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CWA # 763, 27 July 2022

NIAS Fortnightly on Science, Technology and International Relations
Geopolitics of Semiconductors

  STIR Team

The semiconductor industry has evolved into a highly competitive market as the US, China, and other global powers are racing to have a monopoly in the industry. Similarly, with silicon conductors approaching their limits according to Moore's law, the push for new rare earth minerals would further accentuate the complex interdependence between countries to source advanced semiconductors. 

NIAS Fortnightly on 
Science, Technology and International Relations (STIR) 
Vol 1, No. 22, 17 May 2022.

Cover Story
By Ashwin Immanuel Dhanabalan

Geopolitics of Semiconductors

Semiconductors are like the nervous system of our everyday electronic products. Smartphones, appliances, factory machinery, medical equipment, and cars all use multiple types of semiconductors. It is also an indispensable national security asset that countries aim to have technological supremacy over, as the trade war between the US and China and the war in Ukraine hinted at the states moving toward more local production. The COVID-19 pandemic, the supply chain disruptions, and the war in Ukraine have each time brought the spotlight on the semiconductor industry and its global shortage. 

Semiconductors are a class of crystalline solids made dominantly of silicon. The materials used in a semiconductor conduct electricity higher than an insulator but lesser than a pure conductor. They are employed in manufacturing electronic devices, transistors, and integrated circuits. Since the 1950s, semiconductors have been made from silicon, as it has four valence electrons and melts at a high temperature (1,414 degrees Celsius). However, with rising demands and challenges, semiconductors made out of silicon are approaching their limits, following Moore’s law. Research to use new rare-earth minerals is undergoing to make the semiconductors smaller and work as faster integrated circuits to boost the material’s efficiency. Apart from sourcing the raw materials for semiconductors, the process of making them is what distinguishes them in terms of semiconductors and advanced semiconductors. 

The monopoly of semiconductor manufacturing 
As of 2021, only three significant firms can manufacture the most advanced semiconductors. The three are Taiwan’s Semiconductor Manufacturing Corporation (TSMC), South Korea’s Samsung, and Intel of the US. This is where international relations, complex interdependence, and geopolitics are crucial for countries to gain access to these critical chips. These advanced semiconductors are crucial for a country as they are used for artificial intelligence, communication, computing, healthcare, the Internet of Things, the military, and energy sectors. Thus, it leaves the complex process of making advanced conductors a monopoly to only a handful of countries across the globe while it remains a necessity for every country. Countries are working towards increasing their independence from the few firms that control complex semiconductor supplies. 

I
The geopolitics of semiconductors: Taiwan, China, and the US

Taiwan
In 1987, the Taiwanese government initiated the TSMC as a joint public, private venture with Phillips and local private investors. The technology they acquired and were asked to build upon was at least a generation behind that of Intel. Over the years, contributions from venture capital industries locally also increased the institutional support to the TSMC to further create more sophisticated and industry production standard chips. Since the technology requires more challenging development and high capital investments, many other chip companies only work on designing the chips while outsourcing it to foundries such as the TSMC. Countries like the US have struggled to keep up with the advancing semiconductor market and depend on Taiwan to produce advanced semiconductors. The US currently has only mastered the seven and ten-nanometer chips, while TSMC is working towards three-nanometer chips. 

Taiwan dominates the foundry market, and TSMC, its country firm, is the primary source industry with clients such as Apple, Qualcomm, and Nvidia. Taiwan also outsources its semiconductor manufacturing, accounting for more than 60 per cent of the total global foundry revenue in 2020. Even though governments and companies across the globe try to mimic TSMCs success, they have not been able to do it because of the costs and investments involved. TSMC also accounts for the manufacturing of 50 per cent of all semiconductors in the world. South Korea’s Samsung and Taiwan’s TSMC are the only foundries that have the capabilities to manufacture the advanced 5-nanometer chips. The company is also working towards preparing to create 3-nanometer chips. The smaller the chips, the higher the advantages as it consumes lesser energy and gives a higher processing speed. 

China
In 2017, the US-China trade and technology confrontation was centered on their trade conflict as the US campaigned against Huawei and put efforts to cut off the supply of semiconductors. The US also released policies to encourage the construction of advanced chip factories. This led to the inclusion of semiconductors in the US-China tech cold war. The US tried to use the semiconductor industry and its vulnerable supply chains as a strategic bottleneck to target China. However, China has been rapidly advancing in 5G, AI, quantum computing, and other mobile applications, yet, it has not been able to gain access to advanced semiconductor manufacturing. China has been taking steps to master advanced semiconductor manufacturing to counterbalance the disadvantage of market control and deter a bottleneck situation. 

In 2014, it set up a massive National IC Investment Fund, which was revived in 2019, earmarking around USD 200 billion for the development of the industries. However, it remains around five years behind the industry leaders. The Chinese company Semiconductor Manufacturing International Corporation (SMIC) has been facing drawbacks in creating semiconductor nodes below 7 nanometers. More specifically, SMIC and other Chinese producers face shortcomings in the process involving extreme ultraviolet (EUV) lithography technology used to create nodes below 7 nanometers. TSMC, Samsung, and Intel will also use EUV technology to create nodes below 5 nanometers. 

The US
The US targeting China by cutting off Huawei’s access to TSMC was a major escalation of the US-China tech trade war. Under the Trump administration, the US played a complex role within the semiconductor global supply chains. The US has also introduced a new industrial policy whereby it has asked the TSMC to build an advanced manufacturing facility in the US. This is a part of its broader economic security strategy and, in a way, encourages restoring advanced manufacturing industries to the US. However, the US-China trade war and tensions have caused implications for the semiconductor industry. The tensions could lead to a bifurcation of the technology into groups of red and blue supply chains whereby the grouping is decided by the destination of the product, either to the US or China. Furthermore, SMIC and other memory producers Changxin and Yangtze Memory Technologies are included in the “military end-use list” restricting exports. Thus, complicating supply chains and cutting revenues for the US as many of the US semiconductor manufacturing equipment (SME) companies supply products and equipment to China. 


II 
Implications of the War in Ukraine 

The war in Eastern Europe may lead to a shortage in the already strained semiconductor industry. Ukraine produces 70 per cent of neon, while Russia produces 40 per cent of the world’s palladium. Both these raw materials are crucial for the production of semiconductors. Neon is the gas used during lasers' operation while engraving chips. Russia is a large-scale producer of this gas as it requires the same for its steel industries.

On the other hand, Ukraine processes the gas and extracts purified neon used for export purposes. Therefore, with a shortage in its supply due to the war, the prices of the two resources have exponentially risen, causing a price hike in the production of semiconductors. TSMC also announced that it would stop importing resources and exporting its advanced semiconductors to Russia, complying with the US sanctions. The halting of exports would not appear to affect Russia immediately but would cause complications in the long run. 

III
The way ahead

Localizing chip manufacturing 
As the chip shortage continues, governments and private entities are moving to create more localized chip manufacturing centers. For example, with the recent investments by the US, China, Japan, Singapore, Israel, Europe, and India, a trend of localization is likely to appear, countering the traditional manufacturing clusters of Taiwan and South Korea. This would mean that the complex process that starts from chip design and wafer manufacturing to packaging, testing, and assembly, would all happen in a cluster of industries to deter supply chain disruptions. 

Strengthening supply chains
With semiconductor companies preparing to strengthen their competitive edge to increase production and produce advanced conductors, chip companies should also focus on “Digital transformation efforts." These efforts would address the fallouts of a complex and unpredictable market environment that affects their business functions and supply chains. The digital business model would require a transformation in changing operating models and adopting new digital and talent capabilities to create resilience to further disruptions. 

Artificial intelligence and semiconductors 
The future would see a tandem of the two as AI would need more efficient semiconductors to adapt to its requirement. This would also transform the design and production of semiconductors as it requires chips that have efficient memory systems, improves their overall performance, and speed up the movement of data. The introduction of non-volatile memory could also increase AI-related semiconductor designs. Non-volatile memory could turn “system on a chip” a reality, which would help meet the demands of AI algorithms. 

Implications of the advancement of the Internet of Things 
The  IoT poses a different problem to semiconductors. With more than 74 billion different types of IoT devices, the demand for semiconductors would also increase. The numbers could also hit 125 billion IoT devices by 2030, which would be joined by a scarcity of resources and an inflated price of raw materials. The demand for high-quality semiconductors would be needed to ensure the longevity of IoT devices. With smart cities being the future, maintenance of these devices would be more difficult, requiring the creation of high-quality, custom semiconductors that would be future-proofed. 

Replacing traditional semiconductors 
Planning, innovation, and research are going on concerning the semiconductor industry to introduce organic and compound semiconductors and meet the demands of modern electrical items. The induction of compound semiconductors would mean combining two or more elements to produce more capable materials. These materials are likely to outperform silicon and play a critical role in the automobile industry and the development of 5G technologies. Other possibilities include the replacement of silicon with graphene and carbon nanotubes. However, to create these, quantum computing would have to be used to create a possible solution from the traditional binaries.  

References

Semiconductors and the U.S.-China Innovation Race,” Foreign Policy, 16 February 2021.
Davide Tentori and Alberto Guidi, "Semiconductors: Key Intermediate Goods for International Trade," Italian Institute For Political Studies, 07 June 2022.

2 charts show how much the world depends on Taiwan for semiconductors,”  CNBC, 15 May 2021.

Alan Crawford, Jarrell Dillard, Helene Fouquet, and Isabel Reynolds, “The World Is Dangerously Dependent on Taiwan for Semiconductors,”  Bloomberg, 26 January 2021.

Santosh Onkar, “How K T Li Turned Around Semiconductor Industry In Taiwan And Why Modi Needs A Man Like Him In India,” Swarajya, 7 January 2021.

TSMC: how a Taiwanese chipmaker became a linchpin of the global economy,” Financial Times, 24 March 2021

About the author
Ashwin Immanuel Dhanabalan is a research assistant at the National Institute of Advanced Studies. He is a part of the Europe studies program at the institute, and his research in the program looks at regional politics, governments, and governance. He also monitors geopolitical changes in Southeast Asia.

In Brief
By Akriti Sharma 

Australia: Bleaching of coral reefs at the Great Barrier Reef Marine Park
On 11 May 2022, the Great Barrier Reef Marine Park Authority, the Australian Institute of Marine Science (AIMS), and the Australian national science agency, CSIRO released a coral reef snapshot for summer 2021-2022 which helps to assess the coral reef health in the Great barrier reef.  The snapshot is an initiative to summarise the reef health on yearly basis and revealed that marine heatwaves were warm enough to trigger bleaching during a La Niña. According to the map published, the reefs have more bleaching in the areas where tourism is higher. The survey included 719 reefs and 654 of them exhibited bleaching.

A marine heatwave was recorded in February 2022 which has led to mass coral bleaching of about 91 per cent of the coral reefs. The continuous heat exposure resulted in a mass bleaching event of the coral reefs. It was the fourth such event that occurred in seven years and the first one to occur under La Niña conditions. Summers are critical times for coral reefs due to the extreme temperature, cyclones season, rainfall, and crown-of-throne starfish outbreaks. 

In March 2022, a United Nation delegation visited to assess the reefs for world heritage listing and to examine whether they should be downgraded due to climate change. In July 2021, the government of Australia managed to seek support when UNESCO made an attempt to downgrade the heritage listing because of in danger due to climate change. 

According to a campaign manager with the Australian Marine Conservation Society, reported by The Guardian “cutting emissions should be the top priority of the government.” She added: “This was a La Nina year, normally characterised by more cloud cover and rain,” “It should have been a welcome reprieve for our reef to help it recover and yet the snapshot shows more than 90% of the reefs surveyed exhibited some bleaching. Although bleaching is becoming more and more frequent, this is not normal and we should not accept that this is the way things are. We need to break the norms that are breaking our reef.”

Coral reefs are the most dynamic marine ecosystems which harbor more organisms than any other ecosystem per unit area. According to the estimates, there might be many undiscovered organisms in the coral reefs which support diverse marine life. They are home to one-fourth of marine species. They absorb wave energy and prevent coastal erosion They also are a source of major economic activities and tourism.(Adam Morton and Lisa Cox, Devastating’: 91% of reefs surveyed on Great Barrier Reef affected by coral bleaching in 2022,” 10 May 2022;“ Reef snapshot: summer 2021-22,”  Australian Government Great Barrier Reef Marine Park Authority)

S&T Nuggets
By Akriti Sharma and Harini Madhusudan

CLIMATE AND ENVIRONMENT

Environment: Air pollution impacts hurricanes
On 11 May 2022, a study titled “Substantial global influence of anthropogenic aerosols on tropical cyclones over the past 40 years” was published in the journal Science Advance. The study correlates air pollution affects the frequency of hurricanes. In Europe and North America, the frequency of hurricanes in the past four decades has decreased because of the decrease in aerosols. On the other hand, the increasing pollution from India and China has resulted in a decrease in hurricane activity in the Western North Pacific. However, the study only looks at the frequency and not the magnitude of hurricanes. (Henry Fountain, “Air Pollution Can Mean More, or Fewer, Hurricanes. It Depends Where You Live,” The New York Times, 11 May 2022)

Environment: Michael Bloomberg to invest in developing countries
On 17 May 2022, Michael Bloomberg announced a USD 242 million investment to promote clean energy in ten developing countries. The funding will help Bangladesh, Brazil, Colombia, Kenya, Mozambique, Nigeria, Pakistan, South Africa, Turkey, and Vietnam. According to the International Energy Association report, the clean energy investments in the developing countries are less than USD 150 million and by the end of the decade, the investments required are to be USD 1 trillion to meet the targets. The representatives from Bloomberg said that they will work with the local actors to plan the spending. (Maggie Astor, “Michael Bloomberg Plans a $242 Million Investment in Clean Energy,” The New York Times, 17 May 2022)

HEALTH 

Australia: Researchers find causes for SIDS
On 16 May 2022, Australian researchers found that sudden infant death syndrome (SIDS) is caused due to low levels of an enzyme called butyrylcholinesterase (BChE) in the blood. The study was published in the journal eBioMedicine and can help in newborn screening and interventions. According to a doctor at the Children’s Hospital at Westmead, in Sydney, Australia, reported by the New York Times said: “It’s the first time we’ve ever had a potential biomarker for SIDS,” In western countries, SIDS continues to be a leading cause of deaths of infants under the age of 1 year and researchers have been trying to examine the causes of the disease. SIDS is a complex disease because it is caused by multiple factors, low levels of BChE being one of them. Previous studies have highlighted some other causes such as low activity in the brain that controls heart rate and some environmental stressors. (Knvul Sheikh, “New Research Offers Clues as to Why Some Babies Die of SIDS,” The New York Times, 16 May 2022)

SPACE

Space: Virgin Galactic announces a pushback in their commercial services
On 6 May, Virgin Galactic announced the postponement of the start of commercial services of SpaceShipTwo suborbital spaceplane for another time. Now, the suborbital flight is scheduled for early 2023 to late 2022. The VSS Unity spaceplane is now expected to start after completing the upgrades of the vehicle and its WhiteKnightTwo carrier aircraft, VMS Eve. The chief executive of the company stated that they were “experiencing elevated levels of supply chain disruptions,” with the hiring numbers not keeping pace with projections. Additionally, he also mentioned the delay in the delivery time of the high-performance metallics, which has cumulated as the cause for the pushback of the launch in services. (Jeff Foust, “Virgin Galactic pushes back commercial suborbital flights to 2023,” SpaceNews, 6 May 2022.)

Space: Crew Dragon astronauts face space debris
On 6 May, a Crew Dragon spacecraft returned four astronauts after they had completed nearly six months on the International Space Station. In a statement during the briefing, the VP of the build and flight reliability at SpaceX announced that the crew noticed a small piece of debris floating away from the spacecraft after docking on 5 May. The photos have shown that the piercing is a part of a frangible nut that is used to hold a tension rod that connects the spacecraft’s trunk to the Falcon 9 rocket during the launch. Luckily, the debris did not cause any risk to the flight, the spacecraft, or the ISS. (Jeff Foust, Crew-3 splashes down in Gulf of Mexico,” SpaceNews, 6 May 2022.)

Space: Mankdrake 2 Experiment successful
On 17 May, CACI International announced that two small satellites in the low-earth orbit, launched in the summer of 2021 by the Defense Advanced Research Projects Agency, successfully established an optical link on 14 April following a 40-minute test. Over 200 gigabits of data were transmitted and received over a distance of about 100 kilometers. These Optical terminals have used lasers to connect satellites in orbit with the aim to transfer data in space. This experiment by DARPA was named Mandrake 2 and was funded by the Space Development Agency and the Air Force Research Laboratory. The success is a positive sign in space-to-space optical communications technologies. (Sandra Erwin, “Military experiment demonstrates inter-satellite laser communications in low Earth orbit,” SpaceNews, 17 May 2022. (Sandra Erwin, Military experiment demonstrates intersatellite laser communications in low Earth orbit,SpaceNews, 17 May 2022.)

TECHNOLOGY

China: Digital Panda System for the safety of Pandas
On 16 May, CNN reported on China’s new national park that is said to be using smart technology to protect and conserve the animals within. This national park named ‘Giant Panda National Park,’ spans three provinces in China- Sichuan, Gansu, and Shaanxi, covering over 10,500 square miles with an aim to protect the pandas and other 8,000 animal and plant species in the ecosystem. With the primary threat being the loss of habitat and natural disasters, the smart tech is aimed at helping safeguard the region. The Park administration and Huawei have partnered to deploy technology and detect wildfires and other disasters. The technology would alert the officials and departments to do the needful. Additionally, Huawei is adopting facial recognition technology to identify pandas. . (Rebecca Cairns, Smart Tech is helping to save China’s giant pandas.” CNN, 16 May 2022.)

The US: Healthcare company ransomware attack 
On 9 May, an MNC Omnicell disclosed during the company’s quarterly 10-Q filing that it had experienced a data breach after a ransomware attack impacted its internal systems. This adds to the increasing number of cyberattacks on US healthcare providers. These breaches lead to the exposure of trade secrets and other intellectual property or lead the loss of confidential or sensitive information. In March 2022, the US Senators proposed a new bill called the Healthcare Cybersecurity Act to address the increasing risk of cybercrimes and the possibility of exposing personally identifiable information of their civilians. (Benjamin David, “Ransomware hits American Healthcare Company Omnicell,” InfoSecurity, 10 May 2022) . (Rebecca Cairns, Smart Tech is helping to save China’s giant pandas.CNN, 16 May 2022.)

About the authors
Harini Madhusudan and Akriti Sharma are doctoral scholars at NIAS. 

 

 

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