The Geopolitics of Chips: A Recent Era of Competition and Investment
The development of technology and innovation is often seen as driven by economic gain. However, recent geopolitical developments and shifts within the chip industry demonstrate that this is not always the case. National ambitions are increasingly taking precedence, with governments vying for control of this critical technology. As Chris Miller notes in “Chip War: The Fight for the World’s Most Critical Technology,” microchips are the “new oil”—fueling modern historical processes.
A History of Chip Wars
While the central role of chips in society has develop into prominent recently, particularly during the COVID-19 pandemic, “chip wars” are not a new phenomenon. In the 1980s, Japan’s economic boom saw Japanese companies dominate the global memory chip market, causing concern in Silicon Valley. This led to the US-Japan Semiconductor Agreement of 1986, which forced Japan to raise prices and open its market to American products, contributing to the end of its rapid economic growth.
Today, China has taken Japan’s place, with ambitions to become a technological leader. Companies like Huawei and SMIC are heavily supported by the “Made in China 2025” initiative. The US responded with export controls and restrictions on Huawei, blocking its access to 5G markets in several countries.
The US Chips Act and European Response
The semiconductor supply chain crisis caused by COVID-19 further highlighted the strategic importance of chips. In 2022, the US passed the Chips Act, allocating $52.7 billion to semiconductor production and research, signaling a state-led investment strategy.
The European Union has also recognized the critical role of microchips, particularly after disruptions to the automotive sector. The European Chips Act aims to mobilize around €43 billion in public and private investments. The Chips Joint Undertaking (Chips JU) invests funds in chip development through grants, in collaboration with national European governments.
Amendments are currently being made to the European Chips Act, moving towards a “Chips Act 2.0,” to better compete with the US and China.
Latvia’s Role in the Microchip Landscape
Latvia, while relatively isolated from these major processes, has a growing microelectronics industry with companies like MikroTIK, SAF tehnika, Hansamatrix, and LMT. The country is now at a crossroads, with opportunities arising from the geopolitical situation and the EU’s response.
The aCCCess project, funded by Chips JU, is establishing chip competence centers in each EU country, including Latvia. The Latvian Microchip Competence Center (LMKC) unites Riga Technical University and the University of Latvia, providing Latvian startups and medium-sized companies with access to microchip competencies, development, production, and funding opportunities.
Looking Ahead: Latvia’s Chip Innovation
The LMKC is part of the EU’s strategic effort to achieve sovereignty in microchips, particularly in defense and health. Latvia has the potential to transition from a chip consumer to a chip innovator by 2030, strengthening its economic development and defense sector.
The success of this endeavor will depend on Latvia’s ability to capitalize on the opportunities presented by the LMKC and the broader EU initiatives. This may be a unique opportunity that will not come again.
The author is the head of the RTU microchip department.