Satya S Sahu and Amit Kumar
As the struggle for critical tech supremacy with China escalates, the U.S. and its allies grow increasingly wary about their reliance on China for “legacy” semiconductor chips. Earlier this year, U.S. policymakers called for prompt action to reduce domestic dependence on Chinese-made trailing-edge or commodity chips. Sharing this concern, the U.S. Department of Commerce launched a survey to map the supply chains for such chips in January 2024. This issue was also a prominent focus in the April U.S.-EU Trade and Technology Council session, where both partners committed to identifying supply chain distortions caused by Beijing’s subsidized production of legacy chips. Such developments reflect a growing consensus in Washington and Brussels that China’s control over legacy chip supply chains poses serious economic and national security risks.
Legacy chips are critical components for a vast range of applications and products, from consumer electronics and vehicles to industrial equipment, military systems, and other critical infrastructure like power grids. To borrow parlance used in the U.S. CHIPS and Science Act, semiconductor chips fabricated on a process older than 28 nanometers are categorized as “legacy semiconductors.” In contrast, today’s leading-edge chips (the chips that power our smartphones and the GPUs that power AI tools like ChatGPT) are fabricated on more sophisticated 5 or 3-nanometer process nodes. While legacy chips lack the raw processing power of newer leading-edge chips, they are also vastly cheaper to produce. However, producing these chips profitably is also dependent on shipping huge volumes, with foundries operating with razor-thin profit margins.
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