Please ensure Javascript is enabled for purposes of website accessibility

What’s driving semiconductor chip demand

The semiconductor chip sits at the center of a technology war being waged between the US and China. Growing political and commercial tensions continue to foster fears over the supply of this vital component of economic activity. This, in tandem with the Covid-19 pandemic disruption, has prompted a global rethink about supply chains, and as China develops, the threats posed by this technology giant from a competitive and security angle.

The importance of the silicon chip should not be underestimated. They are central to the functioning of the global economy. They are critical components of almost any manufactured product, from industrial robots to phones to cars and are the foundation of the technology infrastructure of businesses. Virtually all companies rely on software and hardware infrastructure, whether on-premise or in the cloud, to deliver value-added services or products.

The US put into place legislation aimed at inhibiting the development of the semiconductor industry in China, with restrictions on the ability of Western companies to export the critical equipment China requires to make advanced chips. But the Covid-19-related disruption has also acted as a spur to policy making in the US. The pandemic represented a perfect storm for the global semiconductor supply chain, significantly affecting the vast array of businesses that rely on semiconductors.

The disruptions, along with the Sino-US tensions, brought about the enactment of the CHIPS and Science Act of 2022 (CHIPS Act), which provides critical semiconductor manufacturing incentives and research investments with the aim of promoting the development of the US semiconductor industry and countering potential security and supply chain threats.

Walter Scott research team


All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

The holdings listed should not be considered recommendations to buy or sell a security.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change.

The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

There is no guarantee that any strategy that considers environmental, social, and governance (ESG) factors will be successful, or that any strategy will reflect the beliefs or values of any particular investor. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities as investors that do not use such criteria.

BNY Mellon Investment Management is one of the world’s leading investment management organizations, encompassing BNY Mellon’s affiliated investment management firms, and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

Walter Scott & Partners Limited (“Walter Scott”) is an investment management firm authorized and regulated in the United Kingdom by the Financial Conduct Authority in the conduct of investment business. Walter Scott is a subsidiary of The Bank of New York Mellon Corporation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Securities Corporation is a subsidiary of BNY Mellon.

Not FDIC-Insured | No Bank Guarantee | May Lose Value

© 2023 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th Floor, New York, NY 10286.