic devices, from computers and gaming consoles to cars and microwaves. As the demand for advanced devices skyrockets worldwide, the value of these crucial components has never been more apparent. However, recent years, particularly during the COVID pandemic, have seen high demand and strained supply chains for semiconductors.
Governments have recognised the importance of securing a stable supply of these chips, leading to international competition to attract major chipmakers and establish domestic production facilities.
Rapid Expansion in the Semiconductor Industry
Driven by the growing needs of the automotive, data storage, and wireless sectors, the global semiconductor industry is poised to reach a staggering $1 trillion within the next seven years, according to research from McKinsey. Nations are vying for a slice of this lucrative market, with the European Union and the United States enacting ambitious policies to bolster their semiconductor capabilities.
European Chips Act Aims to Strengthen EU Semiconductor Industry
The European Chips Act is a comprehensive policy framework designed to boost Europe’s semiconductor industry. It focuses on investing in research and development (R&D) to foster innovation and drive technological advancements in semiconductor design and manufacturing. The act also calls for the creation of a European Semiconductor Alliance, which brings together industry players, research institutions, and governments to facilitate collaboration and knowledge sharing. The act also aims to establish regional semiconductor hubs across the EU, attracting global talent and fostering local expertise.
In early 2022, the European Union adopted The European Chips Act, aiming to double the EU’s share of global chip production from 9% to 20% by 2030. By pooling €43 billion in private and public funding, the EU hopes to establish itself as a leading player in the semiconductor ecosystem and fend off competition from other countries.
Ursula von der Leyen, President of the European Commission, emphasised the timeliness of the Chips Act, stating, “The global shortage of chips has really slowed down our recovery… So this European Chips Act comes absolutely at the right time.”
US CHIPS and Science Act: Bolstering American Semiconductor Capabilities
The US CHIPS and Science Act is a major legislative initiative aimed at strengthening the American semiconductor industry. Key provisions of the act include establishing a grant program to support domestic semiconductor manufacturing, investing in R&D to advance chip technologies, and creating a National Semiconductor Technology Center to foster innovation and collaboration. Furthermore, the act focuses on the need for workforce development and educational programs to prepare the next generation of semiconductor professionals.
The US recently signed the CHIPS and Science Act, allocating $52 billion in federal subsidies for semiconductor production and research. With a focus on limiting China’s ability to dominate the semiconductor market, the US has collaborated with chip suppliers to secure over $300 billion in investments related to the act. The United States accounts for around 47% of the global semiconductor market, showcasing the importance of maintaining its competitive edge.
China’s Semiconductor Ambitions
China is also ramping up its semiconductor efforts, aiming to increase domestic production and reduce reliance on imports. Chinese semiconductor firms have experienced strong double-digit growth in recent years, further fueling the competitive landscape. In 2020, China captured approximately 9% of the global semiconductor market, highlighting its growth potential.
China is home to several semiconductor firms striving to make an impact on the global stage. Prominent Chinese semiconductor companies include SMIC (Semiconductor Manufacturing International Corporation), Yangtze Memory Technologies, and HiSilicon, a subsidiary of Huawei. These firms are focused on expanding their manufacturing capabilities and developing advanced chip technologies to compete with international rivals.
The Chinese government has implemented a series of policies and regulations to support the domestic semiconductor industry. These measures include financial incentives, such as tax breaks and low-interest loans, to encourage investment in semiconductor manufacturing and R&D. Additionally, China has established national semiconductor research institutes and innovation centers to promote technological advancements and collaboration within the industry.
Taiwan’s Semiconductor Dominance Led by TSMC
Taiwan is a major hub for semiconductor manufacturing, with TSMC being its flagship company. TSMC leads the semiconductor industry, commanding more than half the global semiconductor foundry market. Major technology companies such as Apple, Nvidia, and Qualcomm rely on TSMC’s semiconductors, underscoring its dominance in the market.
Other significant players in the Taiwanese semiconductor industry include United Microelectronics Corporation (UMC) and MediaTek. The Taiwanese government has supported the growth of the semiconductor sector through policies such as tax incentives, R&D funding, and the development of specialised industrial parks. The strong presence of semiconductor companies in Taiwan has contributed to the country’s status as a global leader in the industry, attracting international talent and investment.