Opinion | If the US doesn’t thwart China’s efforts to be semiconductor self-sufficient, climate change might

As China rushes to build up its chip manufacturing capabilities, climate change is making parts of the country increasingly prone to extreme weather that could create resource scarcities and disrupt operations

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Cracks run through a partially dried-up river bed in Nanchang, Jiangxi province, on August 28, 2022. Climate change is making parts of China increasingly prone to droughts, which could make scaling up the country’s semiconductor industry difficult. The chip-making process is extremely water-intensive, and in China alone requires around 150 billion litres a year. Photo: Reuters

Published: 9:30pm, 28 Mar 2023

The addition of Chinese chip designer Loongson Technology to the US entity list restricting exports of chip-making technology to China is the latest geopolitical blow to an economically vital industry.

Loongson is working to build its own advanced chips to help China move towards self-sufficiency in semiconductor design and manufacturing.

But geopolitics isn’t the only threat to China’s semiconductor manufacturers and by extension, to China’s increasingly tech-based economy. Climate change is also driving new and evolving risks for the chip-manufacturing process.

China’s digital economy accounts for nearly 40 per cent of its GDP, and semiconductors are a central component of that segment. Earlier this month, Vice-Premier Liu He emphasised the industry’s importance, calling it “the core nexus of modern industrial systems”.

China uses more than three-quarters of the world’s semiconductors but produces only 15 per cent of them. They are used to make everything from cars to phones to a whole range of products in the so-called internet of things.

Physical disruptions to the supply of chips, such as floods or droughts, would carry costs that would reverberate throughout the economy.