Three Key Strategies for Navigating the US-China Chip War

Read | Nov 16, 2023

AUTHOR(s)

A WNS Perspective

Key Points

In recent times, the global semiconductor industry has become embroiled in a high-stakes conflict between the US and China. The dispute, which originated with US restrictions on China's access to advanced chip technology, has evolved into a tit-for-tat battle involving not only the two superpowers but also their allies.

Central to the issue is China's restriction on the export of critical raw materials like germanium and gallium, essential components for semiconductor manufacturing. China's dominance in the supply of these materials has put pressure on semiconductor-producing regions worldwide, prompting them to seek alternative sources. This situation has triggered concerns about disrupted supply chains and rising prices.

Both China and the US rely on each other for vital components, creating a mutual interdependence that will likely necessitate compromise. To help businesses adapt to the challenges posed by the chip war, they must adopt three key strategies:

Diversify the Supply Chain: Businesses heavily reliant on semiconductors must explore alternative sources, particularly if their current supply chain heavily relies on China. Some major companies have already begun diversifying their sources to reduce vulnerability.
Seek Local Suppliers: To minimize disruptions, it's advisable to look for local suppliers where possible. Though these suppliers may have limitations, they can serve as a short-to-medium-term solution to avoid semiconductor supply interruptions.
Continually Review the Market: Staying informed about developments in semiconductor supply chains is crucial for companies in the technology, manufacturing and automotive sectors. Implementing risk detection tools can help identify potential disruptions and enable swift responses.

The US-China chip war is having a widespread impact across industries, necessitating proactive measures for resilience and adaptability.

To delve deeper into this topic and access further insights, you can read the full blog here.