The U.S. can easily use its strength in critical areas of the semiconductor supply chain to slow China’s development of advanced chips. 

This is the conclusion reached by the Wall Street Journal after analyzing the layers of the global chip supply chain where the United States currently has an overwhelming influence over China. 

The semiconductor industry is a typical integrated global supply chain. Due to the industry’s high research and development (R&D) and capital requirements, different countries have only explicitly focused on developing certain parts of the process, not all.

As no single country can do it all, an interdependent chip manufacturing environment has formed among several countries. 

Even so, the United States leads the early and important parts of the chain, especially those requiring R&D. 

Many of the largest companies that design semiconductors and manufacture their software and hardware are based in the United States.

More importantly, because U.S. workers are spread throughout the semiconductor supply chain, the U.S. has more power to stop China from hiring chip workers. 

Earlier this month, the Department of Commerce made it illegal for Americans and permanent residents to support China’s chip industry.

The chip supply chain can be divided into 3 parts: chip design, wafer fabrication and assembly, packaging and testing.

The United States accounts for 74% of the global chip design software market, while China accounts for only 3%. The largest U.S. companies in this field are Cadence Design Systems and Synopsys, but there are no major companies in China. 

67% of chips are manufactured by U.S. companies and only 5% in China. In the United States, top companies are Nvidia, AMD, Intel and Qualcomm. In China, the leading companies are Huawei’s HiSilicon and Shanghai’s Will Semiconductor.

Only 2% of wafers are manufactured in China. However, up to 41% of wafers are manufactured in the U.S. In this area, the leading U.S. companies are Applied Materials, Lam Research and KLA Corporation, while the leading Chinese companies are Naura Technology and AMEC.

Both the U.S. and China have a very small global market share in chip manufacturing and packaging. The United States manufactures 15% and China 17% of logic chips, but only 2% and 46% of packaging, respectively.

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