Manufacturing News 28/05/2024, 10:02

$81 billion in subsidies heat up the global chip war

Major economies led by the US and the European Union (EU) have invested nearly 81 billion USD to develop a new generation of chips, increasing the heat of the global chip war in which China is determined to gain the position of superpower

$81 billion in subsidies heat up the global chip war

According to Bloomberg news agency, $81 billion is only a part of the nearly $380 billion that governments globally have pledged to subsidize companies like Intel and Taiwan Semiconductor Manufacturing Co. (TSMC) to promote the production of the most advanced chips. Huge subsidies for the chip industry have pushed the technology confrontation - between the US and its allies on one side and China on the other - to an important turning point that could shape the future of the global economy.

“Certainly the technology war with China has reached an irreversible level, especially regarding chips. Both sides have essentially made this issue one of their top national strategic goals,” said Jimmy Goodrich, senior China and strategic technology advisor at RAND Corp., commented to Bloomberg.

The US and its allies' heavy investment in the chip industry poses a new challenge to China, heightening the US-China trade war, and drawing more countries and regions into conflict such as Japan and the Middle East.

HOW MUCH MONEY HAVE COUNTRIES INVESTED IN THE CHIP INDUSTRY?

Last month, the US announced a $6.1 billion subsidy plan for Micron, America's largest memory chip manufacturer. This is part of the US Government's $33 billion subsidy program for companies such as Intel, TSMC and Samsung Electronics.

The above US investments in the chip industry are not only aimed at responding to China. In addition to not letting China get ahead, the US also wants to narrow the gap that has existed for decades in direct state support for the chip industry - something Taiwan and South Korea have been doing for a long time.

On the other hand, the US's efforts to subsidize the domestic chip industry are also increasing tensions between the US and its allies in Europe and Asia - economies that are also trying to gain a piece of the pie in demand. The world's growing demand for chips serving AI and quantum computing.

The EU has outlined a $46.3 billion plan to expand the region's chip production capacity. The European Commission (EC) estimates that public and private investment in the chip industry will reach more than 108 billion USD. The two largest chip manufacturing projects in Europe are both located in Germany, one is Intel's factory in Magdeburg worth about 36 billion USD and will receive nearly 11 billion USD in subsidies; and one is a joint venture of TSMC worth about 11 billion USD, of which about half will be subsidies.

Emerging economies are also eager to jump into the chip competition. In February, India approved a plan to pour $10 billion in budget capital into the chip industry

The Japanese Ministry of Trade has won a commitment of 25.3 billion USD in funding for the chip industry from June 2021 to present. South Korea still avoids direct subsidies to the chip industry, instead, this country mainly directed large corporations (chaebols) to invest in the chip industry. With such large investments in this industry, the world may face the risk of chip surplus

WILL THE TECHNOLOGY WAR BE MORE INTENSIVE?

China currently has more chip factories under construction than any other country in the world. These are mostly factories that produce older-generation chips, while China continues to accumulate the knowledge and experience necessary to achieve a technological leap. Currently, China is trying to create its own chips to replace Nvidia's AI chip and other advanced chips.
The amount of money that China pours into the chip industry can far exceed America's investment. According to estimates by the Washington-based Chip Industry Association, China will invest more than $142 billion in the domestic chip industry.

China's progress in chips is being hindered by a series of restrictions imposed by the US. The Biden administration has called on US allies in Europe and Asia to implement export measures on advanced chips and equipment to make them, to keep those products out of the hands of China.

According to expert Paul Triolo of Albright Stonebridge Group, the chip war makes Chinese companies feel even more necessary to "strengthen domestic chip capabilities, go above and beyond value, collaborate, and win more government support for companies like Huawei to pull the whole industry forward."

Vneconomy/ Translator: Ngoc Mai
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