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A photo illustration of a smartphone displaying the NVIDIA Corporation stock price on the NASDAQ market, with an NVIDIA chip visible in the background.
A chip bottleneck
Margrethe Vestager, the European Union’s competition chief, has warned of a “huge bottleneck” involving Nvidia. The US semiconductor company plays a pivotal role in designing chips necessary for training and running artificial intelligence models and applications — good for 80% of the market. In recent months, Nvidia has become a $3.1 trillion company — now the third-most-valuable firm in the world behind only Microsoft and Apple.
It’s too much of a good thing: NVIDIA’s chips are so in demand that it can’t make enough for AI firms looking to train bigger and better models. EU regulators are starting to wonder whether that bottleneck raises concerns over fair competitive markets.
In Singapore, Vestager told Bloomberg that the EU’s watchdogs are asking preliminary questions of Nvidia but haven’t made up their mind about any further regulatory steps. Vestager said a robust secondary market could relieve competitive concerns, implying that as long as Nvidia respects smaller firms it should stay in antitrust regulators’ good graces. Meanwhile, AMD and Intel are looking to close the gap with Nvidia, something that intense regulatory scrutiny on the market leader might aid.
FILE PHOTO: Semiconductor chips are seen on a printed circuit board in this illustration picture taken February 17, 2023.
The US-China chip stranglehold
The Biden administration has already imposed severe restrictions on semiconductor companies selling to China through export controls. But now it’s considering additional steps to maintain an edge over its rival in the East. The new measures would reportedly restrict China’s ability to access a specific chip architecture known as gate all around, or GAA. GAA is a powerful type of transistor that large chipmakers — including AMD, Intel, Nvidia, and Samsung — are planning to mass produce in the next year.
The US Commerce Department, which oversees export controls, hasn’t confirmed whether or when the rules will be finalized. But the administration has been dead set on limiting China’s access to chips they can use to train and run AI applications — an attitude that’ll only intensify as AI technology becomes more mature and more useful.
With a weak economy making retaliatory tariffs unlikely, Beijing is left with few responses other than subsidizing its domestic industry, which still lags behind the US.
Xi Jinping's solution to his "Taiwan problem"
"Xi has made it clear he plans to go solve the Taiwan problem while he's still in office." That's New York Times national security correspondent and New Cold Wars author David Sanger on why China's leader is setting his sights on the slender island off its eastern coast. Xi Jinping has made no secret of his belief that Taiwan belongs to China and that it is a national security imperative to bring it under Chinese sovereignty. But it's also an American national security imperative to prevent Xi from doing so, says Sanger. That's because the small island nation still manufactures the vast majority of the critical semiconductor microchips that power our modern world in both China and the United States.
"What Biden has done here in the semiconductor field of trying to choke the Chinese of the most advanced chips, but also the equipment to make those chips while trying to build up here, is the right step." At the same time, however, the Biden administration's push to manufacture more chips in the United States may also imperil the "silicon shield" that currently protects Taiwan from its Chinese neighbor. Nevertheless, Sanger argues that it's not just an industrial imperative for the United States to become self-sufficient in this area. It's a national defense imperative one as well."For our long-term security, it is much more important to build those [semiconductor factories] fabs than it is to build those aircraft carriers."
Catch GZERO World with Ian Bremmer every week on US public television (check local listings) and online.
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US Secretary of Commerce Gina Raimondo announces a major grant at the Samsung semiconductor plant in Taylor, Texas, on Monday, April 15, 2024.
Samsung hands Biden another chip win
The Biden administration is busy courting global semiconductor manufacturers to build stateside, recently handing billions to Taiwan Semiconductor Manufacturing Company to expand its chip fabrication plant in Phoenix, Arizona.
On Monday, Commerce Secretary Gina Raimondo announced that the Biden administration is giving out another award as part of its CHIPS Act budget — this time to TSMC competitor Samsung, the South Korean electronics giant. Samsung will receive $6.4 billion to put toward its new manufacturing hub in Taylor, Texas, and expand its existing plant in Austin. In return, Samsung will pour $45 billion into its US projects and commit to producing cutting-edge two-nanometer chips.
Biden has made so-called silicon nationalism a tenet of his economic and national security-focused public policy, desperate to control the slow but crucial supply of chips used for everyday technologies as well as new artificial intelligence applications.
Where the US & China agree - and where they don't
“This is largely a competitive relationship,” Burns tells Bremmer. It’ll likely be a systemic rivalry well into the 2030s between the two largest economies in the world and the two strongest militaries in the world, so what happens here is very consequential.”
Catch GZERO World with Ian Bremmer every week on US public television (check local listings) and online.
Are the US and China frenemies now? Perspective from Nicholas Burns, US Ambassador to China
Listen: US Ambassador to China Nick Burns joins Ian Bremmer on the GZERO World Podcast to look at the complex and contentious state of the US-China relationship. What do the world's two biggest economies and strongest militaries agree on, and where are they still miles apart? After Presidents Joe Biden and Xi Jinping met at a summit in San Francisco last November, it seemed like frosty relations were starting to thaw. But while China and the US have committed to re-engage diplomatically after the 2023 Chinese spy balloon low-point, there is still a lot of daylight–and no trust–between the two. So how stable is the US-China relationship, really? Are we adversaries? Frenemies? Toxic co-dependents? Burns and Bremmer discuss Taiwan, aggression in the South China Sea, China’s economic woes and national security push, and where one of the most consequential bilateral relationships between any two countries in the world goes from here.
US-China relationship at its most stable in years as Yellen visits
Ian Bremmer's Quick Take: A Quick Take to kick off your week. Want to talk about the most important geopolitical relationship in the world, the US and China. Janet Yellen, the secretary of treasury, back over to China yet again, both to help ensure that the relationship is reasonably stable, also to deliver tough messages in places where she feels like that is required, the Biden administration feels it's required. And it's been a useful trip.
On the one hand, the United States, like the Europeans, delivering tough messages on Chinese dumping, on overproduction and low-cost goods going into the American and European markets, because of massive state subsidy, into key sectors. Particular concern on transition energy. On the one hand, great to see more effort to reduce carbon emissions, both in China and globally, and as the prices come down, that's a good thing. On the other hand, really hurting less competitive corporates that don't have that level of state subsidy in the United States and Europe. Tesla was really fast out of the box, hasn't got much support from the White House, but that's been the American champion to the extent that there is one. On the other hand, when you talk about other corporations, American and European, nowhere close to the Chinese. The hundreds of Chinese EV companies that are less expensive, they are higher quality, they are manufacturing at scale, and people can buy them all over the world. So, that is creating a lot of friction.
On the one hand, Americans and Europeans that are saying, “We want to move towards net-zero faster.” On the other hand, if the Chinese government is leaning into that and US and European jobs are at stake, and production is at stake, then they don't feel so comfortable with it. So, that's the primary area of tension between Yellen and her counterparts in China. Having said all of that, the meetings have been open, they've been pretty frank, they've been reasonably friendly, certainly not hostile, and Chinese state media and state influence media has been both very detailed and very fair in their coverage of Yellen, as they have been every high level meeting the Americans have had with the Chinese for months now. And that clearly has been a shift from the top in China, saying, “We don't want you to be picking on the Americans. We want you to show that this is a relationship that is treated with respect, and we want you to cover it reasonably accurately.” That's a big plus.
You know, you go to Russia, you go to Iran, you read their media and I try to follow their media pretty closely, it is overwhelmingly anti-US, anti-Western, strongly propaganda in orientation. That used to be more the case in China. It is not today. In fact, in many ways, I would argue, presently, US media covering US officials, certainly much more hostile, towards China, than the Chinese are towards the United States right now. That's very unusual in this relationship. And in large part it's because the Chinese economy continues to underperform and they're trying to get more American, more Western investment in, they're trying to have less pressure for capital flight out.
There are plenty of other areas where there are big tensions. In particular, we see that with semiconductors, with TSMC now getting, speaking of industrial policy, billions and billions in American government loans, as well as direct grants, subsidies, to expand production in the United States, which TSMC is now planning on doing. The Americans want 20% of semiconductor production globally in the United States by 2030. It is plausible that they get there. A big fact is at TSMC, the world's leading producer of semiconductors, now saying they are going to put their highest end production in part in the United States. That's a big win for the Americans.
It also, over time, makes Taiwan less critically important. That's also true for mainland China, as the Chinese will have to build their own. Finally, when you talk about Taiwan, you talk about the upcoming, in a month, inauguration and an incoming Chinese, Taiwanese president, who is has no engagement with mainland China as former President Ma is meeting with XI Jinping this week. Those things are not connected. They are very far apart. So former president of Taiwan, that China says, “We can work with that guy, we can't work with the incoming guy,” potential for greater tensions going up.
Also, especially around the South China Sea, in the Philippines, their president coming to the United States this week, He’s going to meet with Biden in addition to Japanese PM Kishida and it's going to be more coordinated and deepening defense relations as the Chinese are pushing the Philippines pretty hard in contested waters that the international legal community has ruled on in favor of the Philippines and the Western position. The Chinese say, “Sorry, we don't accept that outcome.”
So, plenty of areas where there is fighting, plenty of areas with this tension, but lots of communication at the high level and generally speaking, and Yellen said this, but I completely agree, the relationship is more stable than we've seen it, certainly in the first three years of the Biden administration and the four proceeding of Donald Trump.
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A smartphone with a displayed TSMC (Taiwan Semiconductor Manufacturing Company) logo is placed on a computer motherboard in this illustration taken March 6, 2023.
Biden, chips, and the Silicon Shield
For all countries with advanced manufacturing capabilities, future chip production will be crucial for both economic dynamism and national security, because semiconductors will be an indispensable component in everything from electric vehicles to consumer electronics to satellites and advanced weapons systems.
Monday’s announcement marks a political victory for President Joe Biden, who can now claim he’s adding a “Made in America” label to the world’s most advanced technologies.
There is an important security implication from this announcement, one that Taiwan’s government may not like. TSMC remains at the heart of the island nation’s “silicon shield,” the protection that semiconductor dominance provides Taiwan by giving the United States good reason to protect it from Chinese attack. Shifting more of TSMC’s production to Arizona reduces that incentive.