Chip Wars #6: No End in Sight?

Pranay Kotasthane feels the chips war is unwinnable by either side. China cannot hope to build the entire chip industry in-house – there are too many things to be built from grounds-up, starting from the tools for chip design, the chip manufacturing equipment, the expertise in all aspects, the barrier of existing copyright and trade secrets… There are way too many hurdles, he writes in When the Chips are Down.

 

The US, by trying to move every key piece of the chip industry into Western locations, will make the cost of all chips higher. And lose all the expertise built over decades in niche areas in other parts of the world. Additionally, can the US government keep pouring money and subsidies to move everything to the West? For how long? Further, banning the sale of certain items to China will result in the loss of a huge market, right around the time when Europe ages and its market share declines. Lastly, history tells us that even private semiconductor companies can’t predict the next advances or the timing of the rise and fall in chip demand over time. So what chance does the US government have of figuring out such things?

 

Sadly, Kotasthane doesn’t see the US (or China, as a response to US policies) changing course anytime soon on the chip war. But it will happen (eventually) when they “encounter the negative consequences of forcefully displacing global supply chains”.

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