Microchips and the Macro World: Semiconductor Shortage Ushers in East-West
Tech War
If Taiwan were no longer the center of the semiconductor manufacturing
universe, would the U.S. relinquish its influence over the island or would
it continue to use it as a pawn against the country that is increasingly
being cast as the next global nemesis of the "free world"?
Mint Press
by Raul Diego
February 26th, 2021
By Raul Diego
WASHINGTON - A worldwide semiconductor shortage has upended the best laid
plans of several major industries - including automobile, TV and laptop
manufacturers - which have been forced to cut back on production and delay
shipments as they try to weather the storm hitting one of the cornerstones
of the global supply chain.
On Wednesday, President Joe Biden announced a 100-day review of "key
products including semiconductors and advanced batteries used in electric
vehicles" as part of an executive order signed one day after Majority Leader
Chuck Schumer directed the relevant Senate committees to "start drafting a
legislative package to outcompete China," based on a bill he introduced in
May of last year called the Endless Frontiers Act.
Earlier this month, General Motors was forced to shut down three plants and
slow down production at a fourth as a result of the semiconductor crisis.
Automakers across the globe are facing similar problems, with Ford, Honda
and Volkswagen - the world's largest car maker - all slashing production as
they try to find alternative suppliers of the critical piece of technology,
which has been dominated by Taiwan since it overtook Intel as the largest
manufacturer a few years ago.
Some have laid the blame for the $60 billion shortfall in chips on Covid,
attributing the bottleneck to pandemic-related issues like remote-work
logistics at car manufacturing plants and the diverting of chip production
capacity to consumer electronics. That shift came in response to rising
demand in the wake of "virtual working patterns" resulting from lockdown
policies, according to Ford's chief product platform and operations officer
Hau Thai-Tang.
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This narrative conceals the deeper realities of Washington's pernicious
influence in Taiwan and the impact of Trump's trade war with China, with its
direct attacks on Chinese technology company Huawei in particular, which set
the stage for the shortage itself and possibly undermined America's own
position of strength in the Taiwanese semiconductor industry.
End of an era
The Taiwan Semiconductor Manufacturing Corporation (TSMC) controls "half of
the world's foundry chip capacity" and maintained a position of dominance in
the sector even before surpassing Intel, according to China-U.S. policy
expert Peter Lee, who spoke to MintPress for this piece and whose
semi-weekly podcast "China Threat Report" offers crucial insights into the
relationship between the United States and the Asian superpower.
In a recent edition titled "Taiwan's Silicon Shield Collides with its
Silicon Lance," Lee delves into the nuances of the semiconductor saga, which
began with Trump's 2018 ban on Chinese telecom giant ZTE for shipping
telecommunications equipment to Iran and North Korea in violation of U.S.
embargo laws, a ban the Taiwanese government enforced through a license
requirement on ZTE's two chip suppliers.
It was among the first salvos in a continuing "tech war" between the U.S.
and China, which has included accusations of intellectual property theft
against Chinese DRAM chip manufacturer Fujian Jinhua. That manufacturer's
production of low-end chips for domestic (Chinese) consumption was shut down
by U.S. sanctions after a joint operation between Taiwanese law enforcement
and the FBI against the company's technical partner and second-largest
foundry in Taiwan was used to declare Fujian Jinhua's DRAM chips a threat to
U.S. national security.
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The result was the loss of a $5.6 billion investment by the Chinese company
and heightening tensions between China and the U.S. According to Lee, the
"mainland semiconductor technology drain" - which had been growing under the
previous, more China-friendly Taiwanese government - was halted and coupled
with the ensuing ban on chipsets furnished to China's technology giant
Huawei, produced by Taiwan's semiconductor behemoth TSMC.
While Washington's bullying tactics had a major impact on curbing Huawei's
growing domination of the smartphone manufacturing business and set back
China's own lower-end semiconductor production by a few years, U.S. actions
have spurred massive investments by China into its domestic chip
manufacturing sector - such as the National Integrated Circuit Industry
Investment Fund recent $32 billion addition to enhance its domestic chip
production capacity - in order to circumvent the tech-war sabotage.
More significantly, according to Lee, is the spotlight now being shone on
Taiwan as the world's sole-source supplier of high-end semiconductor
technology, as a result of the global drought putting so much strain on the
world's industrial supply chain. This has predictably led other nations to
look into developing self-sufficiency in the sector.
The question remains as to how such a shift will affect the geopolitical
realities surrounding the volatile U.S.-Taiwan-China relationship. If the
key element of Taiwan as the center of the semiconductor manufacturing
universe were to be removed from the equation, would the U.S. relinquish its
influence over the island or would it continue to use Taiwan as a pawn
against the country that is increasingly being cast as the next global
nemesis of the "free world"?
Adhering to Moore's Law
As a result of the U.S.'s very public attack on Huawei and other Chinese
tech firms, these companies - and every other company with product lines
that rely on the semiconductors produced in Taiwan, such as Apple and
virtually every processor firm in the world - began trying to get ahead of
the game by placing advance orders, which had the inevitable consequence of
tying up production for months on end.
Lee concludes that the resulting chip shortage was one of the unintended
consequences of Trump's trade war against China. But he add that in light of
the increasingly aggressive rhetoric coming out of Washington, which looks
to blame China for the pandemic, the fact that the semiconductor shortage is
being tied to Covid in U.S. mainstream media outlets seems like the perfect
storyline to buttress the Cold War revivalism currently unfolding in the
United States, whose proponents are chomping at the bit to build China up to
be the next Soviet Union.
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Speaking to MintPress, Lee reflected that, given the fact that these
production plants take years to construct, Taiwan's preeminence in
semiconductor manufacturing "can remain a vital strategic resource for the
world for the next 5 to 10 years," which he believes will suit the Pentagon
"just fine." Nevertheless, Trump's late-term decision to bring a TSMC plant
to Arizona may point to more long-term bipartisan policy goals.
In terms of Schumer's initiative in the Senate, time will tell whether he's
simply angling to procure quick funds for his chip-manufacturing friends in
upstate New York or whether the legislation that ultimately comes out of the
forthcoming committee sessions will represent a more permanent shift towards
the much-heralded "self-sufficiency." In the meantime, Biden's executive
order will look into whether the "U.S. should incentivize new semiconductor
manufacturing plants," as the burgeoning "green revolution" promises to
exponentially increase demand for this critical component.