If it’s not compared to gold (Bitcoin) or oil (solar) then it’s probably not worthy. The “new oil” in the tech world is semiconductors. China’s “Greater Bay Area” is where all the new drilling will happen. Right now, it’s where the demand is coming from in a world facing chip shortages for car makers.
About two years ago, the Chinese government released its latest strategy to compete with the Western world, namely the U.S. The name “Greater Bay Area” alone strikes many China chords — it’s their old school copy cat style in mimicking the Bay Area of San Francisco, and more importantly, it’s a challenge to Palo Alto. China isn’t going to just compete with the Bay Area of California. It’s going to be greater than than the Bay Area of California.
The cities of Guangdong-Hong Kong-Shenzen, China thinks, will eventually smoke Silicon Valley.
On November 23, outgoing Intel CEO Bob Swan wrote a letter to Joe Biden calling for a national strategy to protect the semiconductor industry. There is only place to protect it from — Shenzhen.
According to the Semiconductor Industry Association, the U.S. accounts for just 12% of global semiconductor production capacity, with more than 80% of that capacity in Asia. Rising costs and foreign government subsidies to national champions (as in China) are a significant disadvantage for U.S. semiconductor companies that still make substantial capital investments domestically.
Around the same time that Swan was penning that letter, the China Strategy Group, which includes ex-Google
Axios’ China reporter Bethany Allen-Ebrahimian brought that report to light on January 26.
“America’s technological leadership is fundamental to its security, prosperity, and democratic way of life. But this vital advantage is now at risk, with China surging to overtake the United States in critical areas,” the report stated.
China also works in close partnership with Taiwan, a country it claims it owns, and South Korea, a country that has more allegiances to the United States, but whose financial interests are increasingly tied to Chinese demand.
The U.S. has been trying to stop Chinese companies, namely Huawei, from gaining access to chips, including going so far last year as to impose restrictions on what Taiwan Semi
Chipless: U.S. Lacking. China Demanding.
Look at these charts by investment research firm TS Lombard. China demand for chips has outpaced oil, on and off, for the last 20 years. Now, thanks in part to the pandemic, it’s off the charts. It is unclear if China’s demand is causing the shortage the automotive sector is facing now, but it’s plausible.
The rapid acceleration of the “internet of things” forever moves semiconductors ahead of oil as the world’s key commodity for growth, TS Lombard analysts Rory Green and Steven Blitz wrote in a report to clients last week.
The chip shortage that forced GM to cut production at four facilities in the U.S., Canada, Mexico and South Korea underscores the speed and scale of this change.
For now, U.S. chip makers like Advanced Micron Devices lead the world in designing and selling semiconductors, accounting for 45% to 50% of global sales.
But as the above charts by TS Lombard show, manufacturing (chart 2) has shifted to Asia and…