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Bargaining chips

Hal Hodson: Asia technology correspondent, The Economist

A crucial year for China’s semiconductor firms

THROUGH TRADE wars and pandemics, China remains the world’s workshop. But there
is still one vital product its manufacturers cannot make competitively: the
microprocessor chips that power smartphones and cloud servers, whose number-
crunching underpins the world’s leading companies. In this arena America and its allies,
especially South Korea and Taiwan, remain dominant. China is trying hard to catch up.
America is trying hard to stop it.

This struggle will intensify in 2021. American officials learned a lot about global
microprocessor supply chains during their recent campaign against Huawei, China’s
telecoms-equipment giant. The walls they threw up around the company, to cut it off
from vital chip supplies, went from leaky to robust. They can now deploy that
understanding against China’s nascent chipmaking industry.

Manufacturing chips requires huge multimillion-dollar machines that each carry out
just one step of the complex chipmaking process. A few of those machines are made
exclusively in the United States by American companies, mini monopolies that are ripe