China’s strategic expansion into the production of legacy semiconductors is sending shockwaves across US and European governing bodies.
In response to the broad controls imposed by the Biden administration on advanced chips, China is pumping billions into the production of older-generation chips that still serve as vital components in modern technology.
These chips play a pivotal role in everything from smartphones and electric vehicles to essential military equipment.
The unsettling growth in China’s control over these legacy chips has raised alarm, sparking serious debates on how to contain China’s swift emergence as a dominating force in the global chip industry.
Legacy chips: A new frontier for China’s influence
While cutting-edge chip technology is often associated with 3-nanometer etching, legacy chips are those produced using 28-nm equipment or above. These chips, though not the latest in technology, hold significant value in today’s global economy.
China’s aggressive push into this market is causing serious concern among US and EU officials who view this as a potential economic and security threat.
The fear is that China may eventually flood global markets with these legacy chips, driving competitors out of business in a manner similar to their dominance in the solar industry.
The Western world may then find itself relying heavily on China for these vital semiconductor components. Such dependency could create substantial national security risks, particularly if these chips are required for critical defense equipment.
China’s development of new chipmaking facilities outpaces anywhere else in the world, with an estimated 26 new fabs slated for construction through 2026.
In comparison, the Americas are planning just 16 fabs. The rapid pace of China’s growth in this sector poses a clear and present danger to the economic equilibrium and security considerations of the West.
Strategies to counterbalance China’s chip dominance
The United States and Europe are not taking China’s ascendancy in the chip market lightly. The urgency of the issue was underscored by US Commerce Secretary Gina Raimondo, who recently voiced concerns about China’s subsidies for legacy chip production.
Although specific plans have not been disclosed, all options remain on the table, with both continents actively considering how to counterbalance China’s influence.
Central to this strategy is the effort to bolster domestic chip production in the US and Europe. Governments have earmarked substantial public funds to support local manufacturing, including the $52 billion allocated by the Biden administration for the CHIPS and Science Act.
The move is a clear indication of the determination to reduce reliance on Asian chip production. However, this approach is not without challenges.
Western companies may hesitate to invest in facilities that must compete with China’s heavily subsidized plants. A delicate negotiation is underway, with the Biden administration and its allies assessing the willingness of Western firms to invest in such ventures.
China’s aggressive push into the production of legacy semiconductors is an issue that neither the United States nor Europe can afford to ignore. The situation’s complexity requires a careful and considered response. The balance between economic competition, technological independence, and national security is delicate.
As China continues to forge ahead in this market, the US and Europe must act decisively to ensure that legacy chips do not become a point of leverage for China.
The strategic alignment between the US and its European allies will be crucial in navigating these uncharted waters. The stakes are high, and the need for a coordinated, strategic response has never been more urgent.