CHIPS Act: A Strategic Move in the Semiconductor Battle

The competition over the green economy and global chip industry is shaping up to determine the dominant economic force in the coming decades. With the global chip market size expected to reach $588.4 billion in 2024, it is evident that the semiconductor sector is on a stable growth trajectory.

The West, particularly the United States, is taking significant steps to strengthen its position in the semiconductor market with the CHIPS and Science Act. This US federal statute allocates $280 billion in funding to boost domestic research and manufacturing of semiconductors, with the aim of enhancing supply chain resilience and countering China’s dominance in the sector.

However, while the CHIPS Act is a crucial move for the US, it is not a comprehensive solution to the challenges facing the semiconductor industry. The EU and China are also making strategic investments to bolster their chip manufacturing capabilities, with China focusing on dominating the market for less advanced chips.

China’s semiconductor strategy revolves around achieving self-sufficiency and establishing a strategic leverage point in the global supply chain through mastery of mature chips. With state capital and cheap loans at its disposal, China is making significant strides in semiconductor manufacturing, posing a challenge to Western dominance in the sector.

To counter China’s growing influence in the semiconductor industry, the West must focus on investing in mature chips, implementing comprehensive tariff regimes on Chinese chips, and restructuring key supply chains. However, these measures may only buy time for the West, highlighting the need for a more holistic approach to re-industrialization and enhancing global competitiveness.

In conclusion, the battle for dominance in the semiconductor sector is intensifying, with geopolitical implications that extend beyond economic competitiveness. The West must adopt a strategic approach to ensure its position in the industry and mitigate the threat posed by China’s growing influence.

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