Global Semiconductor Funding Boost Amid Geopolitical Rivalry with China

The global increase in funding for the production of semiconductors, mainly driven by superpowers like the US and EU, is part of a larger geopolitical rivalry with China, specifically regarding cutting-edge technology in the field of semiconductors. This competition is expected to shape the future of the global economy. The US has committed $33 billion to companies like Intel and TSMC to boost production of more powerful microprocessors, while the EU has pledged $46.3 billion for expanding local manufacturing capacity. Emerging economies like India and Saudi Arabia are also investing heavily in semiconductors. However, experts warn that the surge in funding may create an oversupply of chips, potentially leading to a glut of capacity. China, which still lags behind in advanced semiconductor technology, is building more semiconductor plants than any other country, focusing on less-glamorous legacy chips while developing domestic alternatives to advanced silicon. The US and its allies are imposing export controls on sophisticated equipment needed to make the most advanced chips to prevent China from accessing this technology for military purposes. The Biden administration is also investigating whether Chinese tech firm SMIC has violated US law by producing chips for Huawei. The political stakes of this competition are high, with US officials estimating that China might invade Taiwan, which is home to leading chipmaker TSMC, by 2027. This threat is motivating the US to accelerate the construction of factories that will produce 20% of the world’s most advanced logic semiconductors by the end of the decade, as part of President Joe Biden’s reelection campaign against Donald Trump. However, it will take until well after the US election for these factories to be built and start producing chips, potentially testing voters’ patience to see the promised jobs. The race to construct these factories also carries the added stakes of Biden’s pursuit of a second term, putting his promise of a manufacturing revival at the center of his reelection campaign against Trump.