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Semiconductor Chips:Geopolitics and Geoeconomics



  Apr 17, 2024

Semiconductor Chips:Geopolitics and Geoeconomics



Semiconductors, the tiny chips that power our modern world, have become a significant factor in global geopolitics and geoeconomics. They are the linchpin of a modern technological landscape, with their significance spanning across a myriad of industries, from automobiles to aerospace, defense, and healthcare. The global semiconductor industry is increasingly rivaling oil and gas in terms of their importance to international relations, the attention they receive from senior leaders in government and business, and their use as a tool of foreign policy.

Geopolitical Aspects:

1. Global Power Balance: Traditionally, oil has played a key role as the driver of geopolitics, but semiconductors are expected to play a much more significant role in driving economic and social growth. Like oil, semiconductors are also concentrated in certain geographical areas of the world largely due to material and talent availability.

2. Regional Dominance: While the semiconductor industry is truly global, the Indo-Pacific is its critical region. Taiwan, Japan, China, and South Korea all play pivotal roles in the Indo-Pacific and particularly the global semiconductor landscape.

3. National Strategies: Drawing from lessons learnt, nations are increasingly emphasizing self-reliance and devising strategies to bolster domestic manufacturing. Many countries including the US and China are investing significantly in semiconductor research and development (R&D) and manufacturing.

Geoeconomic Aspects:

1. Economic Impact: The semiconductor industry is an irreplaceable enabler of tens of trillions of dollars of annual economic activity worldwide. The importance of semiconductors is best demonstrated by the drastic economic consequences of the recent semiconductor shortage.

2. Supply Chain Complexity: The supply chain crisis highlighted the complexity and vulnerability of the industry’s globalized supply chains, with many potential choke points which can hold up production — and lead to sudden shortages of chips.

3. Market Growth: The market size of semiconductors is expected to reach USD1 trillion by 2030, due to their ubiquity in the development of emerging technologies such as artificial intelligence (AI), 5G, quantum computing, industrial automation, among others.

In conclusion, the geopolitical and geoeconomic aspects of the semiconductor industry are intertwined and complex, with far-reaching implications for nations and industries around the world. The race to gain competitive advantage and self-reliance through semiconductor has already begun and will become more intense in the future.



SRIRAM'S


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