The View | Fallout of US-China chip war could be global overcapacity across industries
- China’s pursuit of semiconductor self-sufficiency risks leading to overcapacity and price wars
- The current experience may motivate China to look into its other vulnerabilities and develop domestic substitutes, spreading overcapacity across many industries
Chinese companies have come to appreciate the risk of losing access to key equipment or components. Their responses, sometimes with financial assistance from local governments, are leading to a wave of import substitution.
While precision and complexity make some equipment difficult to replicate in the short term, a decade could be enough for China to be self-sufficient in some key technologies. The replication of global tech supply chains within China will lead to overcapacity and price wars.
Global sales of mobile phones, tablets, personal computers and printers were worth about US$700 billion last year. These products need the latest chips and are mostly made in China. Foreign companies, such as Apple, that have factories in China are largely not affected. Many Chinese companies, perhaps because the US considers them tech users rather than creators, are not subject to restrictions. They keep making consumer tech products for export or the domestic market.
