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Reading: AI Chip Market Surges Past $100 Billion, Igniting US-China Geopolitical Tensions — Puts Taiwan in the Spotlight
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Distinct Post > Business > Tech > AI Chip Market Surges Past $100 Billion, Igniting US-China Geopolitical Tensions — Puts Taiwan in the Spotlight
Tech

AI Chip Market Surges Past $100 Billion, Igniting US-China Geopolitical Tensions — Puts Taiwan in the Spotlight

Henry Ortiz Published August 28, 2023
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In the era of artificial intelligence (AI), semiconductor chips have risen to paramount importance due to their role in powering modern electronic devices. This newfound significance has led to a surge in demand for these chips, projected to boost the market’s revenue potential to an astonishing $67 billion by 2024. As AI applications continue to permeate various industries, the competition to control semiconductor manufacturing and supply chains has sparked geopolitical tensions between major players like the United States and China.

AI Amplifies Semiconductor Demand

Semiconductor chips, the vital connectors between conductors and non-conductors in electronic devices, are experiencing a resurgence in demand. The integration of AI technology has opened a new dimension in the market, driving further growth and revenue generation. Alan Priestley, Gartner’s Vice President, attributes the heightened demand for semiconductor chips to the computational demands of advanced AI programs and platforms.

The current year has witnessed AI-driven semiconductor applications contributing approximately $53.4 billion to the market. This trajectory is expected to continue its upward climb, with a projected growth rate of 25.6% propelling revenues to reach $67.1 billion by 2024. Priestley forecasts a continued upward trend, envisioning the market reaching a substantial value of $119.4 billion by 2027.

Global Power Struggles Emerge

While the art of designing semiconductor chips may be well-mastered, the challenges arise in their manufacturing and supply chain management. The nation that can assert dominance in semiconductor production and supply chains gains not only economic but also significant geopolitical leverage on the global stage.

Taiwan currently holds the reins as the world’s foremost semiconductor producer, commanding a significant share of the global supply at 20%.

However, disruptions from the ongoing COVID-19 pandemic have strained these supply chains and manufacturing processes. The resultant spike in demand has led the United States and China to engage in a semiconductor race that is transitioning from a mere competition to a complex geopolitical contest.

For the United States, the concern revolves around the potential repercussions of China establishing dominance in semiconductor manufacturing and supply chains. The fear is that China could wield this economic leverage as a geopolitical tool against not just the US, but also its European allies.

On the other side, China is keen on countering Taiwan’s stronghold – a crucial Western ally – with the goal of bolstering its geopolitical standing.

As AI-driven advancements continue to reshape industries, the semiconductor chip market’s newfound significance is reverberating on both economic and geopolitical fronts. The intensifying struggle for dominance in this sector underscores the growing intersection of technological prowess and global influence. While AI propels the demand for semiconductor chips, it is also fanning the flames of geopolitical tensions, making the quest for dominance a multi-dimensional challenge with profound implications for the future.

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