TECHNOLOGY RESILIENCESeismic Shifts Underway in Global Semiconductor Market as U.S. Accelerates Decoupling from China

By Jenny Wong-Leung

Published 20 October 2022

Historically, the U.S. had the lion’s share of the global semiconductor industry (37 percent in 1990), but its dominance has been eroded by North Asian markets over the past three decades. In August, the administration committed to bolstering the U.S. semiconductor manufacturing sector with $50 billion in funding under the CHIPS and Science Act, with the potential to create 40,000 new jobs.

In August, the U.S. government made a major commitment to America’s semiconductor manufacturing sector with the announcement of U.S.$50 billion in funding under the CHIPS and Science Act. Bolstered by this move, memory chip manufacturer Micron announced a U.S.$40 billion investment with the potential to create 40,000 new jobs in construction and manufacturing.

But it turns out the CHIPS Act was just the start.

On 7 October, the U.S. Commerce Department announced sweeping export controls on ‘advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items’. In addition, the Bureau of Industry and Security has added 31 Chinese institutions and corporations to its unverified list because of ‘sustained lack of cooperation by a foreign government that prevents BIS from verifying the bona fides of companies’. The restrictions apply to all U.S. citizens who support the development or production of chips in semiconductor fabrication plants in China without a license.

Historically, the U.S. had the lion’s share of the global semiconductor industry (37 percent in 1990), but its dominance has been eroded by North Asian markets over the past three decades.In 2020, Taiwan (22 percent), South Korea (21 percent), Japan (15 percent) and China (15 percent) accounted for 73 percent of global semiconductor manufacturing, compared with the U.S. 12 percent.

The Semiconductor Industry Association, which represents 99 percent of the U.S. semiconductor industry, projected in its 2020 report that the U.S. share of the market would decline to 10 percent by 2030, while China would boost its share to nearly a quarter (24 percent), closely followed by Taiwan (21 percent) and South Korea (19 percent). The report emphasized the difference between the minimal amount of U.S. government support provided to semiconductor companies compared to most Asian countries and made a series of recommendations. Semiconductor manufacturing in China, for example, is intensely supported by government policies under the ‘Made in China 2025’ plan.

Semiconductors have become ubiquitous in many aspects of our daily lives and are important for other critical technologies such as artificial intelligence and quantum computing. Increased demand for semiconductor chips for cars, infotainment and other commodities, together with supply-chain issues driven by the Covid-19 pandemic, have led to a worldwide shortage. Memory chips have become an important share of the semiconductor manufacturing industry and sales of these devices have grown by 31 percent in the past three years.