ASIA, THE NEW AI BATTLEGROUND?
Asia, the new AI battleground?
Yvonne Gill charts how the war for dominion in artificial intelligence and semiconductor chips is hotting up in Asia
The world is in the midst of a technological arms race. The artificial Intelligence (AI) revolution is propelled by innovations like Machine Learning (ML) and Large Language Models (LLMs). Yet it is microchips that provide the extraordinary processing power to the massive neural networks at the heart of these AI systems.
All this is likely to change the way we work, think, disseminate information and even go to war. Nascent forms of these technologies are already embedded in everything we use, from the Internet to smartphones, 5G networks to self-driving cars, military & surveillance systems, and space exploration devices. With the rise of ML technology and LLMs, we are faced with a situation where machines are learning and thinking very much like human beings, and have begun to interact with us in our languages – not in codes and commands, as has been the case with computers.
Right now, the epicentre of the AI revolution is the US. But rumblings beneath the calm surely point to Asia emerging as the future battlefield of this tech war. China, Taiwan, South Korea, Japan, and now India are bracing for dominance in the field of AI and microchip (semiconductor) production. Interestingly, Europe plays a crucial role in the microchip manufacturing supply chain, too. The Dutch company, ASML, is the sole supplier of latest EUV lithography machines,without which it will almost be impossible to manufacture the latest microchips.
The AI revolution would not have happened but for the unprecedented processing power of millions of Graphic Procession Units (GPU) chips that power the major LLMs. Whoever dominates in these fields will be aleaderin global innovations and become an economic powerhouse in the not so distant future.
No wonder, then, that China, the US and Asian giants like Taiwan, South Korea, Japan and even India are racing to catch up by ramping up their semiconductor production and AI capabilities.
China has already set an ambitious goal of becoming the world’s AI leader by 2030. Tech giants such as Baidu, Tencent, Alibaba, and Huawei are investing heavily in AI research, particularly in areas like facial recognition, smart cities, self-driving cars, and military systems.
China has an edge.With its more than1.4 billion people under constant surveillance, it has access to unmatched volumes of data, crucial for training AI systems. This was one of the advantages that helped a Chinese company to develop an LLM called Deepseek at a fraction of the cost American companies spend on training their AI systems. Besides, the Chinese government provides billions to state-run companies and startups for AI research. In China, which does not allow free speech and has an autocratic regime, AI is embedded in daily life, from automated retail and payment systems to predictive policing and public surveillance.
However, China’s major weakness is its semiconductor industry. The countryis heavily dependent on Taiwan and South Korea for high-end chips, and cannot import advanced semiconductor technologies, including advanced lithography machines,due to restrictions imposed by US-led sanctions.
In order to overcome these handicaps, China is investing heavily in its domestic chip manufacturing capacity through SMIC (Semiconductor Manufacturing International Corporation). But the country still has a long way to go.
India is now aggressively entering the AI and semiconductor race
Taiwan is the global leader in semiconductor production.The Taiwan Semiconductor Manufacturing Company (TSMC) produces over 90 per cent of the world’s most advanced chips.The islandis a critical contributor to the global semiconductor supply chain because it leads in 3nm and 2nm chip production, and is years ahead of competitors.
Major tech giants including Apple, Microsoft, NVIDIA and Microsoft rely on TSMC for their microchip requirement. This also makes Taiwan a flashpoint of US-China tensions. By taking control of Taiwan, China could disrupt the global IT industry, affecting everything from smartphones to supercomputers.
South Korea,too,is a key tech hub, home to Samsung and SK Hynix, two of the world’s largest semiconductor companies.Samsung competes with TSMC in high-end chip production, while SK Hynix is a major supplier of DRAM and NAND flash memory chips. And, with companies like Naver and Kakao developing AI-powered language models and smart assistants, South Korea has also made initial advances on the AI front.
Europe has a monopoly on the most critical technology in the semiconductor supply chain – lithography machines
Although Japan is no longer a leader in chip manufacturing, it controls key materials and equipment needed for chip production. Companies like Tokyo Electron and Nikon supply crucial semiconductor manufacturing tools, making Japan an essential part of the supply chain. Aligning itself with the US and European moves to curtail China’s microprocessor supply chain, Japan has also restricted exports of critical semiconductor materials to China.
While Europe does not dominate the chip manufacturing scene, it has a monopoly on the most critical technology in the semiconductor supply chain – the lithography machines. The Advanced Semiconductor Materials Lithography (ASML), a Dutch company, produces the world’s most advanced Extreme Ultraviolet (EUV) lithography machines. These EUV machines are required to produce the most advanced chips (5nm, 3nm, and future 2nm).The microchip is a tiny, intricate piece of semiconductor material that packs a vast number of transistors onto a small surface, allowing it to perform complex calculations and operations at high speeds. It is the fundamental building block for modern electronics. The more transistor the chip packs, the greater its processing power. But it is a big challenge to produce chips below 5 nanometers (nm)
All companies, including TSMC, Samsung and Intel, rely on ASML’s lithography machines for manufacturing the latest chips.China cannot acquire ASML’s most advanced EUV machines due to US-led sanctions.As it cannot produce cutting-edge chips without ASML’s EUV technology, this gives the US, Taiwan, South Koreaand Europe a strategic advantage.
India, traditionally a software and IT services powerhouse, is now aggressively entering the AI and semiconductor race.It has a strong AI ecosystem, with companies like TCS, Infosys and Wipro integrating AI into business solutions. Indian AI startups are also making a mark in global AI innovation. Niramai, for instance, has developed an AI-based breast cancer detection system. Similarly, SigTuple is developing AI-driven medical diagnostics, while CropIn is working on the application of AI in agriculture.
So far, India has lagged behind in microchip production. The government has therefore launched the $10 billion India Semiconductor Mission. The initiative aims to promote the setting up of domestic chip fabrication and productionfacilities, attract foreign investment, and reduce dependence on chips imported from China, Taiwan and South Korea.
To an extent, India been successful in attracting major Investments. Foxconn is investing in a microchip production facility in Gujarat and Micron is setting upa $2.75 billion chip testing and assembly plant in the state. Vedanta and the Tata Group are also leading India’s semiconductor push.
Given the fact that major chip manufacturers are exiting China, India could become a reliable semiconductor hub, providing an alternative to China.
Although the AI and microchip battle is being fought in Asia, the US still plays a key role by blocking China from acquiring advanced chip-making tools (like ASML’s EUV machines). It is investing $52 billion in domestic semiconductor production via the CHIPS Act and strengthening alliances with India, Taiwan, Japan and South Korea.
When all is said and done, the US still depends on Asian chipmakers, and therefore, Asia will continue to dominate the semiconductor industry and could become an AI hotspot.
With continuous advances being made in AI and semiconductor technology, the race for dominance is sure to intensify.
China’s future will depend on its ability to build a domestic semiconductor industry that keeps abreast with the latest technology. Taiwan and South Korea will face stiff challenges from both China and India to maintain their lead and, if things go well, India could rise as a semiconductor manufacturing hub and a leader in the field of AI application and innovation.
Clearly, the tiny microchip is king.
Yvonne Gill is a freelance journalist based in London