Escalating geopolitical tensions and trade interruptions have prompted both China and the United States to prioritize building domestic supply chains of the key component of advanced computing and electronics. Neither country intends to depend on foreign supply for long.
What is a Semiconductor and Where are they made?
Semiconductors are the advanced computing power technology transforming human life on every continent: in the progress towards “smart cities”, in daily business operations, tele-communications, domestic security, and military operations. Critical applications for semiconductors include defense, aerospace, 5G and upcoming 6G networks, energy technology, information security and data storage, healthcare, financial services, and financial markets. Advanced semiconductors can be divided into three categories: advanced logic, advanced memory, and advanced analog:
|Advanced Logic||Advanced Memory||Advanced Analog|
|Product application examples*||Mobile phones, AI, supercomputers||Flash storage for mobile, PCs||Electronics for vehicles, aircraft, “green” energy|
|Size (12 inch wafer, node)*||≤10 nanometers||≥10~20 nanometers||65 nanometers|
|Key Locations (production share)||Taiwan (92%) Korea (8%)||Korea (40%)|
|Key Manufacturers per Location||Taiwan: TSMC, UMC Korea: Samsung US: Intel||Korea: Samsung, SK Hynix||China: SMIC|
|Category of Highest Manufacturing Capability||Taiwan (5 nm) South Korea (5 nm) US (7 nm)||China (14 nm)|
There are four types of businesses in the semiconductor ‘ecosystem’. These are fabless companies (chip design), foundry (“pure-play” manufacturers), IDM (design, manufacture & sales), and OSAT (packaging, assembly & testing). Leading-edge fabless companies are located in many countries, but foundries for advanced logic semiconductors are concentrated in East Asia. Taiwan’s largest foundry, Taiwan Semiconductor Manufacturing Company (TSMC), is held to be the most critical of the entire industry because it manufactures 47% of the world’s ≤10nm semiconductors and produces the smallest sizes with the highest reliability. Korea’s IDM Samsung recently began volume manufacturing of advanced logic semiconductors. America’s IDM Intel, meanwhile, has fallen behind in manufacturing capabilities and delayed volume production of its 7nm chip until 2022-23. TSMC plans to launch a 3nm chip during this time frame and has been enlisted by Intel to build a 5nm foundry in Arizona (to be operational in 2024). China’s most advanced foundry, Semiconductor Manufacturing International Corporation (SMIC), manufactures 14nm chips.
In an industry when technology capacity doubles every 24 months – known as Moore’s Law – neither China nor the US can afford to fall behind. Both aim to approach self-sufficiency in the near future: the US by 2024 when its Arizona joint-project foundry becomes operational, and China likely by 2035 (based on analysis of stated policy goals). However, the magnitude of this task cannot be understated. Taiwan and South Korea have spent decades building up the ‘ecosystem’ of supporting industries yet continue to outsource and subcontract some components. Semiconductor supply chains include materials such as raw wafers, specialty chemicals and gasses, engineered tools, processing and assembly capacities, testing and packaging. Developing and scaling capacities in hundreds of parts and tools is a risky, costly, and complex undertaking that has never before been accomplished.
Who will pull ahead?
China is currently trailing its competitors in advanced semiconductor manufacturing despite its having become an economic superpower capable of challenging the US on global governance issues. However, China’s fast-increasing capabilities and national push in high-tech mean that it is adding momentum. The US faces domestic inertia due to political divisions, social and racial tensions, and a lack of STEM education and, moreover, its recent efforts have been diffused in private sector instead of guided by adequate national policy support. Yet the long-term outcome of China-US technology competition is undecided. Therefore, the long-term outcome of China-US race for self-sufficiency cannot be decided just yet.
 To facilitate general comparisons of national capabilities, this paper focuses only on one type of advanced semiconductors.
 SIA. “Strengthening the global semiconductor supply chain in an uncertain era – 2 pager”. April 2021. Accessed April 10, 2021. https://www.semiconductors.org/wp-content/uploads/2021/03/SIA-BCG_Global-Value-Chain_2-pager.pdf, p.2.
 Pat Gelsinger. Intel Unleashed: Engineering the Future. Intel. February 15, 2021. Accessed April 10, 2021. https://www.intel.com/content/www/us/en/events/engineering-the-future.html.
 Moore’s Law states that “The number of transistors that can be packed into a chip will double about every 24 months.”
 SIA. “Strengthening the global semiconductor supply chain in an uncertain era”. April 2021. Accessed April 10, 2021. https://www.semiconductors.org/wp-content/uploads/2021/04/SIA-BCG-Report_Strengthening-the-Global-Semiconductor-Supply-Chain_April-2021.pdf, p.4.
 Director Wang at the US-China Summit in Alaska, 2021: “…in front of the Chinese side, the United States does not have the qualification to say that it wants to speak to China from a position of strength…”