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Chip wars: How Nigeria can tap $1trn industry

Chip wars: How Nigeria can tap $1trn industry thumbnail

The use of the majority of silica sand deposits in construction and the gaps in human capital development means Nigeria will be totally missing in the chip war between the United States and China in 2023.

But should the most populous country in Africa with many developmental challenges change track, it could be one of the major beneficiaries of the large-sized investment going to the semiconductor market. The global semiconductor market hit a valuation of $555.9 billion in 2021 and is projected to reach $1,033.5 billion by 2031, with a compound annual growth rate of 6.21 percent from 2022 to 2031.

Chip is the foundational ingredient in today’s modern world. It has to be present in nearly all technology devices for them to function efficiently. It powers mobile devices from 5G-enabled smartphones to feature phones, the transistor radio set used by millions in Northern Nigeria, the television set in many homes, and several technology devices used by people today.

While no one country can control the entire manufacturing process of chips because of the complexity and the outsized value chain, countries like the US focus on gaining as much share as they can to avoid being overly dependent on others.

The US views its participation in chip manufacturing as critical; it considers it a matter of national security.

Chips are increasingly being used to produce advanced weapons. For example, in 2022, China launched a hypersonic glide vehicle built with advanced chips, in an exercise near Taiwan, and Russia used hypersonics for the first time in warfare in Ukraine.

A major concern of the US is that China controls 80 percent of the world’s refining capacity for rare-earth materials, which are essential in making both military products like parts for fighter jets and everyday consumer devices components like batteries and screens. Restricting exports could provide China with some leverage.

The position of Taiwan is also a major issue for China and the US. Taiwanese companies dominate the global semiconductor output. Taiwan Semiconductor Manufacturing Company (TSMC) is responsible for around 50 percent of global semiconductor chip production. By contrast, no single country accounts for more than 18.5 percent of global oil production.

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China continues to maintain that Taiwan is part of its sovereign territory. But Taiwan sees itself as separate from the Chinese mainland, with its own constitution and democratically-elected leaders. The US supports an independent Taiwan, therefore sees it as an ally to the consternation of China which continues to threaten to reunify Taiwan.

In a move to curtail the growing power of China, the US, in recent months, has instituted the widest restrictions ever on what chips can be sold to China and who can work for Chinese companies. At the same time, it has targeted the supply side of the chip industry, introducing generous federal subsidies to attract manufacturing back to the US. Other governments in Europe and Asia that are home to major chip companies have introduced similar policies to maintain their own positions in the industry.

The result of the new US policy is a rise in investments in chip manufacturing, which is expected to trickle down to the value chain. The chip industry cannot function efficiently without a well-motivated value chain.

The US committed $52 billion to semiconductor manufacturing and research in 2022 with the CHIPS and Science Act. Of that, $39 billion will be used to subsidize building factories domestically. Companies will be able to officially apply for that funding in February 2023, and the awards will be announced on a rolling basis.

Where Nigeria could come in

Chips or computer chips are a vital part of any computer. It was the invention of the computer chip that made it possible for many people around the world and in Nigeria to own a computer. A main component for making chips is silicon dioxide, a naturally occurring semiconductor that is able to transmit or insulate electricity.

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Silicon dioxide is found in large concentrations around beaches. This is why Nigerian states like Rivers, Cross River, and Lagos states have large deposits of silica sands.

The awareness of the huge deposits of silica as a sand resource in Nigeria and its industrial potential has long been created by the Raw Materials Research and Development Centre COOU Journal of Physical Sciences, Nigerian Mining Corporation, and other government agencies. Nevertheless, despite the availability of huge deposits of silica sand in the country, very little use is made of the sand except for the traditional uses in glass and refractory products, according to Chukwu Philomena, a mineral researcher.

There are many other elements that can be used in chip making like sodium, rubidium, iodine, and cesium. Others include germanium, gallium arsenide, oxygen, and boron. These elements are widely used for semiconductors. Some of them are used in the different stages of silicon processing. For example, oxygen is used to make layers of insulators while aluminum and gold are used to make connections.

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In the last two years, supply chain disruptions have led to a shortage of semiconductors in the market. The re-emergence and escalation of the coronations in China has affected tech companies such as Apple, Tesla, OPPO, and many others that depend on the Asian giant for some parts supplies. China is one of the highest suppliers of silica sand used in chip manufacturing. This presents opportunities for countries like Nigeria to seize.

The semiconductor market is also in urgent need of talent, a resource Nigeria is never in short supply of. With an estimated two million direct employees worldwide in 2021, Deloitte predicts that more than one million additional skilled workers will be needed by 2030, equating to more than 100,000 annually.

“And the semiconductor worker shortage shows signs of getting even tighter. The current global economic environment and ongoing semiconductor supply chain issues add to the challenges faced by semiconductor companies,” Deloitte said.

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Another report by Accenture released in January finds that the majority of industry executives consider talent pipeline as a much bigger issue than investment.

“It’s also a bigger issue than geopolitics,” said Syed Alam, Accenture’s global high-tech lead. “That’s one of the findings I find very interesting.”

The shortage affects the US the most, given its big push to build domestic manufacturing, which underlines the Chips and Science Act signed into law by President Joseph Biden.

The European Union, which also signed the Chips Act recently, also contends with a huge talent shortage. The Chips Act is to strengthen the region’s competitiveness and double its current semiconductor market share to 20 percent by 2030. The European microelectronics sector directly accounts for 200,000 and indirectly for 1 million highly skilled jobs, and the demand for new skills is always expanding.

Countries like India are leveraging this opportunity. India accounts for over 30,000 semiconductor engineers globally. Deloitte said the industry employs different skill sets and more will be needed over the next decade. The new fabrication plants companies in Europe, the UK, and the US are building would need electricians, pipefitters, welders, thousands more graduate electrical engineers to design chips and the tools that make the chips; more engineers of various kinds in the fabs themselves, but also operators and technicians.

While each of these job categories would require specific training and educational needs, the number of students currently in semiconductor-focused programs (for example, undergraduates in semiconductor design and fabrication) has dwindled.

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