The micro-semi-conductors war and the fate of the competition between China and the United States

The United States, which has imposed itself on the structure of the international system as an undisputed and uncontested economic and military power for several decades, has faced the challenge of the emergence of a growing power called China in recent years, which can endanger the hegemon position of United States. The United States statesmen, who noticed the rapid and uninterrupted process of China's growth and strengthening in all fields, including economic and military,
28 August 2023
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Reza Pirpiran

The United States, which has imposed itself on the structure of the international system as an undisputed and uncontested economic and military power for several decades, has faced the challenge of the emergence of a growing power called China in recent years, which can endanger the hegemon position of United States. The United States statesmen, who noticed the rapid and uninterrupted process of China's growth and strengthening in all fields, including economic and military, from the early 2010s, immediately put the containment policy to stop China's growth. By announcing the policy of pivot to Asia, Barack Obama's administration revealed United States plans to deal with China, and with the announcement of a trade war by the Trump administration, this policy entered a confrontational phase with China.

While some thought that with the start of the Biden administration, the United States policies towards China will be adjusted, in practice, in this administration, the confrontation with China has expanded from the economic field to other fields, including security and technology. Abandoning the policy of non-interference in Taiwan's domestic affairs and non-adherence to the unit China principle by the United States, which Chinese statesmen have repeatedly declared as the main red line of this country, has attracted the attention of the international community more than anything else in recent months. But in the meantime, the United States, especially in the last year, has started an all-out war against China in the field of very high technology of micro-semi-conductors, which many believe can most likely determine the future of the power structure in the international system and the competition between the United States and China.

 Will micro-semi-conductors determine the fate of the competition between China and the United States?

In today's digital world, micro-semi-conductors are the most important and main components of all electronic equipment, so they are called the brains of modern electronic equipment. The invention of micro-semi-conductors made electronic equipment much smaller, cheaper, faster, and more efficient than before. In the era of artificial intelligence and smart equipment, all areas of human life will be paralyzed without micro-semi-conductors. Millions of micro-semi-conductors are used in the production of computer systems, telecommunications equipment, household appliances, banking systems, security systems, medical equipment, transportation, industrial equipment, and military equipment. The sensitive industries of shipbuilding, aircraft manufacturing, space equipment, guided missiles, and drones strongly depend on ultra-advanced micro-semi-conductors, so these parts are called magic technology.

In order to limit China's access to advanced micro-semi-conductors and their manufacturing technology, in January 2023, the United States convinced the Netherlands and Japan, which are the largest manufacturers of micro-semi-conductor manufacturing equipment, to control the export of micro-semi-conductor manufacturing equipment to China. The Dutch ASML Co. is the only manufacturer of the latest photolithography scanner devices used to make ultra-advanced micro-semi-conductors. The Netherlands announced on June 30, 2023, that the containment measures against China will be implemented from the beginning of September 2023. Taiwan, which is another manufacturer of advanced micro-semi-conductors, followed the containment policies of the United States before Japan and the Netherlands. Taiwan annually supplies more than two-thirds of the micro-semi-conductors needed in the world, and this figure reaches more than 90% for ultra-advanced micro-semi-conductors. The TSMC Co. in Taiwan, which is a manufacturer of micro-semi-conductors, is the most expensive company in the whole of Asia and the most advanced company producing micro-semi-conductors in the world.

The importance and key role of Taiwan in the micro-semi-conductor production network in the world is vital for the United States. If ever the micro-semi-conductor manufacturing factories in Taiwan fall into the hands of China or, due to a military conflict, the export path of micro-semi-conductors from Taiwan to the world market is disrupted, the global economy will face a dangerous situation. Many consider Taiwan's ability to produce micro-semi-conductors as a Silicon Shield for this island, which plays the role of a deterrent and guarantees the intervention of the United States to help Taiwan in the event of a military attack by China. Of course, under the strong pressure of the United States in recent years, the Taiwanese TSMC Co. has been forced to invest and build new factories in the United States. According to the agreement, this company will invest more than 40 billion dollars to build the most advanced micro-semi-conductors in the United States by 2026.

Along with trying to limit China's access to micro-semi-conductors technology, the United States is trying to encourage United States companies to invest more in this sensitive technology in the United States by passing several laws. In July 2022, the CHIPS Act was passed to encourage the research, design, and manufacture of micro-semi-conductors in the United States. Some believe the US-China semi-conductors war is much like the United States-Soviet space race in the 1960s.

By limiting China's access to advanced micro-semi-conductor technology, the United States is not only seeking to stop China's progress in the field of military equipment, but with this action, it has targeted the entire Chinese economy and the country's progress in various fields of technology. By limiting China's access to key areas of technology, the United States seeks to hinder China's progress in areas on which future economic growth and development depend. After United States sanctions against Huawei Co. hit the company hard, the United States increasingly realized that its dominance of the micro-semi-conductors production chain could become an effective leverage against China. According to statistics, in 2020, Huawei CO. was the largest smartphone seller in the world, with 18% of the global market share. After the United States sanctions, Huawei's revenue dropped by nearly 35% compared to the previous year, and the company's share of the smartphone market was reduced to 2% of the global market in 2022.

 Is China able to thwart the United States plan in the war on micro-semi-conductors?

According to the Chinese customs statistics, in the first five months of 2023, the import of micro-semi-conductors to China decreased by 30% compared to last year. At the same time, in order to implement most of the sensitive projects and manufacture most of the advanced equipment, China needs to import advanced micro-semi-conductors from the United States and its allied countries. With the start of the micro-semi-conductors war against China, the Chinese authorities have launched extensive policies and incentive plans to eliminate dependence on the United States and its allies in the micro-semi-conductors industry. However, the fact is that the process of producing micro-semi-conductors is one of the most complicated and difficult processes in industrial production. This process includes design, manufacturing, testing, and packaging stages, which no country in the world alone possesses the entire chain. In fact, the micro-semi-conductors manufacturing network is a very complex and intertwined network involving the United States and its allies. The United States is the leading country in the field of micro-semi-conductor design. The United States and the Netherlands are the leading countries in manufacturing the devices needed to produce ultra-advanced micro-semi-conductors. South Korea and Taiwan are the leading countries in the field of micro-semi-conductor production, and some countries, such as Singapore and China, are active in the field of testing and packaging.

On the other hand, despite all China's efforts in recent years to be self-sufficient in the field of micro-semi-conductors, this country was able to meet only 16% of its domestic needs in 2022 and spent more money on the import of micro-semi-conductors than on the import of oil. Achieving self-sufficiency in the field of micro-semi-conductors is perhaps the biggest challenge facing China, as some call it, as China's Achilles heel in the confrontation with the United States.

However, as the role of knowledge and technology becomes more prominent in determining the level of national power of countries in the structure of the international system, the United States, as the existing hegemonic power, to eliminate the threat of China as the only power that can challenge the hegemonic position of the United States, has started a comprehensive war in the field of technology against China. Knowing that the mastery of future technologies, including artificial intelligence and quantum computing, is the main key to maintaining superiority in the field of technology, the United States has made every effort to prevent China's progress in these fields. Since micro-semi-conductors are known as the brain of modern electronic equipment, and the production of these ultra-modern parts is the monopoly of the United States and its allies, it seems that the White House officials intend to use this tool as the main axis of the technological war against China. As mentioned, the technology of manufacturing micro-semi-conductors is a very complex, chain, time-consuming, and expensive technology, which is very unlikely to be achieved by a country even in the medium term. On the other hand, if China can miraculously defeat the United States in the war on micro-semi-conductors, it will take a very big step towards becoming the world's leading power, and according to many analysts in the field of international relations, the result of this confrontation (the war of micro-semi-conductors), will determine the fate of the competition between the United States and China and the future of the world order for several decades.

Reza Pirpiran, an expert on China's problems

(The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)

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