The global semiconductor industry landscape is undergoing major changes. On the one hand, the United States and other advanced economies have stepped up investment and subsidies in an attempt to compete head-to-head with China in cutting-edge chip technology and manufacturing. On the other hand, China's fast-growing semiconductor industry is narrowing the gap with leading countries and constantly challenging the global industrial landscape. This new round of technology-led "industrial competition" is being staged, which may not only reshape the map of the global chip industry, but also profoundly affect the future world economic pattern.
U.S. spearheads subsidy frenzy
In the face of the rise of China's semiconductor industry, the U.S. government has frequently stepped in to support its own chip industry in recent years. In 2022, the U.S. House of Representatives and Senate jointly passed the CHIPS and Science Act, the largest semiconductor industry support program in history, with a whopping $114.0 million allocated to support domestic semiconductor R&D and manufacturing.
The core elements of this plan include: 1) $39 billion in direct subsidies to support the construction of new chip manufacturing plants; 2) $75 billion in loans and mortgages, as well as up to 25% tax credits, to encourage semiconductor companies to invest; and 3) an additional $2.5 billion in R&D investment.
Previously, the U.S. government also provided a large number of subsidies to leading semiconductor companies such as Samsung Electronics, TSMC, and Micron, with a total amount of about $33 billion. In April 2024 alone, the U.S. government announced that it would provide Micron with $6.1 billion in subsidies to support its chip production in New York and Idaho.
This "subsidy frenzy" is not unique to the United States. The European Union also launched a $46.3 billion "European Chips Act" in 2022, aiming to account for 20% of global chip production capacity by 2030. In addition to the overall plan of the European Union, Germany has separately allocated 20 billion US dollars for subsidies, mainly to Intel and TSMC.
Asian countries have also joined the subsidy bandwagon. Japan launched a chip subsidy program of up to $3.9 billion in 2023 to support the country's Rapidus company to achieve mass production of 2nm chips in 2027. The South Korean government also announced that it will promote a support plan of more than 10 trillion won to strengthen the competitiveness of the Korean semiconductor industry.
Behind this subsidy war is the strategic computing of the United States and its allies to "revive" their own semiconductor industry and reshape the global chip map. On the one hand, they are trying to build stronger chip manufacturing capacity through subsidies, narrow the gap with China, and compete for the dominance of the semiconductor industry in the future. On the other hand, it also aims to cut off the supply chain of China's semiconductor industry, hinder China's technological breakthroughs in the field of chips, and then restrict China's development in cutting-edge technologies such as artificial intelligence and quantum computing.
"Competing with China for chip supremacy"
This "subsidy race" around semiconductors is not accidental, but reflects the current fierce technology competition between China and the United States. In recent years, China's semiconductor industry has risen significantly, and in some areas it has approached or surpassed developed countries such as the United States.
According to the Ministry of Industry and Information Technology, China's semiconductor sales will exceed 500 billion yuan for the first time in 2022, a year-on-year increase of 17.1%, accounting for more than 36% of the global market share. From the perspective of product structure, China's self-sufficiency rate in memory chips, power semiconductors and other fields has exceeded 50%, and it has also made great progress in advanced process CPUs, GPUs and other fields.
This change has sparked strong concerns in developed countries such as the United States. They fear that once China masters the core technology of chip manufacturing, it will pose a serious threat to the technological superiority of the United States and its allies, which will affect national security, economic development, and even the dominance of the global value chain.
Therefore, the United States has been imposing various restrictions on China in the past few years in an effort to prevent China's rise in key technology fields such as semiconductors. The introduction of the "Chips and Science Act" has escalated this suppression into a systematic "industrial policy war".
Bloomberg, citing analysts, said that the move by the United States and its allies "marks a more 'solid' position on the 'trade war' front between the United States and China." The U.S. government is pressuring allies in Europe and Asia to limit the flow of equipment and technology used to make advanced chips to China in an effort to intensify its crackdown on China.
In addition, the United States also plans to achieve "technology supply cuts" to China by increasing semiconductor manufacturing capacity at home. This means not only narrowing the gap with China in advanced process chips, but also cutting off the channels for Chinese companies to obtain key technologies, thereby reducing China's position in the semiconductor field.
Of course, the United States is not alone in this "technological war". Semiconductor giants such as Intel and TSMC also play an important role in it. By expanding production and improving manufacturing technology, these companies are trying to close the gap with China to help the United States and its allies regain dominance of the chip industry.
At the same time, the rapid development of China's semiconductor industry in recent years has also put strong pressure on these countries and enterprises. The introduction of a series of subsidy programs is undoubtedly a positive action in response to China's rise.
Risks and challenges under the changing landscape
This fierce competition around the semiconductor industry will profoundly change the global industrial landscape in the next few years. On the one hand, the United States and its allies are expected to regain lost ground in advanced chip manufacturing by significantly increasing investment and subsidies. On the other hand, with the rapid development of its own industrial chain, China is also expected to narrow the gap and even achieve breakthroughs in some areas.
However, this "subsidy war" also faces a lot of risks. Bloomberg quoted analysts as saying that there is a danger of "overcapacity" because it takes some time for new capacity to be put into production. In addition, the repressive actions of the United States and its allies could also exacerbate the confrontation between China and the United States in the field of science and technology, contributing to the further escalation of the trade war.
Another risk to be wary of is that excessive government intervention could distort market mechanisms and lead to unbalanced industrial development. In the long run, rely solely on supplements
Relying solely on subsidy policies can be problematic. In the long run, excessive government intervention may distort market mechanisms and lead to unbalanced industrial development. For example, while large subsidies can stimulate companies to invest in new capacity in the short term, overcapacity is likely to occur without an accurate judgment of market demand. This will not only result in a waste of resources, but may also further exacerbate the vicious competition between countries.
At the same time, this technology-led industrial war also means that the competition of interests between countries will become more intense. On the one hand, the United States and its allies hope to reshape the global chip industry map through subsidies and other means, and cut off China's access to key technologies. On the other hand, China is also narrowing the gap with developed countries and striving to achieve breakthroughs in some areas.
Such a game could intensify the confrontation between China and the United States in the field of technology and further escalate the trade war. For example, the United States is pressuring its European and Asian allies to limit the flow of advanced manufacturing equipment and technology to China. This will undoubtedly cause turmoil in the global industrial and supply chains, and have a serious impact on enterprises and consumers in various countries.
Therefore, in the future, how to find a balance in the fierce technological competition, not only to protect the security of key technologies and industries, but also to prevent the negative consequences of vicious competition, will be a major challenge that governments need to deal with prudently. In the process of formulating policies, it is also necessary to give full consideration to the laws of the market and avoid distorting industrial development.
At the same time, companies need to respond carefully to this changing situation. On the one hand, it is necessary to pay close attention to policy trends and actively use various support policies; On the other hand, it is also necessary to strengthen the capacity of independent innovation and improve the competitiveness of key technologies and products to cope with the increasingly fierce global competition. Only the close cooperation between the government and enterprises can finally win in this new round of "industrial war".