Chips Of Power: Why Excluding China From Cuttting-Edge Chips Could Halt Its Rise

(MENAFN- The Rio Times) (Analysis) In the global race for technological supremacy, semiconductors have emerged as the most critical asset. These tiny chips power everything from smartphones to artificial intelligence (AI) systems and advanced military equipment.

But behind China's rise as a manufacturing powerhouse lies a glaring vulnerability: its deep reliance on the West and its allies-Taiwan, Japan, South Korea, and Europe-for cutting-edge Semiconductor technology.

This dependency is so profound that if the West were to completely exclude China from the semiconductor supply chain, it could cripple China's technological ambitions without firing a single shot.


The Semiconductor Supply Chain: A Global Web
Semiconductors are not just another commodity; they are the backbone of modern technology. However, producing them is one of the most complex processes in human history. No single country can manufacture advanced chips independently. The supply chain spans across the globe, with each country specializing in different stages of production.

Taiwan, led by companies like TSM , dominates global chip fabrication, producing the most advanced semiconductors. South Korea and Japan supply crucial materials and components, while the United States excels in chip design and electronic design automation (EDA) software. Meanwhile, Europe, especially the Netherlands, hosts ASML , the sole producer of extreme ultraviolet (EUV) lithography machines essential for crafting cutting-edge chips.

China, despite being a manufacturing giant, plays a surprisingly small role in this supply chain. It spends more on importing semiconductors than it does on oil, with chips flowing into China from Taiwan, South Korea, Japan, and the U.S. In 2023 alone, the country imported 479.5 billion integrated circuits (ICs) worth $349.4 billion, while spending $337.5 billion on crude oil imports. This makes semiconductors China's largest import item.

These chips are essential for China's manufacturing base, which assembles products like smartphones, computers, and electric vehicles (EVs). Without these imports, China's manufacturing would grind to a halt.
The Achilles' Heel: Advanced Semiconductor Manufacturing
China's leaders are acutely aware of this vulnerability. Despite its efforts to become self-sufficient in semiconductor production-pouring tens of billions of dollars annually into its "Made in China 2025" initiative-China remains far behind in producing high-end chips.

The most advanced chips require EUV lithography machines produced exclusively by ASML. These machines are so complex that it took ASML three decades to develop them, and they cost over $300 million each.

Since 2018, it has been illegal to sell these machines to China due to U.S. export controls. As a result, China cannot produce cutting-edge chips domestically. Even Chinese companies like SMIC and Huawei struggle to move up the value chain because they lack access to this critical technology.


The Role of GPUs in AI and Military Power
The geopolitical stakes are even higher when it comes to artificial intelligence. AI systems require massive amounts of computing power, which is provided by high-performance GPUs (graphics processing units).

Nvidia, an American company, controls about 90% of the market for advanced AI GPUs. These chips are essential for training large AI models used in everything from autonomous vehicles to military drones.

The U.S. government has recognized that controlling access to GPUs is key to maintaining its technological edge over China. In 2022, the U.S. restricted Nvidia from selling its most advanced GPUs to China-a move that significantly hampers China's ability to develop competitive AI systems.

Without access to these high-end GPUs and the semiconductors needed for AI training infrastructure, China cannot keep pace with Western advancements in AI-driven military technologies such as autonomous drones and intelligence-gathering systems. This puts China at a severe disadvantage in any future conflicts involving AI-enabled warfare.


The Economic Impact: A Frozen Manufacturing Base
China's reliance on imported semiconductors extends beyond AI and military applications. Most of the chips used in Chinese-made cars, computers, phones, medical devices, and construction equipment are imported. If the West were to cut off China's access to high-end semiconductors entirely, China's manufacturing base would freeze almost overnight.

This would not only cripple China's economy but also undermine its political stability. The Chinese Communist Party has staked its legitimacy on economic growth and technological advancement. A sudden halt in semiconductor imports would derail China's ambitions to lead in industries like electric vehicles (EVs), where it currently dominates global production but relies heavily on foreign chips.


The West's Silent Weapon: Cutting China Off
The West holds all the cards when it comes to semiconductors. By controlling access to critical technologies like EUV lithography machines and high-performance GPUs, Western countries can effectively throttle China's technological progress without engaging in direct conflict.

It will be unable to produce competitive electric vehicles or autonomous drones, its AI development will fall far behind leading Western firms like OpenAI and Google, and its military will struggle to advance next-generation warfare technologies that depend heavily on AI.
Conclusion: A New Kind of Power Play
In today's interconnected world, control over technology is as powerful as control over territory once was. China's attempts at self-sufficiency will likely continue, but replicating decades of expertise and innovation across multiple countries will take time-time that China may not have if it continues facing restrictions on accessing key technologies.

In this new era of geopolitical competition, semiconductors have become both the battleground and the weapon. By cutting China off from this lifeline of modern technology, the West can maintain its leadership while curbing China's rise as a global superpower-all without a single act of aggression.

Chips of Power: Why Excluding China from Cuttting-Edge Chips Could Halt Its Rise

MENAFN19112024007421016031ID1108901954