The Global Semiconductor Market and Its Geopolitical Implications

The global chip market is projected to reach $588.4 billion in 2024. According to the Semiconductor Industry Association (SIA), global chip sales decreased by 8.2% in 2023 to $526.8 billion, after peaking at $574.1 billion in 2022 post-pandemic. Despite fluctuations, the chip market shows a stable and dynamic growth trend.

This stability is linked to both market size and revenue generation, which operates independently of revenue growth percentages.

Comparison with the Green Economy

The semiconductor sector's growth potential is comparable to the green economy, though it remains behind. In 2020, the green economy was valued at $1.3 trillion compared to $440 billion for semiconductors. By 2050, the green economy is expected to reach $10.3 trillion, representing 5.2% of global GDP, while semiconductor revenues have doubled to 0.5% of global GDP over 30 years.

The West's Semiconductor Market Position

The CHIPS and Science Act, a US federal statute, allocates $280 billion to boost domestic semiconductor research and manufacturing, including $52.7 billion specifically for chip production. The act aims to reduce supply disruptions, enhance US economic competitiveness, and protect manufacturing processes from sabotage.

The European Union enacted its own CHIPS Act in 2023, targeting $47 billion to double its global chip output share to 20% by 2030. However, the funding is considered insufficient for substantial impact.

China's Strategy

China aims to dominate the market for less advanced chips (28nm and above), a sector not fully addressed by Western CHIPS Acts. China is expected to control 50% of this market by 2030, impacting the West's goal of supply chain independence. China employs a strategy of dominating low-end markets before moving up, enhancing its geopolitical leverage through control over essential components in various industries.

Challenges and Recommendations for the West

The West needs to increase investment in mature chips, implement comprehensive tariffs on Chinese chips, restrict advanced software tools, and restructure supply chains by investing in Southeast Asian and Eastern European foundries. However, these measures will only buy time unless the West also pursues broader re-industrialization to stimulate domestic demand.

Conclusion

The semiconductor industry remains a crucial area of economic and geopolitical competition. While the CHIPS Acts are a positive start, they are insufficient alone. A comprehensive strategy involving re-industrialization and strategic investments is necessary for the West to maintain competitiveness and security in the semiconductor sector.

Questions and Answers

Q1: What is the expected size of the global chip market in 2024?

A1: The global chip market is expected to reach $588.4 billion in 2024.

Q2: How did global chip sales change in 2023?

A2: Global chip sales decreased by 8.2% to $526.8 billion in 2023.

Q3: What is the primary goal of the US CHIPS and Science Act?

A3: The primary goal of the CHIPS and Science Act is to boost domestic research and manufacturing of semiconductors to enhance supply chain resilience and US economic competitiveness.

Q4: How is China planning to leverage its position in the semiconductor market?

A4: China plans to dominate the market for less advanced chips, creating a strategic leverage point in the global supply chain.

Q5: What strategies are recommended for the West to counter China's semiconductor strategy?

A5: The West should increase investment in mature chips, implement tariffs on Chinese chips, restrict advanced software tools, and restructure supply chains by investing in Southeast Asian and Eastern European foundries.