Chip technology: the emerging battlefront?

With the rise of technology, the world has been experiencing rapid changes in every sphere of life. Semiconductor chips, though often unnoticed, have revolutionised the world by enabling digital networks and countless other applications. In the modern era, chip technology is playing a pivotal role in shaping the future of the digital world. The role of semiconductor chips is paramount in driving economic transformation, shaping geopolitics and fostering competition among nations. This has fueled a surge in the trade of semiconductors, a pillar of globalisation. With Intel, Samsung and TSMC leading the charge, the chip industry has become a multi-hundred-billion dollar market.

Transistors, the tiny building blocks of chips, play a critical role in determining the efficiency and power consumption of modern devices. Smaller transistors translate to lower energy needs and faster processing speeds. This underlying technology, packed into compact chips, fuels advancements across various sectors — economic, military and social. These chips are now instrumental in evaluating a nation’s capabilities in these very areas. As a result, the world’s dependence on these chips is rapidly growing, becoming both complex and indispensable.

This has ignited an intense, long-term global competition that has become a major source of competition between America and China in the technology field. Driven by a desire for self-sufficiency, China is pouring billions into developing its own domestic chip supply chain, aiming to reduce its reliance on global markets. In response, the US has also ramped up efforts to boost its domestic chip manufacturing capabilities.

Semiconductor chips have played a crucial role in the US military’s technological advantage. In an effort to protect American economic security, the Biden administration has proposed the Chip Act, which aims to increase domestic chip production. This focus on domestic production reflects the growing importance of chips to both military and economic security and the desire to lessen dependence on foreign manufacturers. The US seeks to solidify its leadership in this industry by investing in advanced chip manufacturing capabilities and collaborating with Asian allies.

Meanwhile, leveraging semiconductor chips, countries like China and Taiwan have become technological powerhouses in Asia, leading in computer and smartphone manufacturing. China’s current focus on chip development highlights a strategic shift towards ‘bytes’ over ‘barrels’ — referring to a focus on IT over traditional resource extraction. If successful, this strategy could reshape the global economic landscape, granting China a significant advantage in both the economic and military spheres.

Taiwan’s strategic importance in the ‘chip war’ is undeniable. As the world’s leading producer of cutting-edge chips, Taiwan holds immense power. A staggering 92% of the world’s most advanced chips come from Taiwan, supplying a remarkable 37% of global computing power annually. This dominance dwarfs competitors like South Korea, which manages only 8% of the most innovative chip production.

The race to develop the most advanced chip technology has become a battleground for tech giants. The ongoing tensions surrounding chip production hold the potential to significantly disrupt global supply chains. A major conflict could cripple access to this vital technology, leading to a technological slowdown for the entire world. This highlights the interconnectedness of the global economy, where actions in one region can have far-reaching consequences. Imagine a scenario where a major chip manufacturer’s facilities were damaged. This could cause billions of dollars in losses and disrupt the production of essential devices like phones and computers, impacting communication networks worldwide. The same goes true for China and Taiwan’s chip controversy.

Should the chip competition take a negative turn, the world may face a deep abyss of global technological conflict, further worsening current challenges by adding to the new fronts of war.

Published in The Express Tribune, May 11^th, 2024.

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