How the chip shortage is affecting China

The shortage of computer chips is causing production losses worldwide. China in particular is feeling the consequences. The shortage is triggered by the rivalry with the USA – but also by hoarding purchases by Chinese companies.

China is one of the reasons for the global chip shortage. At the same time, the People’s Republic itself is suffering enormously from the fact that there are too few semiconductors worldwide. One of the triggers was the announcement by then US President Donald Trump.

His administration had threatened to impose sanctions on China in order to cut the country off from the global semiconductor market. This announcement alone was enough to prompt Chinese companies to buy up chips worldwide on a large scale at short notice.

Supply chain problems

Initially, this helped the Chinese tech and electronics industry. But at the same time, the move has completely thrown off the so-called just-in-time production of large international corporations. In the automotive industry, for example, it is no longer possible to build cars without special chips, let alone electric cars with their particularly complex control electronics.

It is not only the conflict between China and the USA that is to blame for the global computer chip shortage. Corona-related supply chain problems are also putting a strain on the semiconductor industry. In addition, a major fire at a chip factory in Japan and the water shortage in Taiwan in the spring meant that some important chip producers were unable to manufacture.

USA increases pressure

The extent to which geopolitics now plays a role in the global computer chip crisis is illustrated by the case of ASML. The Dutch company builds specialized machinery for the high-tech computer chip industry. Under pressure from the U.S. government, ASML is no longer supplying Chinese companies, at least not with the best and most advanced chip-making machines.

This makes it more difficult for China’s semiconductor industry to become completely independent from the rest of the world. However, the state and party leadership is sticking to its goal of so-called chip self-sufficiency: it wants to make China independent of manufacturers from other parts of the world in the medium to long term. This would benefit not only the domestic electronics and automotive industries, but also the Chinese military.