First the world experienced a shortage of microchips. The pandemic severely disrupted manufacturing and supply chains all over the world, creating an initial dip in product demand, including cars, computers and games consoles as everyone was stuck at home with nothing to do.
Not only that, but a quicker than expected return to (something approaching) normal life caught chip manufacturers by surprise and gave rise to an unforeseen surge in the demand for electronics, especially laptops and monitors due to the shift in remote work and learning in the pandemic.
Producing microchips is a complex and delicate process, with semiconductors being the essential ingredient for their manufacturing.
Why are semiconductors being weaponised?
Not only are semiconductors used in the latest XBox or Nintendo Switch, but they’re also used in the highly complicated military weapons and technology that modern defence forces use.
Many semiconductors are made in Taiwan. If you’re not in the habit of reading the “world affairs” part of the news these days, then you might know that it’s a country at the nexus of geopolitical conflict. Put simply: China wants Taiwan to be part of its country (which it was for four years during 1945-1949) but Taiwan wants to be independent of China.
The US is happy to encourage Taiwan to remain independent and, crucially, keep providing the US with more technologically superior chips that the ones China can make for itself. The US also thinks that China intends to invade and attempt to reintegrate Taiwan back into its country within the next ten years. Restricting China’s technological ability to do so will mean that this option will be off the table without more technology at its disposal.
In turn, China is trying to step up its capacity to build microchips that can match Taiwans, but it will still take some time.
The latest developments
Both the US and China are currently locked in a pendulum-style, tit-for-tat political and technological quest to disrupt each other’s economies and influence with increased tariffs and bans on certain products.
The US and other countries banned TikTok being installed on the phones of users with access to sensitive data in the belief that its owner, the Chinese company Bytedance, could be in a position to pass on data gained from this to its own government.
In retaliation, China banned chips from US manufacturers Micron saying its products were a security risk to the country. As China’s government and state become increasingly involved and pump investment in the fields of technology, it has also been undermined by fake companies being set up in order to receive lucrative government subsidies.
China won’t threaten Taiwan’s or the US’ dominance in the tech sector just yet, but it’s also a country known for its ability to play the long game.
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