China condemnation . . .
The bold new C$360B U.S. CHIPS Act, which earmarks nearly C$70B for domestic semiconductor manufacturing, has further etched critical fault lines in the advanced chips industry and international security environment. The law deliberately targets China by providing significant subsidies to companies on the condition that they do not increase chipmaking capacity in China. Last week, two Chinese trade associations blasted the Act, accusing the U.S. of hindering global economic recovery and technological innovation. Chinese Foreign Ministry spokesperson Wang Wenbin called it an example of “economic coercion.” Despite the sharp critique, Beijing has yet to retaliate, likely because its advanced semiconductor manufacturing capabilities lag at least six years behind the world’s cutting-edge production. It cannot afford to freeze out foreign chipmakers just yet.
Taiwan, Japan, and South Korea’s balancing act . . .
Top firms such as the Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung are now being forced to pick sides between China and the U.S. Most of the world’s critical chip production equipment is supplied by the U.S. and its allies, contributing to an uneasy growing U.S.-led partnership between the U.S., Taiwan, Japan, and South Korea, known as the Chip 4 alliance. Now, by accepting CHIPS subsidies, TSMC will not be able to expand its facilities in China, losing growth opportunities in the world’s largest semiconductor market. In response to the CHIPS Act, Taiwan has also doubled down on its “key position” as a supplier of 92 per cent of the world’s advanced chips, vowing to keep manufacturing at home. Meanwhile, Japan’s Mitsubishi Gas Chemical will invest C$478M to triple its U.S. production of a chipmaking chemical over the next decade. South Korea is the only country yet to commit to the alliance officially and today it announced it would attend a preliminary Chip 4 meeting.
A role for Canada?
Despite Minister François-Philippe Champagne’s ambitious goal for Canada to become “a strategic global leader in the semiconductor industry,” Canada’s investments in the industry are relatively low. However, some of the world’s leading chip firms have offices in Canada, including TSMC, Samsung Electronics, AMD, Qualcomm, and Intel, that focus on R&D and design. As supply chains are rerouted in reaction to the CHIPS Act, Canada will be looking to leverage its favourable trade footprint and tariff regime, skilled workforce, clean energy, and AI leadership.
- The New Statesman: The future world order will be decided by the war over semiconductors
- Nikkei Asia: China can't afford to counter the CHIPS Act -- yet, experts say
- South China Morning Post: South Korea’s delicate US-China balancing act as Chip 4, IPEF limits room for Seoul, Beijing to manoeuvre