Chinese chips will keep powering your everyday life

To give you a brief overview, I was told by many experts that the already-stressed global chips supply chain will be challenged even more by geopolitics in 2023

Over much of 2022, the US started to take steps to freeze China out of the industry—even forming an alliance with the Netherlands and Japan to restrict chip exports to the country. The measures have pushed the once market-driven business to come up with contingency plans to survive the cold-war-like environment—like diversifying from the Chinese supply chain and building factories elsewhere. We may see more similar plans announced in the next year. And at the same time, the US government’s punitive restrictions will start to be enforced and industrial subsidies for domestic chip makers will start to be doled out, meaning new companies may end up on top while others may get penalized for still selling to China.

To learn more about how the US, China, Taiwan, and Europe may navigate the industry this year, read the full article here.

But I also want to highlight something that didn’t make it into the story—a rather unintended outcome of the chip tech blockade. While the high-end sector of China’s chip industry suffers, the country may take a bigger role in manufacturing older-generation chips that are still widely used in everyday life. 

That may sound counterintuitive. Weren’t the US restrictions last year meant to severely hurt China’s semiconductor industry? 

Yes, but the US government has been intentional about limiting the impact to advanced chips. For example, in the realm of logic chips—those that perform tasks, as opposed to storing data—the US rules only limit China’s ability to produce chips with 14-nanometer nodes or better, which is basically the chip-making technology introduced in the last eight years. The restrictions don’t apply to producing chips with older technologies. 

The consideration here is that older chips are widely used in electronics, cars, and other ordinary objects. If the US were to craft a restriction so wide that it destroyed China’s entire electronic manufacturing industry, it would surely agitate the Chinese government enough to retaliate in ways that would hurt the US. “If you want to piss somebody off, push them into a corner and give them no way out. Then they’ll come and punch you really hard,” says Woz Ahmed, a UK-based consultant and former chip industry executive. 

Instead, the idea is to inflict pain only in selective areas, like the most advanced technologies that may power China’s supercomputers, artificial intelligence, and advanced weapons. 

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