As the leader of the world’s largest economy, what would happen when a trade war with an economically powerful second power begins without a detailed reflection on the consequences?
Sattler: China as an enemy. The threat is not limited to its technologies
It will turn against you relatively quickly. Former US President Donald Trump will make history with his radical actions against China. Hawaii, its largest technology company, was shut down from Western technologies and chips, and it gradually expanded its list of banned companies to the famous drone manufacturer DJI and many more. When you mix corona virus controls and connected geography, many unexpected problems arise.
The orders of American and European car manufacturers were so well known that they had to stop or reduce production. This method is not charged closures, but the absence of chips that a modern car “swallows” hundreds. This look below the hood shows how much the world today depends on the semiconductor industry and why today’s superpower wars are the focus here. Chips are key components of almost “everything”. At the same time, they are much needed and often non-duplicate in terms of production, capital investment, and expertise.
Over-reliance on Taiwan
There are many reasons why car manufacturers do not have enough chips. One of them is Trump’s actions. Its restrictions on China are as follows: If you deliver anything related to chips to China, at the same time using machinery, software or components from the United States, you must stop such deliveries. As a result, Hawaii’s much-hated Hawaii doesn’t really have access to chips and sales of its cell phones are declining, but semiconductor production in China is declining. Thanks to many industries, China is one of the largest chip exporters in the world, and breaking the chain is a significant intervention in the market.
But the problems cannot be blamed solely on Trump. His actions revealed only one problem that has long been known in the industry. The world today depends on Taiwan. DSMC, the largest and dominant chip manufacturer, is located there. DSMC does not make its own chips, but its factories, processes and scale economies are so advanced that they are difficult to find competition. Apple, AMD, Nvidia, Qualcomm and many others manufacture their chips at DSMC.
Productivity is not inflated, and investing in a new production hall is not the equivalent of building a Papuntech warehouse near Prague. Each generation of chip manufacturing technology consumes tens of thousands of dollars and is half as expensive as the previous one. That’s why companies around chips often operate at a profit of 60 to 70 percent. Without high returns, the necessary costly investments cannot be made. The number of people with expert knowledge is also low.
DSMC can provide the ability for those who choose and pay well. The biggest customer has long been Apple, which can take most of the production line and leave the junk food to others. The problems caused by the lack of chips are not limited to car manufacturers. For months it was not possible to get graphics cards and new processors, new generation game consoles were not available, and the situation for laptops was complicated. Demand for this specialty has grown significantly as a result of recent corporate scandals.
The Taiwanese government had to intervene in the situation surrounding the DSMC, asking the company to give some priority to car chips. At the same time, after last year’s record financial results, DSMC said it would raise investments in chip production to $ 28 billion this year. But even that is not enough. Chip companies are trying to look elsewhere. Samsung wants to capitalize on this situation by investing $ 31 billion this year to overtake DSMC. The United States is trying to move a portion of its production to its borders. But companies have told the government that something like this would require tens of thousands of dollars in government subsidies.
Remove Trump’s restrictions
The US embargo on China will not help the situation. Semi, the US body that unites the industry’s biggest players, is pushing Joe Biden’s cabinet to remove Trump’s restrictions. As a result, they are damaging the American chip industry as well. These are not just short-term declines in profits. More dangerously, the long-standing tendency to see China relying on the United States is forcing it to become more independent. Recently, $ 180 billion has been boosted by China’s semiconductor operations.
America’s actions were not liked by the old continent. If the US could simply sever China, it could happen elsewhere. The European Commission has come up with a plan for European chips, with up to 5 145 billion to be invested. Local companies like Infinion or STMro Electronics are starting to turn to China because they see potential and diversification there.
“America will isolate itself,” said Karel Masak, director of Brno Chip, which has investors from China and the United States behind it. Radoslav Danilok admits that “Trump’s actions have awakened a large number of people,” and his Slovak company, Dacium, is said to be the revolutionary processor this year. Of course DSMC