The World of Tomorrow
“Never know where the bullets might hit
Never know when the bombs might fall.
We are living in such a dangerous world.
It’s enough to scare you to death”
The aforementioned poetry by Dorsey Baker is an ode to the present which we all inhabit. The world today is mired in two of the most pressing conflicts including the prolongation of the Russia- Ukraine war, and the Israel-Hamas conflict.
Many experts argue that Cold War 2.0 conflicts between major power centers, including the United States, Russia, and China, are defining the world. Enough has been said about the geopolitics and the realism surrounding territorial gains. Today, I will be addressing a different topic – semiconductors.
Colloquially, elements have specific electrical properties, enabling them to serve as a foundation for computers and other electronic devices. Semiconductors embedded in chips make our lives easier by making everything around us, from calculators to mobile phones to laptops to any devices. In the future, which is AI-induced, semiconductors become of paramount importance.
A brave new world
Long taken for granted as a mere technological commodity, semiconductors today have become critical. This is the cornerstone of the US-China conflict, with Donald Trump’s controls restricting Chinese companies’ access to essential equipment, software, and intellectual property which was prolonged by the Biden administration taking it to the center.
It is also central to the China-Taiwan conflict. Taiwan, a small country, is protected by ‘silicone shield’, a term used for its ability to account for 80% of the global contract foundry revenues and 58% of the world’s outsource assembly testing packaging revenues in 2022. Not only this, Dutch company ASML which is the only company in the world to supply extreme ultraviolet systems which is critical for semiconductor manufacturing, has aligned itself with the US, further restricting China. This crisis was exacerbated by COVID-19, which exposed the frailties of the semiconductor ecosystem.
Geographically, East Asia has a heavy concentration of manufacturing and testing. In a future where pandemics become normal, any localised, political, or social crisis could foment trouble all industries using semiconductor chips. As we move forward in the future which is led by machines and IOT-driven systems, semiconductors will gradually gain importance, and unless certain issues are addressed this will be a problem to fathom in the future
What’s the fuss?
Semiconductor and the property of regulating electrical current makes it the sweet spot for all modern electronic appliances. The issue is manufacturing extends to multiple continents and different countries excelling in different stages of production. In many cases, it is just one country or one company, which is the sole player in that cycle.
For instance, chips made in one country move from foundries to another and then to the assembly and packaging units, where it is separated and packed with housing before integrating into the device. It spans around 40 countries and six continents, starting in China with chip design originating in the US. The etching is done in Taiwan, then it is sent to Southeast Asian countries for assembly and packaging, and then finally sent to a manufacturing hub to be assembled into a particular device. Disruption at any point along this chain can halt production.
Traceable to the ‘creative insecurity’. The United States of America and its allies became the semiconductor behemoths. The inability of the erstwhile USSR To replicate such models in their own country was also one of the important reasons why the Soviet Union could not compete against the United States. The ‘technology countries’; In this context, the erstwhile empire of Japan deserves special mention post-reconstruction after the Second World War, Japanese quest to pursue a revamped technological future catapulted it to the top in this business as well, supported by technology transfer from the United States and a competition with the nations like South Korea and Singapore, Japan came to a condition where it became a global leader.
Taiwan created one of the first export processing zones focusing especially on semiconductors. With the latter inclusion of Singapore and Malaysia, the market slowly and gradually started concentrating.
India despite getting initially mired in government regulation is slowly catching pace. India now has a thriving fabless design market. Rising concerns over China and Taiwan have made companies look at India favourably. India’s growing electronic assembly market offers avenues for trailing-edge fabs. The manufacturing sector is dominated by a few companies such as TSMC, Samsung etc.
India focuses on the assembly of chips where it can use its design ecosystem strengths.
For this coordinating policies and partner discussion, cooperation in semiconductors becomes mandatory. A QUAD-aided grouping for the supply chain from geopolitical and geography will also be helpful.
The wars to watch out for
The conflict between the United States and China enters a new era with the American act called the Chips Act and the Chinese manufacturing push would be a thing to watch out for.
Taiwan’s Chinese conflict can metastasize into a full-blown invasion where its semiconductor industry can fall prey to Beijing’s overtures. However, experts opine that such a takeover would not be good for the semiconductor industry of China and the status quo ante is better for the Chinese to ramp up their manufacturing capabilities while poaching Taiwanese engineers.
Future
The various methods of statecraft that include denial of pieces of equipment, restriction of access, and user restriction, investment screening is likely to continue. The world would also see innovation fuelled by creativity and insecurity through open sources and moving away from silicon for the creation of semiconductor devices. There is also a requirement of realization that as an industry. This requires handholding at various levels rather than going solo to increase supply chain resilience. Effective mapping coupled with international partnerships can only lead this industry in a stable direction
Partnerships like the Chips 4 alliance have the best chance of success but the challenge will continue here as well away anytime soon and that’s where China comes in. The constraint even applies to China’s open source. Also, alternatives have not reached a level where they can replace all the software that US companies excel in. For the simple reason, a complete de-coupling of the semiconductor industry is highly unlikely, the world might be a dangerous place to live in but as an idea, the semiconductor industry is here to promote coexistence rather than separation. A brave new world awaits us making us closer than you think.
