G7 Targets Competitive Imbalances in Semiconductor Industry

Industry ministers from the Group of Seven (G7) advanced democracies agreed on Thursday that non-market practices in the semiconductor industry represent an urgent challenge requiring collective action. This announcement was made by the Italian presidency and comes in response to mounting concerns about the growing influence of China in the sector, according to Reuters.

The G7’s focus on the semiconductor industry isn’t new. At the G7 summit in June, leaders had already pledged to confront what they described as China’s unfair business practices in this crucial sector. Over the past several years, China has been aggressively working to close the gap in advanced semiconductor manufacturing, prompting significant pushback from the United States and its allies. These countries have repeatedly restricted China’s access to cutting-edge chip-making technologies, such as deep and extreme ultraviolet lithography, as a means of curbing its technological advancements.

Currently, the vast majority of global semiconductor manufacturing is concentrated in South Korea and Taiwan. Taiwan’s geographic proximity to mainland China, combined with President Xi Jinping’s ambitions to reunify the island with China, has raised concerns about the potential for a military conflict that could disrupt the world’s semiconductor supply. This scenario is particularly troubling given Taiwan’s dominance in the production of advanced chips, which are essential for everything from smartphones to military equipment.

Per Reuters, the reliance on the Asia-Pacific region for such critical components has driven major economies, including the U.S. and European nations, to pass legislation aimed at bolstering domestic semiconductor production. The U.S. CHIPS Act and its European counterpart have collectively committed tens of billions of dollars in subsidies to incentivize companies to build chip manufacturing plants within their borders, reducing reliance on Asia and increasing supply chain resilience.

However, the newly formed G7 task force, established to tackle these issues, will not be limited to the semiconductor industry. Its scope will extend to overseeing undersea cable connectivity—an increasingly critical issue. Recent years have seen a spate of high-profile outages in key undersea cables, such as those in the Red Sea and South China Sea, leading to concerns about the stability and security of global internet infrastructure.

Source: Reuters