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The highly complex and risky business of manufacturing semiconductors has always been a battle between giants of the world. Now it is also a competition between governments. These critical technologies, also known as integrated circuits, or more commonly simply chips, are likely to be the smallest but most rigorous products ever manufactured. . It is also very difficult and costly to manufacture, so we rely on only a handful of companies worldwide. This dependency has eased significantly due to shortages during the pandemic and the US tightening restrictions on chip exports to China amid rising trade and security tensions. Tens of billions of dollars will be spent in bursts to expand production over the next few years, with geopolitical and economic implications.

1. Reasons for wars over chips

Chip manufacturing has become an increasingly volatile business. New plants cost up to $20 billion, take years to build and require him to operate at full capacity 24 hours a day to be profitable. The necessary scale has reduced the number of companies with cutting-edge technology to his three: Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC), South Korea’s Samsung Electronics, and U.S. Intel. Chip makers are under increasing scrutiny over what they sell to China, the largest market for chips. Changes in global supply chains and recent shortages have prompted governments to rush to subsidize new factories and equipment, from the US and Europe to China and Japan.

2. Why are tips so important?

They are what make electronic items smart. A chip made from materials deposited on a disk of silicon can perform a variety of functions. Memory chips that store data are relatively simple and traded like commodities. Logic chips that run programs and act as the brains of the device are more complex and expensive. Semiconductors are also becoming more prevalent in the modern world as the technology that runs our devices, from space hardware to refrigerators, becomes smarter and more connected. With this explosion, some analysts predict that the industry will double in value to him, making him a trillion-dollar market over the next decade.

3. Is the world running out of computer chips?

Pandemic lockdowns and supply chain shortages have led to shortages of many types of chips for about two years. That event helped usher in this new era, and their strategic importance was increasingly recognized.Now that demand for PCs and phones has cooled after the pandemic and much of the world is in recession, The cycle has changed. Chipmakers have warned of oversupply in certain areas, but some customers, including automakers, are still struggling to get enough. But for political reasons, semiconductor makers are poised to add capacity during periods of volatile demand, which could further disrupt the industry.

4. How is the tournament going?

• TSMC is announcing a bigger budget, and Samsung is ahead of its rivals with cutting-edge technology. TSMC’s revenue is expected to surge 40% this year. In 2021, Samsung will overtake his Intel to become the world’s largest chip maker. TSMC is about to overtake Intel this year.

• China is trying hard to catch up, but faces a US move to limit access to US equipment for chip design and manufacturing. The U.S. also targets technologies it determines can be abused for military purposes. In particular, China’s Huawei Technologies, once the market leader in mobile infrastructure and rivaling Samsung as one of the largest smartphone makers, has been cut off from a major supplier. In any case, China still has a long way to go and the task is getting harder and harder.

• US politicians have decided they need to do more than hold back China. The Chips and Science Act, signed August 9, provides $50 billion in federal funding to support U.S. semiconductor production and develop the skilled workforce the industry needs.

• European Union officials have announced how to build advanced semiconductor factories in Europe, possibly with support from TSMC and Samsung, as part of a goal to double chip production to 20% of the global market by 2030. I’m looking for

5. How does Taiwan fit into all this?

The island’s democracy emerged as the dominant player in outsourced chip manufacturing, partly due to the government’s decision to promote the electronics industry in the 1970s. TSMC has almost single-handedly created a business building chips for others. The business was accepted when the cost of building factories skyrocketed. Large customers like Apple Inc. have contributed enormous amounts to build industry-leading expertise, and the world now relies on it. Matching that size and skill would take years and cost a lot of money. But politics are competing for more than money, and the US has suggested it will continue its efforts to limit China’s access to US technology used in Taiwanese foundries. It has long claimed the island, just 100 miles off the coast, as a rebel state and threatened to invade it to prevent its independence. China’s recent military exercises have rekindled concerns about the world’s chip dependence on Taiwan.

More articles like this are available at bloomberg.com.