Taiwan Semiconductor Manufacturing Company (TSMC) will no longer fabricate computer chips for Russia, according to media reports. The ban will particularly affect Russia's Elbrus and Baikal processors, unless China agrees to step in to manufacture these chips, and risk additional US sanctions itself. Both Russian processors use mature 28 nm technology. The world's most advanced TSMC fabrication technology today is 5 nanometers. The best US-based Intel can do today is 7nm technology. China's SMIC (Semiconductor Manufacturing International Corporation) has the capability to produce chips using 14 nm technology. Semiconductor chips form the core of all modern systems from automobiles to airplanes to smartphones, computers, home appliances, toys, telecommunications and advanced weapons systems.
|Top 10 Semiconductor Chip Producing Countries. Source: Comtrade Database|
China is the world's biggest producer of semiconductor chips, according to data from the United Nations. The electronics value chain, which includes consumer electronics and ICT, has been regionalized over the years, and China has become a major global production center for microelectronics, according to a report in Opportimes. Other major producers include South Korea, Singapore, Malaysia, the United States, Japan, Germany, the Philippines, the Netherlands, and Thailand. In particular, the statistics for China add up the production of Hong Kong and Macao.
|Russia's Semiconductor Imports. Source: WSJ|
While China is the biggest volume producer of semiconductor components in the world, the Chinese design centers and fabs rely on tools and equipment supplied by the West to deliver products. Western companies dominate all the key steps in this critical and highly complex industry, from chip design (led by U.S.-based Nvidia, Intel, Qualcomm and AMD and Britain’s ARM) to the fabrication of advanced chips (led by Intel, Taiwan’s TSMC and South Korea’s Samsung ) and the sophisticated machines that etch chip designs onto wafers (produced by Applied Materials and Lam Research in the U.S., the Netherlands’ ASML Holding and Japan’s Tokyo Electron ), according to the Wall Street Journal.
|East vs West Economic Output. Source: Wall Street Journal|
There is no question that the current western technology sanctions can seriously squeeze Russia. However, overusing such sanctions could backfire in the long run if the US rivals, particularly China and Russia, decide to invest billions of dollars to build their own capacity. This would seriously erode western technology domination and result in major market share losses for the US tech companies, particularly those in Silicon Valley.