Global Chip War Impact and US Leverage

Overview

Despite China being a base for several Asian-grown champions in the global chip war, the US maintains key levers of power. This is demonstrated by the revoking of authorization for Taiwanese and South Korean chip titans to export American technology-powered equipment to plants in China.

Impact on Production

The change, effective next year, could disrupt production and potentially threaten the survival of these plants. The Biden-era exemption allowed chipmakers TSMC, SK Hynix, and Samsung to export critical production equipment to China.

US Importance in Global Chip Supply Chain

The US holds commanding positions in chip design and related software, with companies like Nvidia dominating AI chips. The Taiwanese and South Korean companies rely heavily on American companies for crucial chipmaking equipment.

Balancing Act Faced by Companies

Washington’s move highlights the tough balancing act these companies face as tensions between the US and China escalate. The policy change is intended to close an export control “loophole,” with licenses to be granted for continuation of operations but not for expansion or technology upgrade.

Impact on Chip Prices

Analysts worry about the timely approval of these licenses, as delays could cause disruption and lead to surging prices for memory chips. Samsung and SK Hynix, with a larger presence in China, are more vulnerable under this change.

Competitiveness of Facilities

Even if licenses are secured in time, the competitiveness of these facilities in China would decline significantly over time.