What is a Semiconductor?
A semiconductor is a substance typically made of silicon, which has specific electrical properties (it conducts electricity more than an insulator, but less than a pure conductor) that allows it to serve as a foundation for computers and other electronic devices.
Also known as semis or chips, semiconductors can be found in such products as smartphones, appliances, gaming hardware, and medical equipment.
Who Produces the Most Chips?
Taiwan remains the world's undisputed leader in terms of raw semiconductor manufacturing. The rating is mainly due to the work of a single company, the Taiwan Semiconductor Manufacturing Co., which produces roughly 50% of the world's semiconductors.
What About the Global Chip Shortage?
The ongoing semiconductor shortage involves numerous industries related to the automotive and personal electronics sectors that were hit by the COVID-19 pandemic.
Skyrocketing demand for mobile phones, laptops, and other electronic devices, along with the US' protracted trade row with China and decreased manufacturing capacity in America, have sparked the semis industry crisis, according to media reports.
Why Does the Semis Shortage Pose Security Risk to US?
US Commerce Secretary Gina Raimondo last year described the semiconductor shortage in her country as a “national security” issue because she said it had exposed the dependency of US manufacturing on imports of semiconductors from abroad.
She was echoed by Treasury Secretary Janet Yellen, who admitted that "the only country in the world that is a source of the most advanced semiconductors is Taiwan.”
"I would regard that as a resilience risk and also a national security risk," Yellen said, adding that the US is highly dependent on China for certain supplies, like lithium and the processing of some of the minerals that go into electric batteries.
Who are the US' Main Semiconductor Suppliers?
Last month’s report by an American news agency revealed that when it comes to US chip imports, Thailand, Vietnam, India, and Cambodia emerged as the "early winners" in 2023 as "semiconductor production begins to move away from traditional centers such as Taiwan and China."
India saw its semiconductor shipments to the US increase 34 times to $152 million, while Cambodia indicated a whopping 698% growth – from $20 million last year to $166 million in February 2023, according to the report. Vietnam and Thailand increased their US trade in the sector by 75% and 62%, respectively.
Other countries include Mexico, Canada, Germany, the UK, France, Switzerland, and the Netherlands.
In a separate report, an American news agency pointed out that the value of US semiconductor imports soared 13% over the first three months of this year, in a sign that "there's a long way to go before the country can satisfy its chip needs at home."
How is US-China Semiconductor Race Developing?
This comes amid the ongoing competition between the US and China to prevail in the prospering global chip industry, which may grow to $1.4 trillion in revenue by 2030, a race that is expected to continue in the years ahead. According to the White House, the US currently produces roughly 10%, while China accounts for at least 15% of semiconductor-related global production.
Washington is striving to win the race with Beijing by imposing further restrictions and expanding investments in the domestic chip industry.
In October 2022, the Biden administration rolled out the most extensive restrictions to date on Beijing's chip manufacturing industry, requiring licenses for those companies that export chips to China using US tools or software, no matter where they're made in the world. The measures also prevent US citizens and green card holders from working for certain Chinese chip companies.
The restrictions were preceded by President Joe Biden signing into law the bipartisan CHIPS and Science Act, which includes more than $52 billion for US companies producing semiconductors, as well as billions more in tax credits to encourage investment in the industry. The goal is to prevent American investors from directly or indirectly contributing to the development of semiconductor production in China.