Despite the leaps of progress made by Chinese capitalism in recent years in cutting-edge technologies such as artificial intelligence (whatever the term means), next-generation 5G networks and optical fibres, there is one sector of critical importance in which it consistently lags behind: the semiconductor industry. Behind every chip in electronic devices—whether processors or graphics and network cards—lies a huge yet invisible (at least compared with the hype created by software companies) industry whose links are scattered across the entire planet. Some of these links, however, display a geographical and political concentration.
The perception that China is the global hardware manufacturing factory due to low labor costs is only partly correct. More precisely, China has taken on the largest part of the assembly and packaging stage of electronic products. The actual manufacturing of chips is done mainly in countries friendly to the USA (e.g., Taiwan and Korea), while their design continues to be the responsibility mostly of American companies. At present, China can cover only one third of its own silicon-product needs with domestic production and spends more money on imports of such products than on oil imports.
Naturally, this is a thoroughly unpleasant situation for the heads of Chinese capitalism. Equally naturally, they are determined to overturn this imbalance of power, investing (here too) enormous sums in the development of a domestic semiconductor industry, causing (in this area as well) headaches for the West. The degree of success of these efforts so far has been mixed. It is considered a given that for chips of relatively low complexity (but wide application, e.g., those in routers) Chinese companies have already acquired the necessary know-how and capability. They have not yet reached the same level, however, with regard to more advanced chips, such as those used in cutting-edge processors. The problem is that the semiconductor industry has a very high barrier to entry; the cost of a semiconductor fabrication plant (which is extremely capital-intensive) can run into billions (!) of dollars, while the architectural designs of chips are guarded like the apple of their owners’ eye. We still wouldn’t bet, however, that China won’t manage to break through this barrier as well.
Beyond the depth of Chinese capitalism, there is another factor that may ultimately work in its favor: nature itself! Up to now, the traditional method for developing ever more powerful chips has been the continual shrinking of electronic components so that more can fit on a silicon surface. If we’re not mistaken, the minimum distance that two elements inside a chip can have has reached 7 nanometers. The smaller this number gets, however, the more uncontrollable phenomena begin to appear, making the chips unreliable. So what next? Perhaps entirely new design methods—or even a completely different approach—will be needed. Like quantum computers.
And here it is by no means certain that the USA has the upper hand. The race will start again on equal terms – or perhaps even with China in the lead this time.