Celine Lee, Andrew Kidd, and Bruce Schneier
In 2014, the People’s Republic of China (PRC) launched a massive investment campaign to develop its domestic semiconductor industry. While significant policy and media attention is focused on PRC efforts to catch up to the United States at the leading edge of semiconductor manufacturing, PRC investments in foundational, or “lagging-edge,” semiconductors are also an important strategic development. In this issue brief, the authors examine PRC investments in field-programmable gate arrays (FPGAs) as an example of critical, specialized semiconductors that are often manufactured with foundational technology.
FPGAs are specialized semiconductor chips that offer a unique combination of flexibility and performance. They are critical components in guided missile systems like the FGM-148 Javelin, automobiles like the Mustang Mach-E electric SUV, telecommunications systems, and cloud data centers. Today, the United States leads the FPGA industry. US firms hold market-leading positions in FPGA design and design software, while most FPGA manufacturing and assembly, testing, and packaging is conducted by US firms or by close allies such as Taiwan.
However, the PRC has steadily increased its semiconductor investment efforts in recent years to develop manufacturing capabilities for foundational semiconductors overall, and design capabilities for FPGAs in particular. This new PRC capacity will come online in one to three years and, given its substantial scale, it may price US FPGA firms out of the critical segments of the FPGA market. This will create both availability and security risks for the US FPGA supply chain.
Semiconductors are at the heart of US-China tech tensions
In the last decade, US and PRC policy postures toward the semiconductor industry have changed. As the overall US-China relationship shifted from collaboration to competition,1 the US-China semiconductor ecosystem has evolved from a benign mutualistic partnership into a strategic competition. This shift, coupled with rising tensions between the United States and the PRC overall, triggered a broad US response, including prohibiting PRC investments, imposing export controls on critical chips and manufacturing equipment, and an industrial policy that supports domestic chipmakers. Key PRC and US actions are summarized in Figure 1.
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