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they are in smart phones, computers, cars, even appliances like coffee machines. semi conductors are in almost every electronic item we use, but are in short supply around the world. taiwan is the dominant player with 60% of the global market, but production slowed because of measures to slow a surge of covid infections. the worst drought on record is also having an impact as the industry uses larger months of water. the automobile industry is one of the most affected, ford and general motors have shut down factories, laid-off workers and cap production. one manufacturer has warned the production -- has warned the situation could lead into next year. the u.s. and china are pumping money into their industries to become more self-reliant. china's main chipmaker is under u.s. sanctions for alleged ties to its military. the u.s. senate approved $52 billion for america's ma

conductor industry as part of a tech innovation bill. >> as a percentage of gdp, we spend less than half as much as the chinese communist party on basic research. we rely on foreign nations to supply critical technologies that we invented, like semiconductors. that sunny american optimism has flickered as well. the world is more competitive now than at any time since the end of the second world war. if we do nothing, our days as the dominant superpower may be ending. ♪ >> let's bring in our guests. in seoul, a political correspondent and fellow at george washington university. jim, ceo of a tech company and

in miami, a professor of political science at university of miami and the editor of taiwan in the era of siding when. let me start with you, wise the situation so dire? -- why is this situation so dire? >> the pandemic that began at the end of 2019 has basically altered the business planning cycles for many of the industries that we see in connection with the chip shortage. the most vulnerable sector in this chip shortage crisis was the automotive sector, the automobile sector. because usually, when the chip orders are sent in, the primary consideration was given to other products such as mobile phones, computers or any other equipment

we have used in order to get connected during the pandemic. that is why we have the shortage at the moment. >> what is the overall impact of all of this? i am talking about the impact on businesses and also consumers, and folks who want the latest smartphones. >> well, we may have to wait for a long time. i know my grandsons are at the age where they think they will die if they don't have the latest electronic equipment, and they are just going to have to get on a waiting list. but if i may add something, by the way, i have never been on a program with another june, so pleased to sort of make you. a lot of things are being blamed on the pandemic. and in truth, it did disrupt an awful lot of things, but i have

to go with the tsmc chairman, the guy who runs day to day operations, because the founder, although a very alert and hearty 89-year-old, has withdrawn a bit, and he said something interesting. he said it was only partially due to the pandemic, but it was also due to manufacturers stockpiling chips, and that you have to distinguish between real demand and stockpiling for inventory. at he thinks a lot of this is because of stockpiling for inventory. >> jim, from your point of view, how long is it going to take for production to catch up with demand? some suggest this could take at least years. does that timeline sound right, or could it be longer? >> 18 to 24 months is a good

estimate, but there could very well be stockpiling here. supply chains are increasingly interconnected around the world. who knows what companies are stockpiling what. i suspect supply and demand, as prices rise, that changes the dynamic. you may be able to wait -- you may be willing to wait for a game console if the price goes up on it, that certainly has an impact, but there needs to be more supply and 18 to 24 months is a good estimate. >> the u.s., china and south korea are giving incentives to ramp up local production. how are those efforts going thus far? and how long think that is going to take? >> as far as huawei is concerned, it is ongoing at the moment. as much as the de-coupling process continues in this regard, china is going to continue trying to build

self-sufficiency within its domestic environment. -- sufficiency -- self-sufficiency within its environment. south korea and taiwan are investing within their homelands. south korea announced a chip belt cluster, which basically entails foreign companies such as dupont, samsung electronics, sk hynex memory chips, their focus is not just on memory chips, but also on system chips. taiwan, at the same time, is going to invest heavily in taiwan while maintaining leverage in the u.s. by expanding production facilities. we will have to see how this enfolds -- unfolds into 2023 and the longer term, maybe 10 years. >> june, taiwan has a most 60% of the market when it comes to

semiconductors. is there any possibility that he could see taiwan try to use this shortage of semiconductors as a political tool? >> well, taiwan is very, very careful. and the momentum recently, because china has become so increasingly aggressive across-the-board, united front work activities aimed at subverting the democratic process in a number of companies -- and a number of countries, expansionist activities in the south china sea and east genesee -- east china sea, and they have ramped up an anti-china coalition, which is still nascent, but this has defended taiwan, since people now see, instead of china saying we deserve taiwan, it is ours or ought to be ours, they are seeing a very aggressive china

and are therefore becoming much more sympathetic to taiwan. in, taiwan doesn't have to use this as a political tool. it has already got it. and you hear people in publications saying if china were to invade taiwan, which it keeps threatening to do, and it is making gestures in the direction, that would destroy taiwan's semiconductor manufacturing corporation, and china would be the big loser as well. in a way, taiwan is in a good position in that sense. and it doesn't have to be overtly, look at what we have got and what will lose, because i think most of the world is aware of what would be lost. >> are there any viable or concrete short-term solutions that could help with the shortage? >> not for producing more ships

-- more chips, other than making sure your factories are at capacity and if you can do overtime shifts, i am sure those types of things are already being done as they try to boost production good but in terms of building new plants commit is going to take 18 to 24 months. it is a notoriously capital-intensive business. thousands of steps are involved and there is a significant amount of expertise upright or -- proprietary knowledge in developing these chips. they did it better than the others and ended up with a dominant market position. probably the bigger issue will be supply and demand. as prices rise, that will tend to reallocate chips, not entirely because you have stockpiling, but that will tend to reallocate chips. the highest-value uses and you may end up waiting more for game consoles, phone upgrades, those things, which is not a trivial issue, it has an economic impact but doesn't seem to rise to a national security issue. >> june park, i saw you nodding.

did you want to jump in and expand on the point he was making? >> some of the dynamics between south korea and japan have not been resolved. in connection with what jim was mentioning, the export curbs that began to year by japan on some crucial components of semiconductor production, again and south korea, reveals that the u.s. and japan are hoping to benefit from this decoupling process. and there is a geopolitical dynamic because, either you belong in this supply chain, or you don't. that will accelerate the geopolitical divide in the coming years. and the export curbs are not ended. the huawei ban is still in place and we will have to see not just

the economic dimensions of this, but geopolitical dimensions as well. >> june park was talking about the acceleration of the geopolitical divide and that lead to what i wanted to ask you, and that is, could this race to make up for the shortfall ignite political tensions? >> i'm not sure. because the chinese government is the reason for most of these political tensions. things were going fine until the chinese began to use computer chips and rare earths and all kinds of things as economic web as geopolitical tensions -- rare earths as geopolitical weapons. i don't know who the richest person in the world, but a

chinese corporation certainly is up there, it -- but a taiwanese corporation certainly is up there, taiwan has the money and the talent. at the top of my class at m.i.t., there were a half-dozen taiwanese in the top down. and they have got the talents, they have got the money and they have got the geopolitical impetus. if we don't stay ahead on this, we could be obliterated. so, i think the geopolitical cards are still in play, and they are not going to get any worse. but on the other hand, they are knuckling to get any better. >> if we are talking about the geopolitical cards in play right now, how is this race laying out between countries or technological supremacy, technological independence, especially when it comes to semiconductors? >> this is just one piece on the chessboard, if you will, and it is an important piece.

technology is such an important part of our lives and in many ways, economic security is national security. i can't help but think, two years to correct an imbalance of a supply and chips is an incredibly short time as it relates to geopolitics. we are talking about things that unfold over decades, as, say, the u.s.-china relationship. there is bound to be oversupplied 24 months down the road. when you wind up with a shortage and everybody rushes in, especially if government money is at stake to correct the supply imbalance, it web sauce to the other size -- it wh ipsaws the other side. this is the bullwhip effect where you overcorrect the other way. i suspect that we will be having a conversation of massive oversupply of semiconductors, depressed rises and the problems that result from that. how that plays out geopolitically, we will have to see, buddy to his -- but it is a

short have permission was a relates to geopolitics. >> when it comes to chips and countries ramping up production, it is still going to take time. but even when it does happen, when orders are placed, it could still make several more months for those all to be delivered, right? >> that is correct. say for example, when samsung decides to build a factory with the $17 billion pledge it made during a summit in may, or when taiwan finally expands the boundaries within the united -- expands the foundries within the united states, they have pledged six places, including arizona. when these foundries have been completed, it would take time until completion, but when they are completed, you would imagine a different scale of production within the united states, with

the huawei band or not -- within the united states. with the huawei ban or not, we are expecting to see a huge production amount coming from the united states. plus, with the innovation drive in the u.s., that would be a huge change, significant change upon the landscape of the semiconductor industry. what would be interesting to see is how europe responds to this. the contactless economy will accelerate, even during our post pandemic -- even during or post-pandemic. the demand for chips is not going away, it will be expanded in the digital economy will expand as well. >> june, you mentioned rare earth elements -- and last

year, you wrote a piece on rare earth elements. how does that play into semiconductor concerns and ship shortages? >> it plays into china's whole of government and whole of society attack on problems. it is a very, very well coordinated one. no matter whether you are pro-china or anti-china or just meh, china, you have to admit they have played their hand brilliantly. rare earths are not a major component of semiconductor chips. they are mostly silicon, hence silicon valley. geranium is not a rare earth, but the same kind of techniques are seen when china decides to do something, it decides to do it in a very coordinated way. and this is certainly a very coordinated way.

the problem with the micro sees in general, this is a bigger problem for the eu because they have so many democracies with different interests, is coordination. i have been told a foundry costs between $10 billion and $12 billion to make, depending on what kind of chip you want to produce, and that after you make it, it is going to take at least five years to become profitable. in other words, government support is necessary. now, china has the type of government that is willing to support that. joe biden says he is willing to support that. it is harder because of the way our economy is structured, with a of private input. and in the case of the eu, really, really hard because even though the french and germans, the british, who aren't in the

eu anymore, pretend to be very friendly. the national rivalries are still there. >> june park, i saw your reacting and wanted to get your reaction be but i also wanted to ask, is there a lot of worry, concern, that china's hold on the rare earth elements sector is so strong, that it could be used against everyone else? >> for the rare earth elements, there have been previous cases in the beauty out -- in the wto for china, because china withheld them when there was a clash between japan and china over a chain of violence. -- jane of islands -- chain of

islands. that leads me to think that in the future when global supply chains are more politicized, that rare earth is listed as one of the elements the u.s. is going to be fixated on in the coming years. but it is not really exercised as a ban at the moment, as in the form of, say, the huawei ban . so, we would likely see some kind of policy mechanism to secure some of the rare earth elements, especially coming from africa. because china already possesses a huge, huge sum of the rare earth that is discoverable in africa. so, there may be infighting amongst countries that would be in need of the rare earths. >> this dependency on taiwan when it comes to semiconductors

, how worrying is that the western countries? >> very worrying. talking about semiconductors, that is worrying, especially in a place where china has ambition spirit that elevates concern. from a geopolitical perspective, you think in terms of decades, not one or two years, but it is illustrative of the kinds of dynamics that can play out and the importance of technology issues, especially in a sector where you are talking about $10 billion to $12 billion. that is a government-level investment. it is very difficult for private companies to make a $10 billion investment with a five-year payback without some form of government subsidy. in a democracy, very hard to do that compared to a more authoritarian state. i think there is a pretty high degree of concern in general about this kind of dependent the. i -- dependency. i am not sure the acute concern is there, i have not heard

people talking about not getting military hardware we need or that there is going to be a giant economic attack. it is more like, it is going to take longer to get your cell phone or your playstation, which is a concern, but not compared to where it could go today. >> in terms of competition, how far ahead are the taiwanese? >> several years, and making steady progress. they are not sitting on their laurels at all. they have got some amazing talent. they have a very efficient educational system. and you don't have to persuade. it is not like the united states, where we almost have to bribe students into stem study programs. these guys are eager and willing. and they understand, critically, that this is important to their future as an independent, sovereign state. i think they are going to be able to maintain that momentum.

now, there have been problems, a taiwan company, macron, and -- micron, an employee there was found guilty of selling secrets to china, silicon chip secrets to china. so, it is not perfect. but they have got the momentum and the will to stay ahead, so i think they probably will. >> june park aside from everything else we discussed today, i want to talk about the covid-19 outbreak in taiwan. did that further disrupt the semiconductor industry? and how much concern is there that that could make things worse, at least in the short term? >> within taiwan, there may be increased cases compared to the previous months that taiwan has

experienced. but taiwan has had quite a good example of the covid-19 pandemic recovery process. and i think with vaccination provided by the united states, taiwan received moderna vaccines, and within several months, i think taiwan would be able to recover from its current phase and possibly into a more rapid pace into recovery. >> we have run out of time. thank you to our guests, june park, jim anderson and june dryer. and thank you, for watching. you can see this and all our previous programs again by visiting aljazeera.com or go to facebook.com/inside the space

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