South-east Asia can gain amid chips war

Nothing quite captures the turbulence in today's world as the semiconductor industry. In the production of a tiny chip, powerful forces of technology, business, national security and geopolitics are colliding with mounting urgency. A large part of the nervousness stems from the fact that one global flashpoint of Taiwan dominates the industry, making 65 per cent of the world's semiconductors and almost 90 per cent of the advanced chips. For South-east Asia, an electronics hub which aspires to expand its share of the semiconductor market, the tensions are an opportunity to be part of the global supply chain currently concentrated in the United States, South Korea, Japan and China, apart from Taiwan.

In a significant development that may remake the configuration of the industry, US President Joe Biden this month signed an Act providing US$52 billion (S$72.3 billion) in subsidies for chip manufacturing and research on its own shores. But the funds come with a rider that any company that accepts the subsidy cannot materially expand its chip-making capacity in China or any other foreign country of concern for 10 years. China described this as "economic coercion". As a nation which spent US$350 billion to import semiconductors in 2020, more than its fuel import bill, China has set sights on locally producing 70 per cent of the chips it needs by 2025. Beijing has reportedly ploughed around US$100 billion to support its champions. Other nations, likewise, are laying the ground for home-made chips. The European Union aims to localise 20 per cent of semiconductor production by 2030, allocating €45 billion (S$62.8 billion), while Japan has budgeted 600 billion yen (S$6.1 billion).