Need to Know: There’s a real risk of World War 3.1, and the battleground will be microchips, strategist says

by | Feb 21, 2023 | Stock Market

Welcome back from a three-day break honoring America’s founding father, which one congresswoman decided to celebrate by proposing a national divorce. Would a blue and red state split be good for stocks? Bad probably for defense contractors but there would be whole new asset classes opening up, so who knows. Investors tend to reward spinoffs, after all.

What is real are the increasing tensions between the U.S. and China, and in particular the technology sector. At the center of these tensions is ironically enough, a Dutch company. Microchip equipment maker ASML
has been restricted by the U.S. from selling the most up-to-date equipment to China, and now has disclosed theft of intellectual property by China. Peter Tchir, head of macro strategy at Academy Securities, dubs a potential war over semiconductors World War 3.1. He cites a retired lieutenant general, Robert Walsh, in noting why chips are so important. For one, the U.S. wants to prevent China from getting the highest-end chips that can be used in advanced military systems during a conflict with the U.S. Walsh also notes the U.S. operational concept for future warfare is the Joint All-Domain Command & Control Strategy, while China’s concept is the Multi-Domain Precision Warfare — both needing high-end semiconductors. Walsh adds that China aims to be the global artificial intelligence leader by 2030 and on par with the U.S. military by 2035, and that high-end chips are needed for AI, supercomputing and weaponizing technology. Tchir divides the current semiconductor space into four — cutting edge, which is dominated by Taiwan; high tech, which is one to three generations behind and where Taiwan is a leader but the U.S. is competitive; mid-to-low tech, which is global in nature; and commodity chips. And he says there’s a real risk that the U.S. pushes too hard, that Washing …

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