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Developments in Chinese Chipmaking

Excerpt:  “The global semiconductor industry has become a key source of global economic and geopolitical risks. Due to a combination of huge fixed costs, highly specialized human capital, and a high degree of geographic concentration at different stages of production, chipmaking exhibits extremely low substitutability throughout the value chain. Consequently, the industry is vulnerable to supply chain shocks, which, given the role of semiconductors as a necessary input to a huge array of manufactured goods (figure 1), can have large and persistent global effects. Moreover, chips are also viewed as crucial to developing frontier technologies such as artificial intelligence and are increasingly critical to national security. Rising trade tensions and an increasing turn to industrial policy planning have led major economies to increase investments in their domestic chipmaking.”