US-China Trade War: Is it really related to Commerce?
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Issue Net Edition | Date : 16 Sep , 2020

US-China Trade war has been going on ever since Trump moved into white house. As a novice in the arena of world economics, I too believed that indeed it must be true. But with each passing day, week, month and now years, it became clear to me that US-China standoff cannot be related only to commerce. Both nations with extremely powerful economies vying for top spot could possibly not be so insane so as to allow a former super power, Russia (now languishing at seventh place in GDP related merit list of the world) to become a contender for the numero uno spot in world politics.

Cyber security (read cyber weapon) is the most important aspect today. With Artificial Intelligence about to become a reality and part of our daily lives, the warfare has changed/about to change. Fearsome platforms viz. US Navy’s super carriers are no longer the most potent weapon platforms in concert with silo based nuclear tipped ICBMs on land and nuclear submarines carrying more than dozen ICBMs, each with 10, may be more warheads, hiding below the surface of vast oceans.

We have slowly but surely moved into the arena of ‘CHIP WARFARE’. Current year US defence budget is pegged at in excess of USD 700 Billion. Digitisation has been stated to be one of the primary objectives.  All future US weapons will carry an ‘embedded brain’, a less than hair strand width wide a superlative micro chip,responsible for creating Artificial Intelligence. For technologically challenged persons like me, AI framework can be sub-divided into three distinct stages; ability to compute at lightning speeds, technology and finally the application. As on date USA is the uncontested leader in the world in the field of semiconductor research, design and manufacturing and accounts for nearly half of the world semi conductor market of nearly USD 500 Billion. Chips are manufactured by semiconductor manufacturing equipment (SME) and is the most technologically complex part of the ‘chip’ industry. Netherlands, Japan and USA control nearly 90% of SME. 

Chip manufacturing is a capital intensive operation. Technological redundancies make it even more complex. USA leads in designing but foundaries are located in Japan, Korea and Taiwan. World leader is a Taiwanese company TSMC, which produces more than 50% of world requirement of Chips annually. USA has placed on embargo on all companies using American technology from doing business with China. TSMC cannot import chips to Huawei because it relies on US designs.

Committee on Foreign Investments in USA (CFIUS) had not approved acquisition of a US semiconductor manufacturing company in 2017. China has openly stated that before end of next decade China will be leader in AI domain. Russian President Putin, while addressing the military commanders on last May Day celebrations stated that ‘Whoever wins the AI race will rule the world’.

Chinese domestic production of microchips barely meets 7% of domestic requirements. Balance 93% is made up of imports, most of it from USA. Chinese imports of chips exceed USD 200 Billion. No SME; No Chips. This is China’s Achilles heel. It must depend on the US and Taiwan for semiconductors, and the US President Donald Trump is pinching China where it hurts the most.

Just one technological detail will highlight the yawning gap that exists between China and USA. Chinese chips have achived a width of 14 nanometers, whereas TSMC is already producing 5 nanometre width, slated to achieve 3 nanometer width before end of 2020.

US-China ‘trade war’ therefore is not a trade war. Aircraft Carriers sailing into South China Sea is merely an outward expression of dissent and attempt to project USA as the only super power. Actual war is to attain and maintain supremacy in CYBER SPACE. Fearsome weapon platforms are merely protecting few nanometer wide chip.

Where does India fit into all this? Thankfully no discussion is required. We are not even in the main frame of chip technology manufacturing. But China’s desire to attain super power status does not appear to fructify, given the USA approach. China, therefore, is at a most vulnerable point of inflexion in strategic domain. India will never ever have a better opportunity to force China into submission. Events of enormous significance vis SCO leaders summit and Chinese plenary meeting in October does not give enough leverage to Xi to negotiate, even if he was to take the initiative for a dialogue with Mr Modi.

Can we or are we willing to take the calculated risk and strike if Chinese troops do not move back to pre 5th May positions? China has no intention to do so, if the utterances in ‘GLOBAL TIMES’ the Communist Party mouthpiece is to be believed.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

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