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What is real are the increasing tensions between the U.S. and China, and in particular the technology sector. At the center of these tensions is ironically enough, a Dutch company. Microchip equipment maker ASML has been restricted by the U.S. from selling the most up-to-date equipment to China, and now has disclosed theft of intellectual property by China.
Peter Tchir, head of macro strategy at Academy Securities, dubs a potential war over semiconductors World War 3.1. He cites a retired lieutenant general, Robert Walsh, in noting why chips are so important. For one, the U.S. wants to prevent China from getting the highest-end chips that can be used in advanced military systems during a conflict with the U.S.
Walsh also notes the U.S. operational concept for future warfare is the Joint All-Domain Command & Control Strategy, while China’s concept is the Multi-Domain Precision Warfare — both needing high-end semiconductors. Walsh adds that China aims to be the global artificial intelligence leader by 2030 and on par with the U.S. military by 2035, and that high-end chips are needed for AI, supercomputing and weaponizing technology.
Tchir divides the current semiconductor space into four — cutting edge, which is dominated by Taiwan; high tech, which is one to three generations behind and where Taiwan is a leader but the U.S. is competitive; mid-to-low tech, which is global in nature; and commodity chips. And he says there’s a real risk that the U.S. pushes too hard, that Washington blocks technology that is not as critical, crippling sales by U.S. companies to China. “From a commerce standpoint, there is a balancing act that needs to be executed by D.C. So far, so good, but it is something that needs to be watched closely,” says Tchir.
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The other major risk from a semiconductor perspective is that China invades Taiwan, or, from its perspective, reunites a renegade province by force. That would run the risk that the factories would be damaged to the point they are inoperable, though the flip side is that in that scenario, the West would not be able to get those chips either.
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