What’s next for the chip industry in 2023

The Netherlands and Japan reportedly agreed to codify some of the US export control rules in their own countries. But the devil is in the fine print. “There are definitely voices supporting Americans on this,” says Lee, who is based in Germany. “But there are also some pretty loud voices that argue that just following the Americans and going along with that would be bad for European interests.” Peter Wennink, CEO of Dutch lithography equipment company ASML, said his company “sacrificed” for export controls while US companies benefited.

The cracks between countries can get bigger over time. “The history of these technology restriction coalitions shows that they are complex to manage over time and require active management to remain functional,” says Miller.

Taiwan is in a particularly delicate position. Due to their geographical proximity and historical relationship, its economy is strongly linked to that of China. Many Taiwanese chip companies, such as TSMC, sell to Chinese companies and build factories there. In October, the United States granted TSMC a one-year exemption from export restrictions, but the exemption may not be renewed when it expires in 2023. It is also possible that a military conflict between Beijing and Taipei are derailing all chipmaking activity, but most experts don’t see that happening in the near term.

“Taiwanese companies therefore need to guard against uncertainties,” says Hsu. That doesn’t mean they’ll pull out of all China operations, but they might consider investing more in overseas facilities, like the two chip factories TSMC plans to build in Arizona.

As Taiwan’s chip industry moves closer to the United States and an alliance solidifies around the US export control regime, the once-globalized semiconductor industry moves one step closer to being separated along ideological lines. “In fact, we will enter the world of two chips,” says Hsu, with the United States and its allies representing one of these worlds and the other comprising China and the various countries of Southeast Asia, from the Middle East, Eurasia and Africa where China is pushing for its technologies to be adopted. Countries that have traditionally relied on China’s financial aid and trade agreements with that country are more likely to accept Chinese standards when building their digital infrastructure, Hsu said.

Although it would happen very slowly, Hsu says this decoupling is starting to seem inevitable. Governments will have to start making contingency plans for when that happens, he says: “Plan B should be: what is our strategy in China?

This story is part of MIT Technology Review’s What’s Next series, where we examine industries, trends, and technologies to give you a first look into the future.