South Korea has increased its semiconductor investment dramatically to ₩33 trillion (US$23.2 billion) as the nation moves to shield its important chip industry from mounting global pressures.

The expanded support package, announced Tuesday, represents a 27% increase from the ₩26 trillion that was pledged last year, underscoring Seoul’s determination to protect an industry that accounted for 21% of the country’s total exports in 2024. The announcement comes just days after president Trump stated he would reveal new semiconductor import tariff rates within the week, creating additional uncertainty for Korean chipmakers already navigating complex geopolitical tensions.

Strategic response to “increased uncertainties”

South Korean officials cited “increased uncertainties” with the United States as a driver behind the enhanced funding. The comprehensive package covers infrastructure development, low-interest loans for companies in the sector, and initiatives to recruit skilled workers in semiconductor firms.

Government officials confirmed that at least ₩4 trillion ($2.8 billion) will be deployed by 2026. Finance Minister Choi Sang-mok spoke about the government’s approach, following the announcement: “We will consult actively with the US over its Section 232 investigations into semiconductor imports to minimise any adverse impact on domestic companies.”

The expanded financial assistance programme directed specifically at the chip industry, will now reach ₩20 trillion ($14 billion), up from the previously allocated ₩17 trillion, according to the joint statement from multiple government ministries.

Protecting a vital economic engine

The significance of this South Korean semiconductor investment cannot be overstated. In 2024, the country’s semiconductor exports reached $141.9 billion, with shipments to China and the US standing at $46.6 billion and $10.7 billion respectively. South Korea hosts the world’s top memory chip manufacturers, Samsung Electronics and SK Hynix, the latter an important partner to chip giant Nvidia.

However, industry analysts have noted that Korean firms have fallen behind competitors in specialised areas like chip design and contract manufacturing, creating additional pressure to innovate.

Navigating Trump’s tariff threats

The timing of Seoul’s announcement appears calculated to have maximum impact, coming just days after Trump signalled imminent action on semiconductor tariffs. On Sunday, he indicated he would announce semiconductor import tariff rates in a week, though he suggested there might be “flexibility with some companies in the sector.”

The latest support package is the second announced by South Korea in recent days. Last week, the government unveiled emergency measures for its automotive sector, which has also been targeted by the Trump administration’s protectionist policies. Those measures included financial support, tax cuts, and subsidies to stimulate domestic demand. Industry observers view the parallel actions as part of a coordinated response to shield South Korea’s export-dependent economy from volatility.

Balancing act: US relations and Chinese competition

The expanded South Korea semiconductor investment package will address two issues: managing relationships with the US, and responding to intensifying competition from Chinese rivals.

South Korean chipmakers face a complex environment where they must maintain access to the US market and preserve their significant business with China, which remains still the country’s largest export destination. The balancing act has grown more difficult as US-China tech tensions have escalated. The government’s statement acknowledged the two pressures, noting that the measures come “in response to calls on the government to expand support at a time of growing policy uncertainty under the current US administration and rising competition from Chinese rivals.”

Industry context

The country’s semiconductor companies Samsung Electronics and SK Hynix lead the global memory chip market. However, pressure from US tariffs will impact exports, there’s the threat of aggressive Chinese investments in its domestic semiconductor infrastructure, and competition from Taiwan and the US comes in the form of chip manufacturing.

The additional South Korean semiconductor investment provides some financial reassurance to the industry, but the challenges extend beyond funding to include broader geopolitical and trade issues that financial measures alone cannot address fully. The Korea Semiconductor Industry Association has spoken in the past about the strategic importance of the semiconductor sector to the national economy and the challenges it faces currently.

Looking ahead

As Seoul ramps up its semiconductor support, diplomatic engagement will be equally important to financial backing. South Korean officials have indicated they will seek negotiations with the US to mitigate potential tariff impacts, similar to their approach with regards to the issues Korea faces in the automotive sector. The effectiveness of a dual strategy – increased domestic support coupled with international diplomacy – will help determine whether South Korea can preserve its position as a global semiconductor powerhouse. What remains clear is that South Korea views its semiconductor industry as non-negotiable for the nation’s economic future. It will to deploy significant resources to safeguard the sector regardless of international pressure.

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The Nvidia chip crackdown in Malaysia is intensifying. The country is apparently facing mounting pressure from the United States to prevent advanced semiconductors from being diverted to China.

Malaysia’s Trade Minister Zafrul Aziz has confirmed the Malaysian government plans to tighten regulations on semiconductor movements in response to specific US demands to monitor high-end Nvidia chips entering the country. “[The US is] asking us to make sure that we monitor every shipment that comes to Malaysia when it involves Nvidia chips,” Aziz told the Financial Times [paywall]. “They want us to ensure that servers end up in the data centres they’re supposed to and not suddenly move to another ship.”

The minister has formed a special task force with Digital Minister, Gobind Singh Deo, to strengthen regulations around Malaysia’s rapidly-growing data centre industry, which heavily relies on chips from industry leader Nvidia. The move comes amid heightened concerns in the US that Malaysia may be serving as a transit point for advanced AI chips ultimately destined for China, in violation of US export controls.

Singapore fraud case highlights regional concerns

The Malaysian moves follow closely on the heels of a major fraud investigation in neighbouring Singapore, where authorities have charged three individuals – two Singaporeans and one Chinese national – over trades in hardware servers allegedly worth approximately $390 million.

During a press briefing in early March, Singapore’s Home Affairs Minister K Shanmugam stated that the servers in question “may contain Nvidia chips.” The case involves Dell and Supermicro servers imported from the US and subsequently sold to a company in Malaysia. “The question is whether Malaysia was a final destination or from Malaysia it went somewhere else, which we do not know for certain at this point,” Shanmugam said, adding that the Singaporean government had requested assistance from both the US and Malaysian authorities in its investigation.

Two of the individuals charged – Alan Wei Zhaolun, 48, and Aaron Woon Guo Jie, 40 – hold senior positions at Aperia Cloud Services as CEO and COO respectively. According to its website, Aperia claims to be “Nvidia’s first qualified Nvidia Cloud Partner in Southeast Asia,” with “priority access to the highest-performing [graphics processing units] available in the market.” The third individual, a 51-year-old Chinese national named Li Miang, is accused of claiming fraudulently that the end user of items he purchased was a Singaporean computer equipment sales company, Luxuriate Your Life.

US export controls on Nvidia chip and regional impact

The increased scrutiny stems from broader US efforts to obstruct China’s development of advanced technologies, particularly AI with potential military applications. During the final days of the Biden administration in late 2024, the US introduced a three-tier licensing system for AI chips designed for use in data centres, explicitly targeting Nvidia’s powerful graphics processing units (GPUs). The measures were designed to prevent Chinese companies from circumventing US restrictions by accessing restricted chips through third countries. The US is also investigating if Chinese AI firm DeepSeek (which made headlines recently about its impressive AI model performance) has been using banned US chips.

Malaysia’s growing data centre industry

Malaysia has emerged as one of the fastest-growing global data centre development markets, with much of this growth concentrated in the southern state of Johor. According to Zafrul, the state has attracted over $25 billion in investment from major technology companies, including Nvidia, Microsoft, and ByteDance (TikTok’s parent company) in the past 18 months alone. The country recently agreed to form a special economic zone with Singapore, further embedding it as a key player in regional technology infrastructure. However, with the growth comes an increased responsibility to ensure compliance with international export controls.

Challenges in enforcement

Minister Zafrul has acknowledged the significant challenges in tracking semiconductors through complex global supply chains. “The US is also putting much pressure on their own companies to be responsible for ensuring [chips] arrive at their rightful destination,” he said. “Everybody’s been asked to play a role throughout the supply chain.” He emphasised the difficulty of enforcement, stating plainly, “Enforcement might sound easy, but it’s not.”

Nvidia’s global sales patterns underscore the challenge. It generates nearly a quarter of its global sales through its Singapore office, raising attention in the US around potential hardware movements to China. Nvidia has maintained that almost all of these sales constitute invoicing of international companies through Singapore, with very few chips passing through the city-state.

Regional context and industry impact

The focus on semiconductor flows in Southeast Asia represents one aspect of broader technology trade restrictions in place. In a parallel development, the European Union recently sanctioned Splendent Technologies, a Singaporean chip distributor, as part of measures targeting companies allegedly helping Russia’s defence sector.

Balancing economic development with regulatory compliance presents a practical challenge for Malaysia. The country’s efforts to strengthen monitoring systems must address complex supply chains while be supportive of its growing position in the regional technology ecosystem. As Malaysia implements new oversight measures, technology companies operating in the region may face additional compliance requirements stemming from Kuala Lumpur. However, the precise impact on the broader semiconductor industry will depend on the specific implementation approach and enforcement capacity.

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China’s semiconductor prowess is becoming increasingly evident in important technology sectors, So reveals a recent report by the Korea Institute of Science and Technology Evaluation and Planning (KISTEP).

The South Korean think tank’s research indicates China has surpassed South Korea in foundational capabilities across nearly all semiconductor technology areas, including the memory sector, where South Korean firms have traditionally been global leaders.

KISTEP findings reveal a shifting semiconductor landscape

The KISTEP report is based on a survey of 39 South Korean semiconductor experts conducted in 2024, and highlights a significant shift in the global semiconductor landscape. According to the findings, China now outranks South Korea in memory chip technologies, where South Korean giants Samsung Electronics and SK Hynix have maintained dominance for a generation.

China now ranks second globally, trailing only the US in the sector. The change marks a substantial difference from KISTEP’s previous findings published in 2022, when South Korea held the second position after the US in the memory and advanced packaging technology sectors. China ranked third and fourth in these areas at that time, respectively.

“Even in the memory market, where Korea had maintained its unrivalled status, Chinese semiconductor companies are increasing their market share,” states the latest KISTEP report, adding that China is ramping up production of legacy chips “with little technology gap” compared to industry leaders.

Measuring China semiconductor dominance: technology scores and capabilities

The detailed evaluation conducted last year reveals that China’s high-density resistive memory technology scored a ranking of 94.1% (with 100% representing the highest level), outperforming South Korea’s 90.9%. This statistic is particularly noteworthy as memory technology has been South Korea’s most substantial semiconductor sector to date.

The report further demonstrates China’s advance in multiple semiconductor domains. In high-performance and low-power AI semiconductor technology, China scored 88.3%, exceeding South Korea’s 84.1%. It registered 79.8% for power semiconductors, significantly surpassing South Korea’s 67.5%, and in next-generation, high-performance sensing technology, China achieved 83.9% compared to South Korea’s 81.3%.

The two countries achieved parity only in advanced packaging technology, with both scoring 74.2% in foundational capabilities. However, Taiwan leads in semiconductor advanced packaging technology commercialisation, while the US dominates all other technology sectors in both foundational capabilities and commercialisation perspectives.

The KISTEP report also evaluated the technological lifecycle of the semiconductor sector, noting that South Korea maintains an advantage in process and mass production, while China excels in foundational capabilities and design. The report identifies South Korea’s foundational capabilities and design technology as the weakest links in its semiconductor life cycle, ranking lowest among evaluated countries.

Chinese memory manufacturers have been making significant strides in narrowing technology gaps with global industry leaders. ChangXin Memory Technologies (CXMT), a dynamic random access memory (DRAM) chip producer, has developed consumer-grade chips using 16-nanometer processing technology.

While still behind the 12-nm and 14-nm nodes used by Samsung, SK Hynix, and US-based Micron Technology in DDR5 memory production, the progress represents the closing of the technological divide. Growing Chinese semiconductor dominance comes despite extensive US export restrictions limiting China’s access to advanced chips and chip-making technologies. In response to those challenges, Beijing has implemented what observers call a “whole nation” approach to achieving semiconductor self-sufficiency, including establishing the country’s largest-ever chip investment fund last year.

Challenges and opportunities in the global chip race

The report highlights concerns about the impact of geopolitical tensions on South Korea’s semiconductor industry, including “the risk of Korea’s exports falling or being forced out of the Chinese market due to US export controls.” Other challenges identified include the exodus of core talent, intensifying competition in AI semiconductor technology, South Korea’s domestically focused policies, and rapid shifts in supply chains.

The findings represent a serious situation for South Korea, which has built much of its economic success on its leadership in the semiconductor market. To maintain its high-ranking position, the country must address its foundational capabilities and design technology shortcomings.

Taiwan remains a leader in advanced packaging technology commercialisation, while the United States continues to lead in overall semiconductor technology, both in foundational capabilities and commercialisation. However, China’s rapid advancement despite well-publicised international restrictions demonstrates the effectiveness of its focus and its national strategy to achieve technological self-sufficiency.

As China’s domestic semiconductor industry develops, particularly in memory technologies (which have traditionally lagged behind), the global semiconductor landscape is experiencing a significant realignment. The China semiconductor dominance emerging in foundational capabilities suggests that despite export controls and various restrictions imposed on the market, the country is making substantial progress toward its goal of technological self-reliance.

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Malaysia’s 5G Advanced rollout has moved forward, as Digital Nasional Berhad (DNB) and Ericsson announce a new partnership.

The collaboration was announced during Mobile World Congress (MWC) 2025, and aims to implement 5G Advanced technologies across industrial zones and introduce what the companies describe as the “world’s first 5G-powered mobile workspace solution.” The partnership centres on two initiatives: a 5G Advanced deployment to enhance industrial connectivity across Malaysia, and a 5G-powered mobile workspace solution that is designed to replace traditional wi-fi in enterprise environments.

Positioning Malaysia as a 5G global frontrunner

Datuk Azman Ismail, CEO of DNB, highlighted the significance of this collaboration. “By combining DNB’s expertise in 5G deployment with Ericsson’s global leadership in connectivity, we are strengthening Malaysia’s position as a digital economy leader, powering innovation across key sectors like manufacturing, healthcare, and agriculture,” he said.

The partnership’s core focus areas include:

1. Accelerating enterprise digitalisation: Expanding 5G connectivity in strategic industrial zones and collaborating with mobile network operators to deliver connectivity services.
2. Driving IoT and wearables innovation: Using Reduced Capability (RedCap) technologies to enable connectivity for industrial automation and smart devices.
3. Co-creating future-ready solutions: Using DNB’s 5G Advanced network as an platform to develop applications with solution providers, developers, and academic institutions.
4. Advancing sustainability: Integrating AI-powered energy optimisation tools to maximise efficiency and reduce environmental impact, in support of Malaysia’s journey net-zero emission goals.
5. Strengthening network security: Implementing security measures to help safeguard Malaysia’s digital infrastructure against cyber threats.
6. Expanding global API ecosystem: Integrating with a worldwide Application Programming Interface network.

DNB implements a 5G-based office network solution

In a separate announcement during MWC 2025, DNB said it has begun deploying Ericsson’s Enterprise Virtual Cellular Network (EVCN) at its Kuala Lumpur headquarters. The companies claim this is the first instance of a complete “5G-first” office environment, replacing existing wi-fi with cellular technology. Instead of using standard wi-fi infrastructure, DNB’s headquarters now connects devices through 5G cellular networks. The system integrates with Microsoft Intune and Entra ID to manage the 5G-enabled client hardware throughout the organisation.

The change brings several advantages over traditional enterprise networking solutions:

• Security and control: 5G infrastructure eliminates extant and future wi-fi vulnerabilities, and gives administrators greater control over devices’ connections.
• Operational efficiency and cost savings: Simplified network management and large-scale device setup reduce the need for legacy infrastructure, cutting costs.
• Mobility and user experience: Employees get consistent experiences on their 5G-enabled devices, in the office or working remotely.

“By integrating Ericsson’s Enterprise Virtual Cellular Network with DNB’s nationwide 5G infrastructure, we are empowering organisations to move beyond traditional IT models and embrace a new era of cloud-native, secure, and scalable solutions,” David Hagerbro, Head of Ericsson Malaysia, Sri Lanka and Bangladesh said.

Implications of Malaysia’s 5G Advanced rollout

Malaysia’s implementation of 5G-A systems represents an early test case worth monitoring. While DNB and Ericsson have outlined ambitious plans, the accurate measure of success will be in practical adoption rates, measurable efficiency improvements, and the results of cost-benefit analysis by early adopters.

Key questions remain about how widely these solutions will be adopted beyond initial deployments:

• Will the promised security benefits outweigh the costs of transitioning from established WiFi infrastructure?
• Can the system scale effectively in different enterprises with varying technical requirements?
• Will the everyday experience of workers and businesses show meaningful improvements over current connectivity solutions?

The coming months will likely reveal whether Malaysia’s approach to 5G Advanced implementation offers a viable model for other countries or whether adjustments will be needed as real-world applications expose unforeseen challenges. Technology observers across Southeast Asia will be watching to see if the technology delivers on its potential.

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For the second time in two years, YMTC, China’s leading memory chip maker, has proven that US trade restrictions have done little to slow its technological advancement. Fresh on the heels of its 2022 breakthrough with 232-layer NAND technology, the company has pushed boundaries again in memory chip innovation. The breakthrough came to light through research firm TechInsights’ analysis. It demonstrates YMTC’s mastery of the Xtacking4.0 design in high-density 3D NAND chips, and marks another instance of Chinese semiconductor technology advancing despite Washington’s attempts to contain it.

According to TechInsights’ recent report, quoted by the South China Morning Post, YMTC’s achievement was discovered in the commercial ZhiTai TiPro9000 solid-state storage device. The device features an advanced dual-deck structure with 150 gates on the lower deck and 144 gates on the upper deck, totalling an impressive 294 gates.

The design employs sophisticated hybrid-bonding techniques to join two wafers, achieving an unprecedented storage density exceeding 20 gigabits per square millimetre.

YMTC’s journey from latecomer to industry pioneer

Since its inception in 2016, YMTC has transformed from newcomer to formidable competitor in the global flash memory industry. The company’s rapid technological advancement was first highlighted in 2022 when it produced a groundbreaking 232-layer NAND flash, surpassing the abilities of industry giants like Micron Technology, Samsung Electronics, and SK Hynix.

The achievement was particularly notable as it came just before the company was added to Washington’s export blacklist that was assembled over national security concerns. TechInsights senior analyst Jeongdong Choe emphasises the significance of this latest development, stating, “The important takeaway is that China’s YMTC has beaten the competition in the market. With the new Xtacking4.0 technology, YMTC appears to have found a way to overcome the current ban with this new chip.”

Challenging global leaders despite trade restrictions

After being blacklisted two years ago, YMTC lost access to important semiconductor equipment makers like Lam Research. However, the company adapted, strengthening its partnerships with domestic chip tool manufacturers like Naura Technology Group. YMTC’s achievements have caught the attention of global competitors, particularly in hybrid bonding technology. “YMTC is the leader in hybrid bonding technology, which is essential for higher-layered 3D NAND,” Choe explains. “That’s why Samsung and other NAND companies follow and prepare the hybrid bonding structure for the next generations.”

While YMTC maintains a modest public stance about its breakthrough, simply stating it is “committed to driving global innovation to propel the industry further forward and meet the evolving needs of our customers and partners,” the implications of its achievement are far-reaching. The company’s success demonstrates China’s growing capability to develop advanced semiconductor technology independently despite international trade restrictions.

The global memory chip landscape is competitive, with SK Hynix announcing plans to mass-produce 321-layer 4D NAND chips in the first half of this year. However, according to TrendForce, the market faces challenges from weak demand and oversupply, exacerbated by aggressive production expansion from Chinese suppliers driven by domestic substitution policies. The latest memory chip breakthrough by YMTC showcases China’s technological resilience and signals a shifting dynamic in the global semiconductor industry. As the company continues to push boundaries in memory chip innovation, it demonstrates how trade restrictions may be driving rather than hampering Chinese technological self-sufficiency.

The achievement also validates YMTC’s potential as a serious contender in the global market, supporting earlier speculation that the company was considered a potential supplier for major international technology companies, including Apple, before US trade restrictions were imposed. As global competition in NAND flash memory intensifies, YMTC’s success suggests that the landscape of semiconductor manufacturing may be evolving more rapidly than anticipated, with implications for both market dynamics and international trade policies.

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The Indonesian Ministry of Industry has said that Google’s Pixel phones can’t be bought by Indonesians from domestic retailers because the US company does not ensure 40% of their ‘content’ comes from Indonesia. Content can comprise firmware or some form of investment in the local population, as well as the physical components of a phone. Spokesperson Ministry Febri Hendri Antoni Arief said, “The local content rule and related policies are made for fairness for all investors that invest in Indonesia, and for creating added value and deepening the industry structure here.”

The most recent ban follows on from a similar limit on sales of Apple’s iPhone 16 placed in late October this year. Both bans also apply to phones used by tourists and visitors to the country.

Apple iPhone and Google Pixel ban

Apple had promised to invest $109 million in local infrastructure, including educational initiatives, but to date has only committed $95 million. According to Statista, $109 million is accrued in revenue by the Cupertino, California-based company roughly every ten hours, with the required shortfall of $14 million taking about an hour and a quarter’s global income.

Apple Academies – Apple’s choice of Indonesian investment – train students in the use of development tools and methods used to produce software for the company’s devices that run iOS, macOS, tvOS and iPadOS.

Companies wishing to sell their consumer tech devices have to seek certification from the Indonesian government, having proved that they are ploughing money into the local economy. How that investment is manifest is agreed between the Indonesian authorities and the company in question.

Korea’s Samsung and China’s Xiaomi have created manufacturing and assembly plants in Indonesia, and currently, Samsung holds 16.5% of the Indonesian handset market. Mi phones from Xiaomi comprise 18.4%, according to statistics from Counterpoint.

As part of the same survey, Counterpoint’s senior analyst, Febriman Abdillah, stated that there is particular demand in Indonesia for mid-range phones ($200-$399) at present, a bracket that excludes Google and Apple’s offerings other than as luxury items.

The Indonesian government implements its embargoes by means of withholding IMEI certifications for new handsets. That has the effect of making phones impossible to use with a domestic carrier for data, calls or texts. Phones could still operate as wi-fi-only devices – potentially an option for tourists entering Indonesia with a new device. Given the strictures in place at present, however, the government’s edicts have effectively stopped all sales to the domestic market.

Both Apple and Google can still qualify for the necessary certifications to re-open trade in the country, but at the time of writing, neither company had commented on the developing situation. Apple’s Tim Cook visited Indonesia in April 2024 as part of the negotiations over Apple’s inbound investment, but the company’s shortfall means that it, like Google, exists in a state of limbo with regards handset sales. Google’s ban comes just days after that affecting Apple, showing that the Indonesian government is sticking to the letter of its edicts, even if US technology companies are not.

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The intensifying technological rivalry between the US and China has entered a new phase, with a prominent Chinese cybersecurity organisation launching a security probe into Intel products. The development comes amid tightening US restrictions on semiconductor exports to China and growing competition for AI supremacy.

The Cyber Security Association of China (CSAC) announced via WeChat on October 16 that it would examine Intel’s central processing units (CPUs) sold in mainland China, citing concerns over “frequent vulnerabilities and high failure rates.” The Association highlighted historical security vulnerabilities in Intel chips and reported instances of specific processor series causing videogame crashes.

The following day, Intel’s China division responded swiftly, stating through its official WeChat account that it “strictly abides by the laws and regulations of the country,” and that it has consistently prioritised product safety and quality. The company expressed its willingness to “maintain communications with the relevant authorities,” and address any concerns regarding product safety.

In retrospect, the security review follows a series of US measures to restrict China’s access to advanced semiconductor technology, including the October 2022 export controls on high-end chips and chip-making equipment, and the subsequent expansion of those measures in 2023. The timing and nature of the review suggest it could be part of China’s broader strategy to counter US technology restrictions.

The move appears particularly significant as Intel holds substantial business interests in China, which remains one of the world’s largest semiconductor markets. According to industry analysts, the review could signal China’s willingness to leverage its market access as a countermeasure against US trade restrictions.

The scrutiny of Intel comes as Chinese domestic CPU manufacturers such as Loongson, Zhaoxin, and Hygon having made significant strides in recent years. The companies have captured over 50% market share in state-owned agencies and public procurement markets, suggesting China’s growing capability to reduce dependence on foreign processors.

The stakes are particularly high for Intel, which derived 27.4% of its revenue from China in 2023. The substantial market exposure comes at a challenging time for the company, which has recently faced declining earnings and implemented a series of job cuts. The situation is further complicated by US export controls that prevent Intel from selling its most advanced products to Chinese clients, with some customers banned entirely from receiving Intel shipments.

However, CSAC’s criticism extends beyond security concerns. The association noted Intel’s position as a significant beneficiary of the Biden administration’s CHIPS and Science Act, which it characterised as unfairly discriminating against China’s semiconductor industry. The group also criticised Intel’s supplier policies prohibiting the use of products and labour from China’s Xinjiang region – a requirement aligned with US law but contested by Chinese authorities. The timing and nature of this security review follow a familiar pattern. 

In 2023, China employed similar tactics against Micron Technology, leading to significant market disruption. After a cybersecurity investigation by the Cyberspace Administration of China concluded that Micron’s products posed “network security issues,” Chinese authorities banned companies in critical infrastructure sectors from purchasing Micron products. 

The impact was substantial, with Micron facing multi-billion dollar market consequences. China has already begun reducing its dependence on foreign semiconductors, reportedly directing major state-owned telecommunications carriers to phase out chips from Western manufacturers like Intel.  In the broader context, the review appears to be part of what some industry observers call China’s “Python Strategy” – a methodical approach to gradually tightening restrictions on foreign companies while promoting domestic alternatives. 

Its strategy has already been witnessed in action by other US technology companies, most notably Micron Technology, which faced a cybersecurity review in 2023 that restricted its products’ use in critical information infrastructure. This further reflects the complex interdependencies in the global semiconductor supply chain. 

While China remains a crucial market for US semiconductor companies, the Chinese government has been actively investing in its domestic semiconductor industry through initiatives like the “Made in China 2025” plan, which aims to reduce reliance on foreign technology.

Therefore, Intel’s experience might be a cautionary tale for other US technology companies operating in China. The security review marks a significant escalation in the ongoing technology conflict between the world’s two largest economies. It suggests that as US-China relations continue to evolve, technology companies may increasingly find themselves navigating complex political and regulatory challenges in addition to those of a technical and commercial nature.

This development could accelerate several trends: China’s push for technological self-reliance, the reconfiguration of global supply chains, and the increasing bifurcation of the worldwide technology ecosystem into US and Chinese spheres of influence.

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The US Department of Commerce is said to be investigating claims that TSMC (Taiwan Semiconductor Manufacturing Company) has helped Chinese company Huawei make 5G chips, such as those found in the company’s latest Apple-killer Mate 60 phone.

Although a formal probe by the DoC has yet to be announced, sources close to the issue have stated in The Information that TSMC acted in contravention of 5G export controls in allowing Huawei either access to chip designs, helped Huawei in some way design its own 5G semiconductors, or sold chips to Huawei via intermediary companies.

TSMC has denied any wrongdoing, issuing a statement that it is “committed to complying with laws and regulations, including export controls.”

TSMC manufacturing in Arizona

Any proven claims against TSMC could jeopardise the company’s receipt of funding it’s received from the US as part of the package awarded April this year – some $6.6 billion – from direct CHIPS Act funding. Although headquartered in Taiwan, TSMC operates fabrication facilities in Arizona that make chips for AMD, ARM, MediaTek, Nvidia, Apple, and Qualcomm, among others. TSMC has invested more than $65 billion in the Arizona facilities.

Although the largest shareholder of TSMC remains the Taiwanese government, most of the company is owned by international investors. Highly punitive sanctions taken against the company would severely impact the bottom lines of many of the world’s biggest technology companies, and potentially put the brakes on the current supply of chips used in AI applications, communications, servers, communications infrastructure, and consumer devices.

The CHIPS Act funding given to the company was designed to promote TSMC chip manufacturing for US companies, allowing them to better compete against non-domestic offerings. According to NIST, the Department of Commerce implemented conditions for the granting of CHIPS funding that “seek to prevent CHIPS funds from being used to directly or indirectly benefit foreign countries of concern.”

China is considered by the US to be a country of concern, alongside so-called pariah states such as Iran and Russia. Rather than threatening US borders with massed troops or funding terrorist training camps, China’s perceived crimes seem to be a certain success in free market trade and popularity among consumers enamoured of the country’s cheaper-than-average exports by companies like Huawei.

Huawei hardware and technology already underpins much of the world’s telecoms networks, but has seen a rapid downturn in profitability since imposition of trade sanctions led by the US from 2021. In 2020, the company overtook Samsung as the world’s largest manufacturer of smartphones, a position that has since slipped since the sale of the Honor brand to the Shenzen regional government in China.

CHIPS Act funding in jeopardy

The embargo on the use of TSMC technology that might benefit a ‘country of concern’ puts the company’s CHIPS funding from the US into doubt, although the company has worked hard to establish fabrication facilities elsewhere in the world, a move much encouraged by governments keen not to repeat the impact of supply chain problems caused by the COVID epidemic.

In addition to the embargo on selling directly to foreign competition (in this case, Huawei) companies in receipt of US state funding are expected to demonstrate due diligence that any sales will not end up in proscribed hands via intermediary companies. Sources close to the issue have said that the US is investigating the methods employed by TSMC to vet its customers.

If found in breach of rules, TSMC could be liable to pay back the funds it’s received under the CHIPS Act, although as the second largest recipient of such funds, the invocation of any ‘clawback’ rule could jeopardise the CHIPS Act scheme and make investors in the chip sector jittery enough to relocate their interests to areas less subject to political whimsy.

“If we have any reason to believe there are potential issues, we will take prompt action to ensure compliance, including conducting investigations and proactively communicating with relevant parties,” a statement from TSMC said.

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The Northernmost island in the Japanese archipelago, Hokkaido, is perhaps best known for its hot springs, cold winters, spider crab delicacies, and ski-ing. But close to Chitose airport near Sapporo, the island’s capital, a new construction site represents what many think epitomises a revitalisation of the Japanese economy.

The Rapidus Corporation is a Japanese startup that is building a new semiconductor fabrication facility in partnership with IBM. The plant will make wafers based on Big Blue’s 2nm designs which were developed in the US.

The timing of the Rapidus project means that the plant should be coming on line when international trade is being negatively affected by poor US-China relations and supply chain issues caused by the continuing conflicts in the Ukraine and Palestine. Prime time to sell much needed chips, therefore.

The supply-chain shortages stemming from the COVID epidemic sharpened focus for policy-makers all over the world, highlighting just how reliant multiple industries are on microprocessors.

Like many countries, Japan is desperate not to have a repeat of the situation when in 2021, large swathes of industry were at an effective standstill due to supply chain issues outside its control.

Japan economically re-imagined

From its heady days in the 1980s when Japan produced around half the world’s silicon wafers, the country’s market share in semiconductor chip fabrication has dropped to just 10%, a victim of a larger national economic decline and the emergence of China and Taiwan as the powerhouses of chip design and manufacture.

But Japan is not trying to recapture the glory days of its technological past by repeating the same type of economic protectionism that was the hallmark of its Asian Tiger phenomenon. Instead, its policy makers have taken the example set by US, Taiwanese, and European chip makers in forming international conglomerates that jointly design, build and distribute silicon microprocessors.

Since 2021, the Japanese trade ministry has embarked on a more hands-on approach [PDF] to boosting specific sectors of the economy, eschewing the libertarian, market-first economics that many have blamed for the country’s stagnation over the last 30 years.

The government’s policies include huge subsidies in areas of industry it wishes to promote, so medical suppliers, semiconductor chip fabrication and technology companies, and renewable energy hardware manufacturers are being offered attractive packages to locate either in Japan or in countries nearby.

The trade ministry says its commitments to revitalisation measures in these sectors will be “large-scale, long-term [and] well-planned.”
Tokyo is using carefully formulated regulatory policies to promote what it terms ‘mission-oriented projects’ such as promoting green technology, renewable energy and high-tech production facilities like that going up on Hokkaido island.

Semiconductor chip fabrication in Hokkaido

As Japan’s northernmost main island, Hokkaido’s abundant fresh water supplies and a mature renewable energy infrastructure make it a good fit for manufacturing technology that will help create a greener technological future.

It’s also the home to several world-class universities, which it’s hoped, will supply the next generation of researchers and engineers needed for Japan to return to its lost, technological powerhouse status.

The IBM 2nm chip design will, according to IBM, increase battery capacities, lower the power requirements for computers (especially important for power data centres and burgeoning demand for AI) and help improve technologies around real-time processing, such as image recognition and autonomous transport.

The Hokkaido plant is expected to employ around 1,000 people by 2027, and is backed by major Japanese companies like Toyota and Sony. Investment from the private sector is bolstered by significant government contributions. The Japanese authorities have pledged around $27bn in investment in technology development and research over the next three years.

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Germany is known across the world as a centre of engineering and manufacturing excellence. From heavy industry to car manufacture, its reputation is for resilient, high-quality products that are the standard against which many brands measure themselves.

Since the semiconductor supply chain crisis of the post-COVID period, investment in high-tech silicon foundries has grown, especially in the Saxony region, known locally as “Silicon Saxony”

Chip manufacturers beat supply chain shortage threat

The worldwide chip shortage, created by high demand for new hardware and exacerbated by US-China relations, was a wake-up call to governments around the world who felt themselves as hostages to the dominance of the Far East in the silicon fabrication sector. Without domestic chip manufacturers, foundries and, therefore, some guarantee of continued availability of microprocessors, industries of all types could easily find themselves in the same situation as that which transpired between 2020-2023. Several high-profile cases dominated the news headlines in the aftermath of the COVID pandemic when for example, cars could not leave German manufacturing plants for want of a few slivers of silicon for their in-vehicle entertainment and engine management systems.

Germany’s Saxony region, already home to over 3650 high-tech companies that employ over 75,000 workers (expected to rise to 100,000 by 2030), has deepened its ties with Taiwan’s TSMC and welcomed a 50bn Euro in industry investments. Frank Bösenberg, Managing Director of local trade organisation Silicon Saxony, said, “What sets us apart is not just semiconductor production but our ability to combine hardware, software, and connectivity technologies. We’ve cultivated a complete value chain, from R&D to production, supported by top-tier universities and a semiconductor-savvy regulatory environment.”

Chip manufacturer TSMC builds education ties

Ground was broken last month in Dresden, Saxony’s regional capital, on a new fabrication facility being built by the European Semiconductor Manufacturing Company (ESMC), a joint venture between TSMC, Bosch, Infineon and NXP, with additional investment in the form of subsidies by the German government. The plant, owned by TSMC, will come into production in 2027 and provide around 6,000 jobs.

Despite Germany’s advanced abilities in high-tech engineering that are largely unrivalled in Europe, TSMC still struggles to source suitably skilled employees. A range of cooperative projects between the private sector and international universities hopes to supply the demand for future generations in the form of traineeships and internships.

In addition to semiconductors, the Saxony region also boasts companies and startups in developing technologies such as organic computing and battery technology, the latter feeding into the area’s other specialisation, of EV production. But it’s in semiconductors that the realities of global competition will become most apparent. Questions about Germany’s highly unionised workforce competing with Asian work practices mean that companies like TSMC have to embrace local work cultures to expand into a truly global supplier, one that’s less at the mercy of supply chain problems.

That’s an aim in line with the EU’s Chips Act which came into force in 2023, comprising measures to increase the bloc’s share of the global semiconductor production market to 20% by 2030, from its current 10% slice at present. If achieving that goal is only possible by encouraging APAC businesses to locate in Saxony, then companies like Taiwan’s TSMC will find conditions constructed to be favourable.

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