The US-China Semiconductor War Escalates

Semiconductor chips power your world electronic devices. And a fight to control one of the world’s most critical infrastructures has sent the US and China into an escalating trade war.

The US has been losing market share: Since 1990, the US global share of semiconductor manufacturing fell from 37% to 12% — as chip manufacturing in the US takes 25% longer and costs ~50% more than in Asia.

The war ramped up this week: The largest US memory chipmaker, Micron, was banned from selling its products to “critical national infrastructure operators” in China — a market that makes up 15% of Micron’s sales.

What’s the US doing about it?

Last year, the US CHIPS Act was passed to invest $52B into domestic semiconductor manufacturing. Since then, 50+ new facilities have been announced with $210B+ in pledged domestic manufacturing investments by private companies.

• Part of the money will help reduce the design and manufacturing process time and train workers (a critical issue).
• Deloitte forecasted a 70K-90K worker shortage in the semiconductor industry in the coming years.

Cutting the supply: The US has restricted China’s access to certain US-made chips — leading to a 23% drop in China’s chip imports in the first quarter of 2023.

The US has also been pressuring companies to move back home. This week, Apple announced a multibillion-dollar investment in partnership with Broadcom to build chips domestically. And for investors, the war has become a battlefield of landmines and opportunity.

The opportunity: US Industrial CEOs are feeling “super bullish” as manufacturing returns home.