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Monday March 04, 2024

US, China at each other's throats for lion's share of over $100b AI chip market

Recent growth and development in practical applications of artificial intelligence have resulted in a boost to semiconductor chip market

By Web Desk
August 28, 2023
Illustration of a semiconductor chip and OpenAIs generative artificial intelligence platform GPT-4 – Unsplash/file
Illustration of a semiconductor chip and OpenAI's generative artificial intelligence platform GPT-4 – Unsplash/file

Tremendous progress in artificial intelligence (AI) is leading to significant revenue generation due to increased demands in semiconductor production, which is expected to exceed $100 billion by 2027, leading to exponential expansion of the industry.

Semiconductors are essentially small chips with the property of ensuring conductivity between conductors and non-conductors – making them a key component of electronic devices in modern times, especially generative artificial intelligence platforms and programs.

The revenue generation potential for 2023 amidst increased semiconductor demand regarding generative artificial intelligence is expected to be around US$ 53.4 billion, said Alan Priestley vice-president Analyst at Gartner – a technology analyst firm.

Though impressive, the $53.4 billion figure is expected to witness further a notable increase of 25.6% to a whopping US$ 67.1 in 2024 next year.

As reported by editorialge, the growth and revenue generation potential for semiconductor production is expected to sustain its upward trajectory leading to an expected revenue generation potential of around $119.4 billion by the year 2027.

According to Priestley, the notable growth potential for semiconductors’ supply and demand can be attributed to the surge in demand for artificial intelligence-enabled chips as a wide array of businesses and organisations from all sectors have recently focused on incorporating AI into their operations in order to tap its seemingly unlimited potential.

Designing semiconductor chips is not an issue, however, manufacturing them and controlling the supply chain is. The country that dominates semiconductor manufacturing and global supply chain will benefit from significant financial and geo-political leverage on a global stage.

Currently, Taiwan is the leading semiconductor-producing country in the world and controls around 20% of the global supply. However, owing to supply chain and manufacturing issues due to the COVID-19 pandemic, the world has witnessed a significant increase in demand for these chips, which has led to the US and China engaged in a semiconductor race that is gradually turning into a war.

For the United States, the concern is that if China achieves notable dominance in semiconductor manufacturing and supply chain, it’ll use it as a geo-political weapon against the US and its European allies. China on the other hand aims to counter Taiwan’s supremacy – a key Western partner, to strengthen its geo-political position.