Please ensure Javascript is enabled for purposes of website accessibility A bargaining chip for the US - UK - BNY Mellon

The semiconductor chip sits at the centre of a technology battle being waged between the US and China. Growing political and commercial tensions continue to foster fears over the supply of this vital component of economic activity.

The importance of the silicon chip should not be underestimated. They are central to the functioning of the global economy. They are critical components of almost any manufactured product, from industrial robots to phones to cars and are the foundation of the technology infrastructure of businesses. Virtually all companies rely on software and hardware infrastructure, whether on-premise or in the cloud, to deliver value-added services or products.

The US put into place legislation aimed at inhibiting the development of the semiconductor industry in China, with restrictions on the ability of Western companies to export the critical equipment China requires to make advanced chips. Covid-19-related disruption has also acted as a spur to policy making in the US. The pandemic represented a ‘perfect storm’ for the global semiconductor supply chain, significantly affecting the vast array of businesses that rely on semiconductors.

The disruptions, along with the Sino-US tensions, brought about the enactment of the CHIPS and Science Act of 2022 (CHIPS Act), which provides critical semiconductor manufacturing incentives and research investments with the aim of promoting the development of the US semiconductor industry and countering potential security and supply chain threats.

Walter Scott research team

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1414755 Exp: 18 May 2024

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