Preface
Globally, the chip industry is setting off an unprecedented "subsidy war". Economies led by the United States and Europe have invested huge sums of money to promote semiconductor R&D and mass production. This influx of funds not only heralds the rapid development of technology, but also profoundly affects the international political and economic landscape. Especially in the United States, the government's large investment is to seize the commanding heights of global science and technology, and it is also a direct response to China's rapidly rising semiconductor industry.
The event passed
Since 2022, the U.S. government has already invested in the chip industry with ambitious plans. President Joe Biden's signing of the CHIPS and Science Act opens the door to $39 billion in direct subsidies, with an additional $75 billion in loans and mortgages, not including tax credits of up to 25%. This series of measures is obviously aimed at regaining leadership in the field of advanced chips, but also to solve the problem of chip shortages that the world has faced during the epidemic.
In April 2024, the U.S. government announced a concrete enforcement initiative to provide $6.1 billion in subsidies to Micron Technology, the largest U.S. computer memory chip maker, to support its chip production in New York and Idaho. This is just a microcosm, in fact, from TSMC to Samsung, to Micron, a number of semiconductor giants have successively received nearly $33 billion in US government subsidies.
And it's not just the United States that is acting, the European Union is not far behind. At the beginning of 2024, the European Union formulated its own $46.3 billion plan, which is mainly used to expand the production capacity of semiconductor manufacturing in Europe. Germany has announced that it will take out $20 billion in subsidies to increase chip production, and the funds are expected to be in place by 2027. Most of the money will go to Intel and TSMC's projects in Germany, including Intel's planned fab project in Magdeburg, which is worth about $36 billion.
This subsidy frenzy is not just an economic act, but a global game of technology and politics. The actions of the United States and Europe are clearly aimed at countering China's rapid development in the field of semiconductors. In recent years, China's semiconductor industry, although it started late, has developed rapidly, which has triggered strong attention and a series of reactions from the United States. U.S. Secretary of Commerce Raimondo made it clear at a conference in Washington that the United States must act quickly to ensure that it remains ahead of the global technology competition in the face of today's rapid technological development.
But this massive investment has also brought with it some concerns in the market, mainly the risk of "overcapacity". Still, analysts believe that this risk could be reduced in the short term as it takes time for new capacity to come online. In the long run, this subsidy war may not only change the supply chain pattern of the global semiconductor industry, but also trigger a new round of technology and market reshuffle on a larger scale.
The role of the government is particularly critical in this series of actions. For example, the U.S. government has not only provided significant financial support, but also made policy adjustments, such as easing export restrictions on certain key technologies, in an effort to occupy a better position in the global supply chain. This policy adjustment has enabled American companies to expand and occupy market share in the global market more rapidly.
In addition, the increase in government subsidies has also triggered a positive response from domestic and foreign companies. Global chip manufacturing giants like TSMC have announced the construction of large-scale chip manufacturing plants in Arizona in the United States and Kumamoto Prefecture in Japan. The construction of these new factories will not only increase the production capacity of chips, but will also boost the local economy and create thousands of jobs.
However, this subsidy frenzy is not without controversy. On the one hand, it does bring new development opportunities and impetus to the global semiconductor industry, accelerating the iteration and innovation of technology; On the other hand, it could also lead to resource misallocation and unnecessary capacity expansion on a global scale, which could trigger a deep market correction in the future.
In particular, the subsidy war also reflects the trend of increased competition in the technology sector in the world's major economies. With the development of science and technology, semiconductors have become a key area of national security and economic development. Therefore, the United States, Europe, and even China are trying to ensure their superiority in this strategic area through policy and financial support.
On April 16, 2024, the U.S. government provided a $6.4 billion subsidy to Samsung Electronics' chip manufacturing plant in Taylor County, Texas, in a landmark event. It not only shows the important position of the United States in the global semiconductor industry, but also shows how the government can directly intervene in the market through financial means to support the development of domestic industries and the improvement of international competitiveness.
For China, this subsidy frenzy means that the development of its semiconductor industry will face more fierce international competition. Although China has made significant progress in some semiconductor technology fields through years of hard work, there is still a certain gap in the field of high-end chip manufacturing compared with the giants of the United States and Europe. Therefore, the Chinese government is also stepping up efforts to promote the further development of the domestic semiconductor industry through policy support and capital investment.
The far-reaching impact of the global chip subsidy war
1. Scientific and technological innovation and industrial development
Chips are at the heart of modern technological development, and almost all high-tech products, such as smartphones, computers, electric vehicles, and smart home devices, rely on chips. With large-scale investments by governments, we can expect new technological breakthroughs in areas such as artificial intelligence, 5G, quantum computing, and the Internet of Things. These investments not only promote the rapid iteration of chip technology, but also promote the rapid growth of related high-tech industries and the formation of cluster effects.
2. Reconfiguration of the global supply chain
The large subsidy policies of the United States and Europe are aimed at reducing dependence on Asia, especially Taiwan and South Korea, for chip supplies, while countering China's rise in the semiconductor sector. This has led to a major relayout of the global chip industry chain. For example, by building more chip manufacturing plants in the U.S. and Europe, the geographic and political risks of the global supply chain will be reassessed and distributed.
3. Economic competition and political influence
The chip subsidy war is not only an economic act, but also a contest between countries at the political, security and strategic levels. The control of chip technology is related to national security and the dominance of the global technology field. As a result, governments' investments also reflect their intent to seek greater influence in the global political economy.
4. Potential market risks
While the increase in global chip production capacity can alleviate supply shortages in the short term, in the long term, overinvestment can lead to oversupply, which in turn can lead to price competition and market volatility. In addition, this high degree of government intervention may distort the original competition mechanism of the market and affect the healthy development of the industry.
5. Implications for developing countries
Developing countries may be at a disadvantage in this global chip subsidy war. Due to the lack of sufficient capital and technology accumulation, it may be difficult for these countries to occupy a place in the global chip industry. In the long run, this could exacerbate global technological and economic inequalities.
6. Environmental factors
Chip manufacturing is a resource-intensive and energy-intensive industry. As global chip production capacity increases, so will the associated environmental pressures, including energy consumption, water use, and chemical emissions. Therefore, how to achieve environmental sustainability while promoting industrial development will be an important challenge.
conclusion
Although the global chip subsidy war has provided a huge impetus for the development of science and technology and industrial development in various countries, it has also brought a series of complex economic, political and environmental challenges. In order to truly achieve sustainable development of global science and technology and economy, countries need to take into account the security of global supply chains, market stability and environmental protection while pursuing technological progress and economic interests.