The advanced chip industry is a trillion-dollar business

The advanced chip industry is a trillion-dollar business that is essential for modern electronics. However, the industry is controlled by a small number of countries and companies, which has led to geopolitical tensions.

In his speech at the IFA Berlin technology conference, author Chris Miller discussed the geopolitical implications of the advanced chip industry. He highlighted how semiconductors, which have military origins, now play a pivotal role in global conflicts. The Russia-Ukraine war, East Asian arms race, and alliances like AUKUS and the Quad underscore the increasing militarisation and investment in advanced semiconductor technology for military applications.

The COVID-19 pandemic also disrupted global supply chains, leading to a chip shortage that affected consumer technology and automobiles. The demand for computing power, driven by AI and other technologies, intensified the importance of semiconductors. Governments are now heavily involved in the chip industry, as they seek to secure their own supply of chips and protect their technological edge. Advanced AI chips are essential for consumer products and military applications. Concerns about China using advanced AI chips for more efficient AI-powered weapons prompted the US to restrict exports of advanced chip technology to China.

Most of the semiconductor supply chain is controlled by the US, Japan, Taiwan, South Korea, and the Netherlands. Taiwan, particularly TSMC, dominates chip manufacturing under 10 nanometers. ASML, a Dutch company, produces the high-precision machines needed to create advanced chips, and it doesn”t export these to China. China has invested billions in developing its domestic chip industry but still relies heavily on other countries for high-end chips. Other nations, including India, are also investing in chip manufacturing as they reconsider their dependence on China.

India aims to attract chip manufacturing with production-linked incentives, but it has a long way to go in high-end chip production compared to the US, EU, and other advanced chip-making regions. Miller emphasised that the chip industry is experiencing geopolitical shifts, with investment patterns changing, which will have profound implications for the broader electronics industry.

The geopolitical implications of the advanced chip industry are complex and far-reaching. As the world becomes increasingly reliant on semiconductors, it is essential to understand the factors that could disrupt the supply chain and the potential for conflict over this essential technology.