Over the past century, control over oil and energy sources has fueled world wars, forced countries into unlikely alliances, and sparked numerous diplomatic disputes.

But now the world's two largest economies are fighting over another important and valuable technology, and that technology is 'semiconductors', the tiny microchips that have become the most important part of our daily lives.

These tiny silicon chips are the heart of a $500 billion industry. And the industry is expected to double in size by 2030. And according to experts, the country that manages the supply chain of these microchips will become the superpower of the world.

China wants to acquire the technology to make these microchips. And this is why the US, which already has this technology, is trying to isolate China from the world.

Chris Miller, an associate professor at Tufts University in the United States and the author of 'Chip Wars', says that the two countries are clearly locked in an arms race in the Asia-Pacific region.

He further says that there are other factors in this race.

"In this traditional arms race, where there is more production of ships and missiles, it is also about the quality of artificial intelligence algorithms that can be used in military systems as well."

But at this time America is winning this war, but this microchip war imposed against China is changing the world economy.

Microchip Manufacturing:

The semiconductor manufacturing process is complex, specific and integrated.

An iPhone contains a microchip that is designed in the United States and manufactured in Taiwan, Japan, and South Korea, and then assembled in China.

India, which is investing heavily in this industry, can play an important role in the future.

Semiconductors were invented in America, but over time, East Asia became the center of their production due to government incentives and subsidies for the industry.

It has helped Washington develop business ties and strategic alliances in a region threatened by Russian influence during the Cold War. And they are still very useful today in view of China's growing influence in the Asia-Pacific region.

Nanometers:

The competition is now to make the best and most efficient microchip on a large scale, and the smaller the chip the better. There's also the challenge of manufacturing it in how many current-passing and blocking transistors can fit on such a small piece of silicon.

"It's called Moore's Law in the semiconductor industry to double the number of transistors on a microchip over time," says Jiu Wang of Bain & Co., based in California's Silicon Valley. Very hard to get.'

But achieving this is not easy for any major microchip manufacturing company. In mid-2022, Samsung became the first company to begin mass production of three-nanometer microchips.

And then by the end of the year, Taiwan Semiconductor Manufacturing Co., the world's largest microchip maker and supplier of microchips to Apple, had also produced it.

To explain to you, we are talking about these very fine wires which are finer than a human hair and their number ranges from 50 to 100,000.

These tiny microchips are very powerful and can be used in other valuable devices such as supercomputers and other artificial intelligence devices.

While there is currently a market for other microchips that are part of our daily lives such as microwaves, refrigerators, or washing machines, these old microchips are expected to disappear in the future.

Most of the world's microchips are manufactured in Taiwan, which is why its president calls it the 'Silicon Shield'. That is, in common parlance, it provides protection from China, which claims the region as its own.

China has also made microchip manufacturing a national priority and is investing heavily in supercomputers and artificial intelligence industries. However, it is still far behind in the race to become the world leader in this industry. But over the past decade, he has come much closer in the race, says Professor Miller.

He further said that 'if you look historically, every time powerful countries develop information technology and make it a part of their military and intelligence systems.'

And it is precisely China's dependence on Taiwan and other Asian countries to meet its demand for microchips that knocks the United States.

How is America stopping China?

US President Biden's administration is trying to block China's access to microchip technology.

In October last year, Washington announced a wide range of tougher powers or controls that would make it nearly impossible for companies to export microchips, the machines that make them, or programs involving American technology to China. is, no matter where they are in the world.

The US also prohibited its citizens or US residents from supporting the 'production' of microchips in certain factories in China.

The US policy has hurt Asian powerhouse China as its booming chip industry depends on imported hardware and human capital.

"Talent is very important in this sector," says Linghao Bao, policy research analyst at Trivium China. If you look at the executives of Chinese semiconductor companies, many of them have American passports, people who have studied in this country or have green cards. This is a big problem for China.

The US also wants to produce more microchips in its own country. Under the Chips and Science Act, $53,000 in grants and subsidies have been given to chip manufacturing companies in the United States.

Big companies such as TMSC are taking advantage, which is investing $40 billion in two plants for the first time outside of Taiwan.

Micron, the largest U.S. maker of memory chips essential to supercomputers, military equipment and any device that includes a processor, plans to add about 100 chips over the next 20 years at its plant in New York state. Announced to invest billion dollars.

"The law allows us to reduce the manufacturing cost gap that exists in the US versus Asia," says Sanjay Mehrotra, CEO of Micron Technology.

He said that Micron will continue to invest in its plants in Asia. Because the important thing is that it will equalize the industry globally.

The role of China:

US sanctions are causing serious damage to China in this regard.

There are reports that Apple has abandoned its contract to buy memory chips from one of China's most successful manufacturers, Yangtze Memory Technologies Corporation (YMTC), due to sanctions.

And analyst Linghao Bao warns that this experience is likely to be repeated with Huawei. Huawei, which has become the world's second largest smartphone maker after telecommunications giant Samsung, has become virtually defunct.

"It was so easy for Washington to attack a Chinese tech company, but Beijing didn't really have a clear strategy to respond," Bao adds.

"Earlier, the US used to target individual companies, but this time the scope of its action has spread to the entire country," he says.

So what can China do? Withdrawing your own products and services or imposing your own export controls can do you more harm than good, especially when your own economy is slowing down rapidly.

Beijing has protested to the World Trade Organization (WTO) in this regard, but it may take years for the organization to come up with a resolution in this regard.

However, experts say, China could double down on investment to strengthen its microchip industry.

In October last year, Chinese President Xi Jinping told a Communist Party meeting that 'we will focus on national strategic needs, carry out our scientific and technological research with the determination to win the war in key areas of technology. will gather the powers.'

What will happen next?

Currently, the Chinese microchip industry is facing an economic crisis caused by the war in Ukraine, rising inflation and the reopening of the Chinese economy.

Beijing will certainly proceed with caution due to the economic impact of the Corona epidemic.

Miller Said There Will Be a great companies of China, Taiwan And American But, this will only happen where the latest memory and logic microchips are manufactured. And so we will see the United States try to keep China away from these companies and stop China from trying to build its own supply chain without an American presence."

He adds that this means that the ecosystem of the industry may diverge, with one centered in China and the other in the rest of the world.

This will have an impact on the global economy and all parties will be forced to choose between America or China. And there will be a risk that many will not be able to access the Chinese market.