United States of America

Us and China battle to hold a strong position in the tech sector

Gone is the time when the might of a country was determined by the power it has in the military sector. In contemporary times, a nation’s might and presence are directly proportional to its technological strength. We have seen that the West especially the US has always been ahead of the curve and gave tremendous tech startups that are revolutionizing the world. 

However, since the start of the 2010-decade, China has developed itself as a new technological player and is now a counter-parallel of the US on a global level. We have heard the term ‘Looking West’ which referred to relying on the West for technological advancement. Now, China is changing the spectrum and the world considers it a strong technological might to reckon with. 

The focal point of this article is to discuss the recent developments in the US and China tech battle and the steps both nations are taking to reduce their dependence on another one. We have collected data and news to analyze the recent events with a proper rationale to understand their impacts. 

Deepening technology Rivalry

The rivalry between the US and China to determine who will dominate worldwide tech is intensifying. The US Chips and Science Act, which provides incentives of up to US$53 billion for semiconductors development on American territory, has come under criticism from China this year. We’ve seen and studied that Beijing doesn’t have many feasible alternatives for defensive strategy.

We also believe that the new regulation will impede regular US-China semiconductor growth and escalate the tech war between the two. In addition to undermining the global semiconductor supply chain and escalating geopolitical dangers, it will harm the business of American and other international chip firms.

China’s criticisms serve as a symbol of its lack of effective defense. Because the US will continue to take measures to halt China’s advancement in core technology like semiconductors notwithstanding such concerns.

To design and manufacture chips, China primarily depends on foreign technology, machinery, and materials, making it challenging for the nation to develop new technologies independently. Beijing views the US’s invitation of Japan, South Korea, and Taiwan to join the Chip4 alliance as a scheme to diminish China’s influence in semiconductor supply chains.

China’s current moves and investments

What tech observers have been indicating for quite some time that China does not aims to become the biggest tech player by simple competing with recent US technologies. Instead, China wants to take a big leap and increase the tech gap between the US and itself by introducing ground-breaking technologies. 

The leading chip manufacturer in China, Semiconductor Manufacturing International Corp (SMIC), has achieved a significant technological advancement that positions it on the level with industry titans, according to a research organization with Canadian roots.

We also learned by looking at a sample chip taken from a cryptocurrency mining device that SMIC had started utilizing the 7-nanometer technique to create semiconductors. Due to the US-China tech dispute, SMIC is on a US trade blacklist and is subject to extra limitations on the import of cutting-edge machinery. The 7-nm grade technology is not included in the financial statements of the Hong Kong-listed business.

After the bipartisan Chips and Science Act was signed into law by the White House, China’s efforts to catch up in chip technology are facing significant obstacles. The intention is to discourage companies like TSMC, Samsung, Intel, and others from investing in cutting-edge manufacturing in mainland China, particularly 7-nm process technology or newer.

Washington is also pressuring the Dutch government to prevent ASML Holdings from selling to mainland Chinese foundries like SMIC. ASML Holdings has a monopoly on the development of sophisticated chip-making devices.

The US investing big time to Win at all cost

With manufacturing set to start in 2024, the US has already committed at least $12 billion to the construction of a semiconductor fabrication facility in Arizona. Global Wafers, a different Taiwanese firm, recently committed $5 billion to the construction of silicon wafer manufacturing in Texas. 

Additionally, earlier this year, South Korean conglomerates Samsung and SK Group announced plans to invest tens of billions of dollars to increase their presence in US tech manufacturing. This investment was made before the CHIPS and Science Act, but the law will probably encourage additional businesses to relocate their manufacturing here.

Beyond the immediate benefits, we predict that businesses may be eager to establish a presence in the US manufacturing sector due to the nation’s relative stability, security, highly educated working class, and, probably most crucially, overwhelming demand. 

Additionally, just 12% of semiconductors are manufactured in the United States, despite the country accounting for 25% of worldwide semiconductor demand. And, generally speaking, 65% of its revenue comes from North America, with the remaining 10% and 5% coming from China and Japan, respectively.

Globe Impact of this war – Who is leading ahead?

Instead of halting globalization as many people anticipated, this US-China tech conflict has boosted commerce between other nations. Other countries now benefit from superior technology at higher rates as a result of the two giants’ worsening economic and political ties since they both seek to diminish the market for other semiconductors.

On the other side, trade issues, China’s economic system and territorial sovereignty, disagreements over geopolitical implications, and even the depicted fight between liberal democracy and authoritarianism are all topics of increased tensions between the United States and China.

To see, who is winning this tech battle we have to look at specific technology and where each nation stands. If we look at smartphones, 11 Chinese brands are occupying 58 per cent of the global market while 14 brands in the US are only dominant at 14 per cent. China is ahead in these terms but understands that China’s presence is in small markets and Apply revenue generation is higher than any Chinese brand. 

The result is different if we look into the electric vehicle market. Here, Tesla, a US-based brand, holds 19% of the total global share and no other country is equivalent to it. So, if we have to decide on a win, we have to look at a particular technology because both US and China have varied standings on different fronts. 

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Leo Thevenet is a technology enthusiast and a devoted fan of the startup world. His journey began after completing his Bachelor's degree in Software Engineering in France. However, it was his experience earning a Master's degree in IT from the prestigious Tsinghua University in Beijing, China, that truly ignited his passion for innovation and entrepreneurship. With an insatiable desire to learn and share, Leo brings you the latest updates and insights on the startup scene. His enthusiasm for global innovation knows no bounds, and you'll often find him attending and covering major startup events worldwide. From CES and Web Summit to Slush and beyond, Leo is your go-to source for news and trends in the tech industry. Thanks to a strategic partnership with a government association in South Korea, Leo also delivers exclusive updates on cutting-edge innovations from the region. Stay tuned to Startup World to benefit from Leo's wealth of knowledge and expertise as he continues to explore the ever-evolving landscape of startups and technology.

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