The US-China technology war and its effects on Europe



The technology war between the US and China has taken a new turn as the two countries’ race to subsidise their industries gathers pace. The lack of an ambitious response and flexible business support measures from the EU could have serious consequences for European competitiveness and industrial development.To get more china tech news, you can visit shine news official website.

Summary
This paper analyses the economic and political causes and developments in the technology war between the US and China, which began in 2015 and continues to escalate. The Biden Administration has complemented export control measures with a drive to maximise the technological distance between the two competitors through large-scale incentives in the form of subsidies and tax breaks. However, these introduce dangerous imbalances into the global playing field, with the potential to affect other actors such as the EU.

Analysis
The most important trade war in the last few years has not been the tariff war initiated by Trump. In contrast to what some might think, it has been the technology war between the US and China, which began at the end of the Obama era, gathered pace during the Trump presidency and has further escalated under the Biden Administration. The war has two aspects: first, to stop China catching up with US technological supremacy (with all the associated economic and military implications) by blocking technology transfer; and, secondly, to maximise the technological distance between the US and China, subsidising national production. This latter aspect has major consequences for the EU, with the potential to create a dangerous lag in technology.
Semiconductors and their value chain
The current situation can be largely explained by the technological importance of semiconductors and their value chain.

Semiconductors are materials that can act as conductors (allowing current to pass through) or insulators (preventing its passage), depending on a number of circumstances (eg, temperature, pressure, radiation or magnetic fields). This binary function makes them extremely useful for the electronics and IT industries.

They can be classified into two types, depending on their purity: intrinsic or pure; and extrinsic or ‘doped’. The former include silicon (the most widely used semiconductor, since it is the most commonly found in nature and behaves best at high temperatures), germanium, tin, selenium and tellurium. The second are pure semiconductors to which impurities are added to increase conductivity.

Semiconductors are used in the manufacture of a range of products, primarily transistors (amplifiers, switches, oscillators and rectifiers for electrical signals, used in radios, watches and lights), diodes (crystals that only allow electrical current to flow in one direction, used to convert AC to DC in solar panels or for LED lights) and chips (processors and memory for computers, tablets and mobile devices). This last category is the most important.

A chip (also called a microchip or integrated circuit) is a set of electronic circuits superimposed on a small flat piece of silicon (the most commonly used material and the second most abundant material in Earth’s crust) called a wafer. There are two types of chips: logic chips, which process general information (central processing units or CPUs, the ‘brains’ of computers), graphical information (GPUs, also known as video cards), audio (APUs, audio cards) and neural information (NPUs, for deep learning and machine learning applications); and memory chips, which store dynamic random access information (DRAM, which is extremely fast but volatile) or permanent information (NAND Flash, slower but less volatile, such as USB sticks and SD cards). All these chips are used in a range of electronic devices, including phones, games consoles, cars and medical equipment. Chips classed as mature –more than 40 nanometres (nm)– are frequently used in industries such as the automotive industry. The most advanced chips are less than 16nm, with an average size of 10nm (although up to 3nm has been achieved).
The chip value chain is functionally and geographically complex. Global production is structured around five types of manufacturers:

Basic developers, which focus on the initial design phase and include Cadence, Synopsis, CEVA and Lattice in the US, the German firm Mentor Graphics, and Arm in the UK (recently subject to a failed take-over by Nvidia).
Advanced developers without factories (fabless manufacturing), which produce complex or specialised designs and outsource their manufacture. Examples include Qualcomm, Nvidia, AMD, Xillinks and Marvell in the US, MediaTek in Taiwan and HiSilicon in China (owned by Huawei).
Pure manufacturers or foundries, which produce chips under contract for other companies. Examples include the Taiwanese firms TSMC (a technological leader) and UMC, Global Foundries in the US and SMIC in China. Foundries use advanced machinery (cutting, measurement, etc) from the US firms Applied Materials, Lam Research and KLA, the Dutch firm ASML and the Japanese companies Tokyo Electron, Nikon and Canon Tokki, in addition to materials like silicon wafers and photomasks produced by the Japanese firms Shin-Etsu, Sumco, JSR and Tokyo Onika.
Assembly, testing and packaging (ATP) firms, which are responsible for the final phase of the product. Examples include ASE Technology and Powertech in Taiwan, the Chinese companies JCET and UTAC, and the US firm Amkor.
Integrated Device Manufacturers (IDMs), which perform all the above functions within the same corporate group. Examples include the US firms Intel, Infineon and Texas Instruments, and Samsung and SK Hynix in Korea. Some also provide foundry services for other companies.
The geographic distribution of the semiconductor value chain is shown in Figure 1. The significant relative weighting of the US compared to the EU is clear.