The first skirmishes of the new cold war are starting. This week China banned operators of its key infrastructure from buying microchips from US semiconductor company Micron. It’s the first ban of this type from China and comes in response to sweeping sanctions made by the US in October last year. Such political decisions will impact semiconductor companies, electronics consumers across the world and geopolitical stability in Asia.
A little background. Since 2015, China has had ambitions to design and manufacturer more of its own semiconductors rather than replying on the US behemoths. That year it launched Made in China 2025 and targeted 70 per cent semiconductor self-sufficiency in 10 years. Qualcomm which designs the semiconductor chips that go into iPhones cites this policy as a major business risk in its annual report, saying its Chinese customers could develop their own "integrated circuit products due to pressure from policies of the Chinese government”.
These concerns are now coming to light. Micron was the obvious place to start because it develops memory chips. These are much easier to design and make than Nvidia’s GPUs needed for training artificial intelligence models, and Micron can be replaced initially by Korean memory chip manufacturers such as Samsung and SK Hynix. However, as China steals more intellectual property, and develops its own ability, these bans could spread.