Geopolitics and the Semiconductor (Chip) Industry
Ericson Scorsim. Lawyer and Consultant in Regulatory Communications Law. Ph.D. in Law from the University of São Paulo (USP). Author of the book “Jogo geopolítico das comunicações 5G – Estados Unidos, China e impacto sobre o Brasil” (The Geopolitical Game of 5G Communications – United States, China, and Impact on Brazil), published on Amazon.
In the 21st century, the semiconductor (microelectronics) industry is one of the global economy’s leaders. Microprocessors are present in all electronic devices: computers, smartphones, televisions, cars, routers, and others. The United States, Europe, and Asia dominate the global semiconductor supply chain. The leading global technology suppliers and main consumer markets are in these regions.
The matter of semiconductors is now part of world geopolitics. In 2020, the US government imposed several sanctions on the company Huawei, including banning it from providing 5G network technology to the United States. The US government has also imposed restrictions on the supply of semiconductors to the Chinese company. Paradoxically, although the United States dominates the semiconductor industry, it has no global leader in 5G technology. That is why the United States is lagging behind in the 5G technology international competition.
Recently, the German Ministry for Economic Affairs and Energy announced a plan to invest in research and development in the microelectronics industry to prepare for 5G and 6G technologies. Together with other European countries, including Italy, Belgium, and Finland, Germany signed a declaration on “A European Initiative on processors and semiconductor Technologies,” highlighting that the semiconductor sector is a global industry. Therefore, it is crucial to invest in all the stages of the production chain: manufacturing of semiconductor equipment, design, production, testing, packaging, among others. The declaration also highlights that investments in research and development in the semiconductor industry are among the highest, representing 15% (fifteen percent) to 20% (twenty percent).
Europe is focused on advancing the semiconductor industry in the aspects of equipment power (batteries), radiofrequency technologies, embedded smart sensors for artificial intelligence, microcontrollers, and more. Thus, the goal is to mobilize the industry’s financiers by building an industrial alliance to establish strategic maps for research and investment in semiconductor ecosystems.
In summary, the purpose of the industrial alliance is to prepare the European industry for the next generation of low-power processors to be used in 5G and 6G networks. In Europe, the issue of technological and digital sovereignty is on the agenda. Mastering the semiconductor industry and the communications network infrastructure, and the cloud computing industry are understood to be vital to European interests. That is why there are investment programs in European data centers through the Gaia-X program.
The Europeans are researching 5GHz technology. Norway, through its university, is the country at the forefront of this scientific research. Here in Brazil, the federal government approved Decree n. 10.615 on January 29, 2021, which deals with tax incentives for investments in the semiconductor industry. There are tax incentives (PIS, IPI) for importing software. There is a provision for tax benefits for investments in research, development, and innovation to support the advancement of the semiconductor industry, which includes: the conception, development, and design; diffusion or physical-chemical processing and wafer cutting, encapsulation, and thesis, substrate cutting, encapsulation and testing in integrated circuits, information displays, among others.
The Decree also defines research, development, and innovation activities. We note that Brazil lacks a geostrategic vision of the global semiconductor industry, focusing only on importing components. The previous administration created the Brazilian Semiconductor Company, a state-owned company dedicated to the manufacturing of semiconductors.
The current administration decided to extinguish this company. Semiconductors are considered a dual-use technology, that is, with both civil and military use. And that is why developed countries consider the semiconductor industry in their geostrategy. Interestingly, the United States, in the National Defense Authorization Act,provides for federal investments in the manufacturing of the semiconductor industry on US territory. Several US states are vying to attract international investment in domestic semiconductor production. 5GHz (five gigahertz) and 6GHz (six gigahertz) technologies will shape the future of countries’ digital economies. A lack of semiconductors can collapse a whole industry.
Dependence on semiconductors produced in other countries is a systemic risk to the country, including its critical national infrastructure. If Brazil does not have a global geostrategic vision on the semiconductor industry, it will miss historical opportunities that could represent a “quantum leap” in developing advanced technologies and the preparation of its digital economy.
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jun 29, 2022
jun 15, 2022