AI demand drives chip shortages and intensifies US-China technological competition

The global semiconductor industry is facing significant supply pressures as artificial intelligence demand extends into mature manufacturing processes. Vanguard International Semiconductor Chairman Fang Lue reported that 8-inch wafer capacity is “completely exhausted” due to the massive concentration of capital, talent, and resources toward AI applications. This shift is crowding out non-AI sectors, creating a persistent supply-demand imbalance that experts suggest could last for several years.

Simultaneously, geopolitical tensions are intensifying the competition between the United States and China across five key AI domains: advanced chips, AI models, technical security, humanoid robotics, and military applications. The U.S. has implemented export controls on advanced chips to limit Chinese military capabilities, leading to investigations into chip smuggling. Meanwhile, allegations have surfaced regarding Chinese firms using “distillation” techniques to replicate advanced American AI models.

In the robotics sector, the U.S. is restricting imports of Chinese humanoid robots for national security reasons, while China maintains a significant position in the supply chain for critical components and rare earth materials. As both nations prioritize AI development to secure strategic advantages, trust remains low, complicating potential international cooperation on AI safety and regulation.