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What's Next for the Chip Industry

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Examining a chip.

Most chips that go into consumer products and commercial applications are produced in Asia. Moving that manufacturing to the U.S. would likely push up costs and make chips less commercially competitive, even with government subsidies.

Credit: Getty Images

The year ahead was already shaping up to be a hard one for semiconductor businesses. Famously defined by cycles of soaring and dwindling demand, the chip industry is expected to see declining growth this year as the demand for consumer electronics plateaus.

But concerns over the economic cycle—and the challenges associated with making ever more advanced chips—could easily be eclipsed by geopolitics.

In recent months, the U.S. has instituted the widest restrictions ever on what chips can be sold to China and who can work for Chinese companies. At the same time, it has targeted the supply side of the chip industry, introducing generous federal subsidies to attract manufacturing back to the US. Other governments in Europe and Asia that are home to major chip companies have introduced similar policies to maintain their own positions in the industry.  

As these changes continue to take effect in 2023, they will throw a new element of uncertainty into an industry that has long relied on globally distributed supply chains and a fair amount of freedom in deciding who they do business with.

From MIT Technology Review
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