The Economist

One of the ASML machines that make semiconductors. These machines can not be sold in China.

A new cold war has started, and it all has to do with computer chips. China and the West are in a new match, and they will go to their absolute limits just so their opponents won’t get an advantage.
The West has a monopoly on chip manufacturing and chip processing machines, and China wants to break out of the monopoly. China is trying to make their own chip machines to make their own high-end semiconductor, causing a cold war with the West. China might or might not be successful, but we can look at the past and predict where this cold war will go.
The West and China have been fighting over who gets the right to control the chip industry. According to ET Telecom, “China will modernize its military by 2027 and invade Taiwan when that happens.”
China gets its chip production machines from the West, mainly from ASML, the only company that makes chip machines. ASML only gives out their old machines to China, which makes many of China’s industries outdated. As a result, China mainly needs Taiwan to fuel its economy.
Chips are used in everything. As per Sai Teja Ramadugu, a student in chip manufacturing, “Chips are used in everything, and we need chips to survive in this day and age. China needs Taiwan’s chips just so their economy can survive, which holds China as a prisoner.”
According to the Council on Foreign Relations “TSMC(Taiwan Semiconductor Manufacturing Company) is the world’s largest contract chipmaker and produces around 90 percent of the world’s leading-edge semiconductors that are used for artificial intelligence (AI)”. Seeing that ASML’s biggest customer is TSMC, they worked together to stop China. Ramadugu says, “China needs a miracle just to defeat ASML and TSMC. China tried and failed, and they will keep on trying if that means they can control the entire chip industry.”
Also, according to the Council on Foreign Relations “China’s reliance on chips manufactured in Taiwan is so great that it makes an attack less likely, as destruction or inoperability of Taiwan’s foundries would devastate China’s economy”.
In the US, their industries, mainly their military and technology industries, are advanced compared to China. This makes the US dollar more valuable than the Chinese yuan because the US has a higher purchasing power than China. Xijing Ping knows the West’s monopoly on the chip industry is problematic for China.
How the West Came to Control the Chip Industry
In 1959, the first I.C. integrated circuit chip was made in Texas by Jack Kilby. In the beginning, the US had a monopoly on the chip industry. The chip companies wanted to appeal to civilians, but they needed labor, so they moved into East Asia. When China and the US became allies, the companies moved their factories there. Ramadugu says, “In 2016, as relations between China and the USA began to fall apart, the US stopped all chip companies from selling their new chips and machines that make chips to China.”
Effects on China
China cannot get newer production machines,which means they cannot get newer chips, leaving it behind the US. Gordon Earle Moore, co-founder of Intel, states that every two years, semiconductor performance will increase exponentially, according to what is known as Morre law.
This means that China’s chips are outdated, leaving China far behind the West. China tried to combat this when they paid someone from AMSL to quit their job and come to China with important information from ASML. The West saw this, and they forced ASML not to sell their newer machines to China.
Short Term Impact
In the worst-case scenario, China will invade Taiwan, and TSMC will blow itself up. According to The Conversation in 2023, it was recently quipped that if China invades, “we’re going to blow up TSMC”. The Economist says Taiwan controls over 90% of the advanced semiconductors in the world. China wants to control TSMC so they can get the semiconductors so they can starve the West of the semiconductors.
According to Ramadugu, “If China invades Taiwan, ASML will lose its biggest customer, and they will outsource their products to somewhere else, which will cause ASML heavy losses.” If China takes over TSMC, it will be of no use as TSMC is already in the USA, so taking over the entire company is impossible and not that useful.
This war will cause all the industries that use chips to slow down. Many people will go into unemployment. As Fierce Electronics says “Without sufficient access to chips, automakers have been forced to temporarily freeze production at technology plants globally”.
Ramadugu “In 2020, many companies stopped production because of the lack of chips. Not only that, but it can cause an economic depression because of the chip shortage, which will cause increased inflation, so people will buy less, and since chips are in everything, this means that people will stop buying technology, which could crash the world economy. If this happens, we can’t do anything but watch and suffer until we get back on our feet.”
Longer Lasting Effects
Americans and Chinese may end up in poverty, which will be caused by the huge depression caused by the chip shortages. Our future generations will need to work hard just to fix these countries and fix the depression. Future generations need to find a new way to solve all the problems left by the Chinese invasion of Taiwan.
This may seem like the worst world to live in, but this is only the worst-case scenario, and this is likely not going to happen because, according to the Council on Foreign Relations “China’s reliance on chips manufactured in Taiwan is so great that it makes an attack less likely, as destruction or inoperability of Taiwan’s foundries would devastate China’s economy.”
Let’s hope that China doesn’t get advanced chips, because if they do, the world will not be the same place ever again. Let’s spread awareness to everybody that we know so we can vote for a US president who can solve this situation and prevent an all-out war with China.