Breaking the global semiconductor supply chain: Counterproductive

Editor's note: Mei Xingong is a commentator on international affairs for CGTN. The article reflects the author's opinions and not necessarily those of CGTN.

The semiconductor industry is the backbone of modern technology. From smartphones to critical infrastructure and advanced defense systems, so much is at stake in this core technology. Since joining the World Semiconductor Council in 2006, China has participated in global semiconductor production, promoting the growth of the global semiconductor supply chain and contributing to the steady growth of the global semiconductor industry.

Since 2022, the U.S. has taken a series of measures against China's semiconductor sector through initiatives such as the CHIPS and Science Act, trade restrictions and the so-called Chip 4 Alliance, aiming to exclude China from the global semiconductor supply chain. Such measures, however, risk fragmenting the global semiconductor supply chain and ultimately harming the U.S. economy itself.

Fragmentation of the chip supply chain under globalization

The semiconductor industry is inherently globalized. Chip designers provide designs to chip manufacturers using raw silicon, photomasks and specialized equipment to produce chips. These chips are subsequently assembled by packaging companies and delivered to end customers.

According to research by Accenture, semiconductor manufacturing involves the most expansive global division of labor with 39 countries directly participating in the supply chain, and 34 countries providing market support for key components like lithography equipment, etching tools and deposition systems. Additionally, 12 countries are involved in chip design, and 25 are engaged in testing and packaging.

Therefore, ensuring the stability of the semiconductor supply chains is critical for technological progress and economic growth.

The Chinese mainland is the world's largest semiconductor consumer market and a key manufacturer of essential components and equipment. Chinese companies have significant advantages in semiconductor packaging, testing and manufacturing, making them indispensable players in the global supply chain.

Moreover, China has established a supplier network that provides raw materials and critical components, such as silicon wafers, chemicals and specialized machinery, for semiconductor production.

Beyond manufacturing, China has increased its investment in semiconductor research and development in recent years, fostering innovation and enhancing its global competitiveness. These efforts have, in effect, contributed to developing a dynamic global semiconductor ecosystem, helping reduce costs and improve the supply chain's resilience.

The U.S. targeting China's semiconductor sector has effectively disrupted this global chain. For example, the U.S. suppression of Chinese companies like Huawei has undercut global semiconductor production. Coupled with the impact of the COVID-19 pandemic, this has led to a global chip shortage.

Furthermore, U.S. measures have raised concerns among major semiconductor-producing countries and regions, prompting them to introduce their own "chip acts," effectively triggering an arms race in the semiconductor field.

If every country and region builds its own system, the inevitable result will be the fragmentation of the global semiconductor supply chain.

A self-defeating strategy

The U.S. government's measures aim to reduce reliance on China in the semiconductor industry while restricting the technological development of its "biggest competitor." Unfortunately, such an approach is shortsighted and may ultimately backfire, undermining America's own economic and technological progress.

For example, it could result in increased costs and lowered efficiency. Semiconductor manufacturing is a complex, capital-intensive industry that relies on global collaboration. "Decoupling" will disrupt existing supplier networks, leading to higher production costs and lower efficiency. For many U.S. companies, China provides high-quality and affordable components, while a forced "decoupling" will result in supply gaps and price increases.

In addition, it may lead to missed market opportunities: China's position as a vast chip market will not change in the short term. Since 2012, China's share of global integrated circuit imports has consistently exceeded 60 percent, peaking at over 80 percent. There is no other China in the world.

The globalized development of the semiconductor industry serves humanity's shared interests. Promoting the establishment of multilateral mechanisms for technical standards, increasing investment in joint research projects and strengthening industry interactions will benefit national economies and ultimately serve the world.

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