The institutional challenge for China’s semiconductor chip industry
Semiconductor chips have been a so-called critical technology since their inception in the 1960s, and designing and fabricating them gives states power as well as status on the global stage. To maximize their power and status, states will rationally seek to acquire the capabilities to build the infr...
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| Format: | Article |
| Language: | English |
| Published: |
2024
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| Online Access: | https://hdl.handle.net/10356/173826 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | Semiconductor chips have been a so-called critical technology since their inception in the 1960s, and designing and fabricating them gives states power as well as status on the global stage. To maximize their power and status, states will rationally seek to acquire the capabilities to build the infrastructure required for their own chip industry. However, not all states are successful in their attempts to do so. The complexity associated with chip technology has meant that only a handful of firms in a small number of states control different parts of the supply and value chain, further amplifying the chip industry's strategic value. While some East Asian states—namely Japan, South Korea, and Taiwan—feature prominently in this elite club, the largest economy among them, China, has struggled to master advanced chip design and fabrication despite its political will to do so and significant state investment. A common explanation is that China's efforts to develop its chip industry have been hindered by its strategic rivalry with the United States, which controls essential intellectual property and technology. However, this explanation is insufficient, and the apparent failure of China’s indigenous innovation policies merits a closer look. This essay argues that the institutional setup—in particular, the extent of state versus private-sector involvement—explains the variation observed in East Asian states’ pursuit of chip industry development. Specifically, China’s state-dominated institutional setup has led it to over-allocate resources to “paper tigers,” which have hindered the advancement of its domestic chip industry. |
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