The semiconductor market has been thrown into disarray by global developments over the past few years: the COVID pandemic and the US-China trade war, both of which are sending governments and companies rethinking their strategies. While the COVID impacts seem to be coming to an end, the geopolitical tensions, first triggered by US president Donald Trump’s trade sanctions on Chinese tech giant Huawei, promise to linger in the form of what some describes as a New Cold War centering more around tech prowess than military might.
At any rate, the production ecosystems are heading towards further decentralization with suppliers having to set up diverse sites to serve clients from different camps – split along the politico-economic divide between China and the rest of the world. And major players in the semiconductor sector are looking at ways to improve self-sufficiency or secure partnerships with others, such as Taiwan, whose dominance in the wafer foundry sector has been the envy of the rest of the world. Taiwan is among the top players in the world of semiconductors, forming part of the so-called “IT first island chain” with Japan and South Korea in the US latest move to contain China. In turn, China has made aggressive plans to raise its semiconductor self-sufficiency, trying to leverage its huge domestic market, which normally accounts for about one-fourth of global semiconductor consumption. But in terms of output value and technological capacity, China still lags behind the US, South Korea and Taiwan.
This white paper discusses the impact of geopolitics on the semiconductor supply chain and explores the possibility of coopetition among the major countries and companies in the race.
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