The world is CONSTANTLY evolving, and the global balance of power is always shifting. Right now, we are seeing a major shift in the world order as China is seen to be rising to challenge the United States as the dominant global superpower. This shift is being fueled, in part, by the ongoing semiconductor chip wars, which have significant implications for the average American citizen and all citizens of the world.
In this short piece, we explore what the changing world order means for us and what we can do to stay informed and prepared for the challenges and opportunities it brings.
What is the Changing World Order and Why Does it Matter?
Coined by Ray Dalio in his book, the Changing World Order refers to the system of international relations and the distribution of power among nations. For the past several decades, the United States has been the dominant global superpower, with a dominant military and economic presence around the world. However, as China has grown in power and influence, it is challenging the United States for global dominance. This shift in the balance of power has significant implications for the rest of the world, as it will shape the global economy, politics, and security.
The Semiconductor Chip Wars: How They Fit into the Changing World Order
One of the key battlegrounds in the changing world order is the semiconductor chip industry. Semiconductor chips are a vital component in a wide range of electronic devices, from smartphones and laptops to military hardware and infrastructure. The United States and China are both major players in the global semiconductor industry, and their competition for dominance has major implications for the rest of the world.
Semiconductor Supply Chain: Massive Investments in the US and China
The United States has traditionally been the leader in the semiconductor industry, with companies like Intel and Qualcomm at the forefront. And its ally, Taiwan serves as a dependable partner in providing the cutting edge of the semiconductors’ fabrication, in super expensive and highly specialized FABs which they can build for 5x cheaper. Even with that, the leading supplier of chips to the world and the US and China alike, Taiwan Semiconductor, is incentivized to construct new FABs in the US as part of an effort to increase the resiliency of the US supply chain of semiconductors.
However, China has been investing heavily in the industry, even while importing over $400 Billion worth semiconductors in just 2021, their semiconductor industry has expanded domestically to generate over $150 Billion annually. And they have a recently introduced domestic policy involving the investment of $143 Billion in their industry and are able to export 7nm chips. While this is still several years behind the bleeding-edge, it is expected to grow dramatically as 19 of the 20 fastest-growing semiconductor companies in the world are Chinese.
In addition, the Chinese government has been heavily subsidizing its domestic semiconductor industry, giving it a competitive advantage over foreign competitors. This has led to concerns about the Chinese government gaining control over critical supply chains and potentially using its dominance in the semiconductor industry as a tool for political leverage.
Similar to Chinese investments, back in August 2022, President Biden signed the $50 Billion CHIPS and Science Act of 2022, marking a significant step in the ongoing economic war between the US and China, particularly in the semiconductor supply chain and technology. This legislation provides funding and incentives to rebuild the US’s supply chains, manufacturing, and infrastructure, and to increase the production of semiconductors, strengthen research and design leadership, and grow a diverse semiconductor workforce. This aims to give the US a competitive edge on the global stage and reduce our reliance on vulnerable or overly concentrated foreign production for both leading-edge and mature microelectronics. More here.
For a deep dive on this topic, watch this 33min video from YouTuber Johnny Harris.
The Impact on the Average Citizen
So, how does all of this relate to the average citizen? The semiconductor chip industry is a key driver of the global economy, and its growth has the potential to create jobs and stimulate economic growth. The competition between the United States and China in this industry could have major implications for the global economy, as well as for individual businesses and consumers.
For example, the United States’ reliance on foreign semiconductor suppliers, particularly from China, has led to concerns about supply chain disruptions and vulnerabilities. This could potentially lead to higher prices for electronic devices, as well as potential shortages in key industries like healthcare and defense.
On the other hand, if China is able to become a dominant player in the semiconductor industry, it could lead to lower prices for consumers as Chinese companies are able to undercut their foreign competitors. However, this could also lead to the loss of jobs and market share for American companies, as well as concerns about the Chinese government’s control over critical supply chains.
What Can We Do About It?
So, what can we do about the changing world order and the semiconductor chip wars? As individuals, it is important to stay informed about the global economy and the geopolitical landscape. This can help us make informed decisions about where to invest and how to plan for the future.
At the same time, it is important for leaders at the national and international level to work towards solutions that promote fair and open competition, while also addressing concerns about supply chain vulnerabilities and national security. This could involve the development of policies that support domestic semiconductor production, as well as efforts to strengthen international supply chains and reduce dependencies on any one country.
Navigating the Changing World Order
As we have seen, the Changing World Order presents both challenges and opportunities for the average American citizen and all citizens of the world. It is important for us to stay informed and prepared for the shifts in the global balance of power, and the semiconductor chip wars are just one aspect of this shift. But there are steps we can take to navigate this changing world.
Ray Dalio, author of “Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail,” outlines six stages of the Big Cycle and offers principles for dealing with each stage.
These stages include:
1) the Rising Stage
2) the Peak of Global Cooperation
3) the Emerging Markets Stage
4) the Fall of Global Cooperation
5) the Coming Apart Stage
6) the Rising Again Stage.
For more about the Changing World Order and how to deal with it, watch this 44-minute animated video.
Dalio’s principles for navigating The Big Cycle include maintaining balance between productivity and debt, having a strong and smart political middle, minimizing the chances of military wars through negotiation and diplomacy, adapting and inventing ways to improve, and managing the relationships between different cultures.
By following these principles and staying informed about the changes happening in the world, we can effectively navigate the Changing World Order and seize the opportunities it presents. It is up to us, both as individuals and as leaders, to shape a future that is prosperous and peaceful for all.
