Overall losers result from the US-China technological dispute

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  • No product has played a more important role in shaping the balance of global economic and military power than semiconductors. But for years, the $556 billion industry received little attention from governments in Washington, Tokyo, and other developed capitals. Chips have become a competitive battleground between the US and China these days. Big companies and other countries will struggle.

Historian Chris Miller argues in Chip War: The Fight for the World’s Most Critical Technology that no other part of the economy relies on so few companies. Taiwan Semiconductor Manufacturing (TSMC) manufactures nearly all of the world’s most advanced microprocessors. ASML in the Netherlands has a virtual monopoly on the UV lithography machines needed to manufacture the most sophisticated circuits. His two giants in South Korea dominate the memory chip market. Three US-based companies manage semiconductor software.

These so-called choke points are characteristic of a hyper-efficient industry capable of producing over 1 trillion units per year. a professor of US and Russian foreign policy, it’s no coincidence that the US and its allies control most of them. After World War II, pioneering companies such as Silicon Valley’s Fairchild Semiconductor and Intel cemented America’s technological supremacy.

The subsequent offshoring of US manufacturing coincided with US efforts to deepen trade and investment ties with Japan and the rest of Asia. Cheap and plentiful labor allowed companies to cut costs. Asian leaders touted better-paying jobs and economic growth. Washington integrated allies more deeply into the US economy. By the late 1970s, companies such as Intel and Texas Instruments employed tens of thousands of workers in South Korea, Taiwan, and Southeast Asia.

Today, Taiwan is not only home to the world’s top chip contract manufacturers, but also a major chip assembly, testing, and packaging company.

However, over time, some Asian manufacturers have amassed sufficient expertise and scaled up across their supply chains to challenge American dominance. Japan first overtook the United States in memory chip production in the 1980s, but was overtaken by South Korea.

Former Intel president Andy Grove presciently warned that abandoning “commodity” manufacturing could keep manufacturers out of future emerging industries. The former U.S. pioneer is now struggling to keep up with $356 billion firm TSMC and South Korean firm Samsung Electronics in chip manufacturing, while natural disasters and the Covid-19 pandemic have left fragile global supply chains at Exposed, Miller describes it as “a complete picture of the failure of globalization.”

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