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US 'chip alliance' can't contain China

By Angelo Giuliano | China Daily | Updated: 2022-08-18 07:24
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During her provocative visit to Taiwan on Aug 2-3, US House Speaker Nancy Pelosi met with the founder of Taiwan Semiconductor Manufacturing Company, a Taiwan-based multinational semiconductor contract manufacturing and design firm. Why?

Pelosi's husband, Paul Francis Pelosi, is deeply invested in the semiconductor industry. Although the House of Representatives speaker claims to be fighting for freedom and democracy, it is a well-known fact in the US that business is connected to "American ideals", as it helps US politicians to amass wealth. For instance, Nancy Pelosi is worth $100 million while US President Joe Biden is worth $70 million.

Accompanying Pelosi on her Taiwan trip was her son Paul Pelosi, suggesting her son is also part of the family's business.

That the US has announced that it wants to build a "Chip 4 alliance" with Japan, the Republic of Korea and the Chinese island of Taiwan should be seen in this context. Apart from strengthening its position in the chip industry, the US move is another attempt to contain China. To put it into perspective, currently the Chinese mainland is reported to lead the global chip market with a 24 percent share, followed by Taiwan (21 percent), the ROK(19 percent) and Japan (13 percent). Only 10 percent of the chips are made in the US.

But China mainly covers the low-end segment of the chip market while the other economies have a stronger focus on medium-to-high end markets. Also, the US recently passed the CHIPS and Science Act, which provides $52.7 billion for semiconductor research, development, manufacturing and workforce development, following which companies have announced about $50 billion in additional investments in American semiconductor manufacturing.

What Washington wants to achieve through the CHIPS and Science Act and the "Chip 4 alliance" is to encourage those economies to decouple from the mainland and, instead, invest in the US to make the US less dependent on the mainland and, most important, transfer high-end semiconductor technologies from Taiwan to the US, even if that means the loss of tens of thousands of jobs in Taiwan and the beginning of Taiwan's deindustrialization.

The "Chip 4 alliance" looks more like a "I win-you lose" deal-win for the US and loss for Japan and the ROK. As for Taiwan, it will see the destruction of a long established profitable business. In fact, the US has already started stripping resources from Taiwan, because it sees the island as a pawn in its geopolitical game.

The "Chip 4 alliance" is probably doomed to failure, because the ROK has already voiced its opposition to the move. The reason: Samsung has made massive investments in manufacturing facilities in China, which is also Samsung's and the ROK's biggest export destination.

The mainland has just developed the expertise to make 7 nanometer microchips, although the TSMC and Samsung have the expertise to make 5-3 nanometer chips. That means the mainland lags behind some East Asian economies in chip manufacturing, yet it can catch up with them as it has done in the past, especially because it produces five times more university graduates in STEM(science, technology, engineering and mathematics) every year than the four "chip alliance" economies put together.

The US and its Western allies are trying to compete with China not through fair means but by employing strategies to contain its rise, because the West is scared to lose its prominent position in the international arena and hold over the Global South, reflecting their imperialist attitude to keep the rest of the world poor and non-industrialized.

But they won't succeed in their design, as the past decades have shown that China has made far greater achievements than the developed countries.

Still, China has to do more to become fully self-sufficient. Seeing how the West is treating Russia, especially since the Russia-Ukraine conflict broke out in February, it is not difficult to understand how aggressive the US-led West will become as a unipolar world gives way to multipolarism and traditional US allies such as Brazil and Saudi Arabia slowly tilt toward China and Russia, as the latter seem to be on the right side of history given their efforts to build a more equitable world and end neo-colonialism.

The author is a Swiss financial and political analyst based in Hong Kong.

The views don't necessarily reflect those of China Daily.

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