The dependence on technology in today’s world is such that it has become a major bottleneck to progress. For this reason, the development and protection of microchips occupy an important role in the policies of all countries, and even more so in industrialized countries.
For the Chinese Communist Party this situation has not gone unnoticed. However, even after 20 years and spending more than $100 billion it appears to have failed to be a leader in the production of advanced microchips.
Apparently, with these gigantic investments, the CCP tried to imitate Taiwan, that is the world leader in the production of microchips.
In the end, one of the most important CCP companies in this field, Semiconductor Manufacturing International Corp. (SMIC), is 4 years behind Taiwan, and the Chinese industry is plagued by corruption.
SMIC is only now producing standard 7 nm (nanometer) chips, tiny to be sure, but Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics launched four years ago. In fact, TSMC is already making inroads into 3-nm chip manufacturing.
Moreover, SMIC’s production equipment is obsolete in a fast-moving industry. To top it off, TSMC sued SMIC in the past for stealing technology, an all-too-frequent accusation against CCP-linked companies.
“For all intents and purposes, China has failed to achieve its semiconductor goals, and those tasked with realizing them are being brought to account,” notes author Tim Culpan in his August 10 Bloomberg article.
Author Jeff Pao corroborated that the anti-corruption storm has so far resulted in, “the arrest of a dozen top Chinese officials and executives of a national investment fund and related companies, prompting a course shift in Beijing’s chip-making strategy.”
In the long chain of personalities implicated in corruption over the use of funds earmarked for technological advancement, Chinese Minister of Industry and Information Technology Xiao Yaqing, was arrested for apparent violations of CCP discipline and laws.
Also, the former president of the Chinese technology and semiconductor manufacturer Tsinghua Unigroup, Zhao Weiguo, was arrested in July for possible involvement in irregular procurement activities.
Other officials of this company were also detained. The same happened with executives in the service of the National Integrated Circuit Industry Investment Fund.
Diao Shijing, former co-chairman of Unigroup, Ding Wenwu, general manager of the Big Fund, and Li Luyuan, chairman of Unigroup’s subsidiary, Beijing Uni Science and Technology Service Group, were arrested in the raid. The list is longer, still.
The investigations were triggered by complaints from senior CCP officials, who questioned why the CCP invested tens of billions of dollars in the semiconductor industry, over the years, without meeting the expected targets.
Another reason that the CCP couldn’t succeed in the high-tech microchip industry is its strong tendency to be self-sufficient, a counterproductive behavior in this field.
“If China’s goal is to build up its prowess and cut itself off from the world, then it will fail at the first and surely succeed at the second,” Culpan warns.
Taiwan’s success becomes its best ally
It is at this point that the technology industry developed by Taiwan is key, since it supplies millions and millions of electronic microchips, of the highest caliber, to the whole world.
Global chip sales reached $556 billion, in 2021, up 26.2% from the previous year.
These microscopic electronic parts are essential to give life to most of the devices that we use today, including computers, cell phones, cars, sophisticated research and defense equipment, as well as almost all everyday household appliances.
For this reason, what Taiwan derives from these tiny, super-specialized technological products, is special protection from industrialized countries, as well as substantial per capita income. Its per capita income of $33,775 exceeds several times that of people governed by the CCP.
However, the constant threats of a CCP invasion are an imminent risk, which does not go unnoticed by governments interested in protecting Taiwan’s chip production.
A violent takeover of the island would disrupt the supply of the sensitive microprocessors and, in that case, present an insurmountable obstacle not only for the CCP to remain in power, but for the development of all peoples.
In the event of a Taiwan invasion, TSMC would cease operations. Its highly sophisticated production facilities “depend on real-time connection with the outside world, with Europe, with Japan, with the U.S.,” TSMC President Mark Liu said, according to The Wall Street Journal.
The world prepares to self-supply microchips
Faced with this devastating threat from the CCP, several countries, in addition to showing their support for Taiwan, are undertaking the difficult task of producing their own microchips.
The United States has earmarked a budget of $280 billion, including incentives for chip manufacturers to build facilities in the United States. In part, it is trying to boost U.S. semiconductor manufacturing to compete with China.
The offer looks so good, even TSMC itself could benefit, given that it is building a new plant in Arizona.
Brussels published a plan of just over $43 billion to cut Europe’s dependence on microchips from foreign suppliers. This was announced by European Commission President Ursula von der Leyen: “The European Chips Act will be a game changer for the global competitiveness of Europe’s single market. In the short term, it will increase our resilience to future crises, by enabling us to anticipate and avoid supply chain disruptions.”
In addition, a US-led partnership has even emerged, linking South Korea, Japan, and Taiwan, which would tend to reduce Beijing’s role in the semiconductor supply chains: the “Chip 4 alliance.”
The aim of this alliance is to coordinate semiconductor supply chain policy, but it would deny CCP-linked companies access to the most advanced technologies and equipment in this industry, which would further hinder their progress in this key sector.
The United States has also been trying for several years to block the export of specialized equipment to its Chinese competitors. All these initiatives complicate the CCP’s chip self-sufficiency efforts, threatening to plunge the country into technological obscurity.
It is important to keep in mind that, after squandering some $100 billion over nearly 20 years trying to excel in electronic microchip technology, corruption and incapacity have become evident.
Because of repeated failures, still “China cannot produce its IT products without U.S., South Korean and Japanese memory chips,” argues author Jack H. Park of Business Korea.