US and China in a Head-to-Head Competition:AI Chip War

Written by Senoria Khursheed ·  1 min read >

By 2027, semiconductor consumption is expected to increase by $100 billion.

This surplus is because of the high demand for processors with AI capabilities.

The country that leads the semiconductor production and global supply chain controls stands to gain significant financial and geopolitical advantage. 

With the emergence of technology, AI has changed the shape of the world. The rapid advancement of artificial intelligence (AI) has brought a significant change in the semiconductor industry, resulting in substantial revenue generation. With the advancement of AI, the demand for semiconductors has increased a lot. Therefore, companies worldwide compete to produce the best chips and semiconductors for buyers. The demand for semiconductors, crucial components in electronic devices including AI platforms, is predicted to surge $100 billion by 2027, leading to leading industry expansion.

Semiconductors are the tiny chips that enable conductivity between conductors and non-conductors. Semiconductors are essential in modern electronic systems, especially in artificial intelligence applications. According to Alan Priestley, Vice President Analyst at technology analysis company Gartner, the expected revenue for 2023 linked with AI-driven semiconductor demand is almost $53.4 billion. This amount is expected to reach an impressive level of $67.1 billion in 2024, a remarkable 25.6% increase.

Jensen Huang, the CEO of one of the top chip manufacturers in the world, claimed that the limits ran the risk of doing “enormous damage” to the tech sector. Nvidia’s sales in China and Hong Kong fell by about 20% from the prior year to February.Recently, Nvidia began promoting the A800, a less sophisticated chip, to Chinese customers. However, the additional restrictions that Washington is considering would limit even those products.

According to experts, there is continuous growth in semiconductor production and revenue generation, with a potential revenue of around $119.4 billion by 2027. This shows the high demand for semiconductors and their importance for electronic devices. The constant high demand for AI-enabled chips across multiple industries is the main ingredient in driving the growth. Manu businesses are eager to benefit from AI’s immense potential.

Although designing semiconductor chips is still accessible, managing their manufacture and supply chain is the biggest challenge. A significant increase in financial and geopolitical clout on the international scene is possible for the country that controls the global supply chain and produces the most semiconductors.

Currently, Taiwan produces the top semiconductors in the world, controlling approximately 20% of the global supply. At the same time, Covid-19 disrupted the whole process and affected it badly. The supply chain and manufacturing issues occurred during the COVID-19 epidemic, resulting in greater demand for these chips. The US and China compete in a semiconductor race that has the potential to escalate into a conflict.

Up till now, China has been the biggest chip producer. Hence, the United States is concerned that China’s dominance in producing semiconductors and supply chain management could be utilized as a geopolitical tool against the U.S. and its European areas. On the other hand, China aims to challenge Taiwan’s highest position, a key Western ally, to bolster its geopolitical situations

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