$100b AI chip market fuels US-China tensions, impact on Taiwan?

• AI chip demand is growing rapidly due to the increasing use of generative AI.
• China aims to challenge Taiwan’s leadership to bolster its geopolitical position.
• Semiconductors are crucial for modern electronics: phones, computers, and cars.

As AI advances and becomes more widespread, the need for semiconductor chips has grown rapidly. These chips are crucial for modern electronics. This trend could increase the market’s value to $67 billion by 2024.

Semiconductors, vital for conducting in electronic devices, are in high demand. Now, AI-powered semiconductor chips offer a new way for the market to grow and generate revenue.

Gartner’s VP Alan Priestley attributes the chip demand spike to generative AI’s advanced computing needs.

Just this year, the AI semiconductor market was valued at roughly $53.4 billion. The trend suggests it will grow significantly, reaching about $67.1 billion by next year, showing a 25.6% increase.

According to the editorial, Priestley believes that the ongoing demand and production trend could lead to a value of $119.4 billion by 2027.

Why are the US and China concerned?

Creating semiconductor chips isn’t problematic, but managing their manufacturing and supply chain is. The nation that controls chip production and the supply chain gains substantial financial and geopolitical influence worldwide.

At present, Taiwan holds the top position in semiconductor production, commanding roughly 20% of the worldwide supply.

Yet, due to COVID-19-related supply chain and manufacturing challenges, there’s been a notable surge in chip demand. This has spurred the US and China into a semiconductor competition that’s evolving into a conflict.

The United States is worried that if China gains significant control over semiconductor manufacturing and the supply chain, it might employ this power as a geopolitical tool against both the US and its European partners.

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Conversely, China seeks to challenge Taiwan’s dominance—a crucial Western ally—in order to enhance its geopolitical standing.

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