Spending spree led by US, EU pushes rivalry with China to critical turning point

WASHINGTON by the United States and European Union have funnelled nearly US$81 billion (S$110 billion) towards cranking out the next generation of semiconductors, escalating a global showdown with China for chip supremacy.

Superpowers led It is the first wave of close to US$380 billion earmarked by governments worldwide for companies like Intel and Taiwan Semiconductor Manufacturing Company (TSMC) to boost production of more powerful microprocessors. The surge has pushed the Washington-led rivalry with Beijing over cutting-edge technology to a critical turning point.

"There is no doubt we've passed the Rubicon in terms of the tech competition with China, particularly on semiconductors," said Mr Jimmy Goodrich, senior China and strategic technology adviser to the Rand Corporation. "Both sides have basically made this one of their top strategic national objectives." What began as concern over China's rapid advances in key electronics blossomed into full-scale panic during the pandemic, as chip shortages highlighted the importance of these tiny devices to economic security. At stake is everything from the revitalisation of US tech manufacturing to the assertion of an upper hand in artificial intelligence (AI) to the balance of peace in the Taiwan Strait.

Chips spending by the US and its allies marks a new challenge to Beijing's decades of industrial policy. The rush of funding has hardened battle lines in the US-China trade war. It is also giving a lifeline to Intel, the one-time global leader in chip manufacturing that in recent years has lost ground to rivals, including Nvidia and TSMC.

Investment plans have reached a critical juncture in the US, where officials in April unveiled US$6.1 billion in grants for Micron Technology, the largest American maker of computer-memory chips. That was the final multibilliondollar grant for an advanced chipmaking facility in the US, capping a flurry of commitments nearing US$33 billion to companies including Intel, TSMC and Samsung Electronics.