Semiconductors: A Powerful Tool Between The US-China Trade War

The Semiconductors industry is prominently cyclical. As such, semiconductor companies are subject to the ups and downs of regular chip cycles tied to supply and demand.

Why Are Semiconductors So Important?

Semiconductors are essential to the world because they power technologies that enrich consumers’ lives and make businesses and other enterprises run smarter, faster, and more efficiently.
They provide the ingredient technologies for personal computers, tablets, smartphones, and other gadgets. Semiconductors run communications networks and the internet.

Semiconductor chips also underpin such massive emerging trends as cloud computing, 5G wireless networks, and artificial intelligence. They are adding smarts to televisions, home appliances, automobiles, and other devices.

“Semiconductors are such a big weapon because they’re one of the clearest choke points in the global technology trade,” says Matt Sheehan at MacroPolo, the Paulson Institute’s China-focused think law.

“Amid a confluence of factors, including ongoing global trade unrest and cyclicality in product pricing, worldwide sales of semiconductors were down considerably in 2019,” SIA(semiconductor industries association) Chief Executive John Neuffer said in a news release.

The World Semiconductor Trade Statistics organization projects annual global chip sales by 3.3% in 2020 and 6.2% in 2021. It issued its latest forecast on June 9.

However, the Covid-19 pandemic has slowed the expected growth in the semiconductor industry.
The second-quarter earnings season for the semiconductor industry kicks off on July 16 when Taiwan Semiconductor releases its results.

Why Is US-Based Semiconductor Chip Manufacturing Critical?

 In practical terms, only about 12% of the world’s semiconductor chips are currently made in the U.S., down from 37% in 1990, and the Chinese government is presently making aggressive subsidized investments in building over 60 semiconductor manufacturing plants (commonly called foundries or “fabs,” which is short for fabrication sites).

The U.S. has been and continues to be the clear leader in the technologies that go into the chips at the heart of not only computing devices but also medical equipment, wireless networks, cars, manufacturing equipment, and virtually every industry.

Therefore, it only makes sense to increase the amount of research and manufacturing support that the industry needs to maintain that lead and grow its share of global manufacturing, mainly as we make our way into a technology-driven future. But as of now, U.S. is making 60% of sales to Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chipmaker, and only 20% from mainland China. Let’s hope our government representatives continue to move these efforts forward.