The semiconductor world has become a battleground between the United States and China, with Brazil and other countries cornered. US sanctions on Chinese companies are prompting Brazil and several other countries to consider partnerships with China.
Lula Hoop, the carioca round dance
The newly elected Brazilian president Luiz Inácio Lula da Silva has not only the headache of deforestation on his desk. The need to develop a semiconductor industry in his country is crucial, given its graphite reserves. The absence of a semiconductor industry is holding back several Brazilian sectors: the automotive sector first and foremost. For this reason, despite the efforts of the United States in convincing countries not to do business with China, the Brazilian foreign minister Celsus Amorim said Brazil cannot afford to take sides in the US-China chip war.
Why is China convenient for Brazil?
The main reason is the cost. The United States and Europe have allocated billions in subsidies and tax incentives to attract semiconductor manufacturers. The US CHIPS and Science Act has dedicated $39 billion to this cause, while the European version of the bill, once passed, would allocate 43 billion euros ($46,6 billion). Brazil does not: it has a lower GDP than these economic giants, making it difficult for Lula to attract US-aligned chip makers. As a result, Brazil finds it much cheaper to partner with Chinese companies.
And it is a "marriage" also coveted on the eastern shore, because despite its difficulties in the production of advanced chips (due to restrictions on EUV and DUV lithography instruments) China is gearing up. The situation could change in a few years. Several analysts predict that China will achieve self-sufficiency in semiconductor production by 2025. Within two years, therefore, Brazil could benefit from a partnership with Chinese semiconductor manufacturers such as YMTC, using existing technologies, to achieve the goal of establish an industry of semiconductors in the country.
Meu amigu Xi Jin Ping: an increasingly close bond between Brazil and China
China has a long history of investing in infrastructure as a means of building good relations and dependence on its products and services. An approach that is proving particularly effective in countries like Brazil, which need improved infrastructure to support semiconductor production. For this reason, the green and gold nation has already drawn on Chinese technology, in particular from Huawei network equipment for 4G and 5G networks. And it has already rejected US pressure to remove such devices from networks (for "national security reasons").
How will it end?
At the moment, Brazil has not yet signed crucial agreements that fully align it with China. The feeling, however, is that this is imminent. And the current direction of the trade war between the United States and China could provide the final accelerator to this process. In a context that also sees other nations friendly towards China joining in.
In essence: in the umpteenth stage of one new cold war (hoping it doesn't get "hot") US efforts to discourage cooperation with China are pushing allies and other nations to change sides and move closer to Beijing.
