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China moves to gain market share, disrupt diplomatic relations with the West.
Semiconductors, often referred to as the “brains” of electronic devices, lie at the core of modern technological advancements, encompassing everything from electronics to artificial intelligence and the digital economy. As the U.S. and China vie for dominance in the global semiconductor industry, Latin America has become a key battleground for this geopolitical competition. The dynamics of this struggle for technological supremacy hold significant implications for a region experiencing the escalating tensions between these two global giants amid their own economic, political and strategic considerations.
In July, the U.S. Department of State announced new partnerships with Costa Rica and Panama to explore semiconductor supply-chain opportunities. These partnerships fall under the International Technology Security and Innovation Fund, established by the CHIPS Act of 2022, which provides the Department of State with $500 million to “expand global semiconductor manufacturing; secure semiconductor supply chains; and develop and deploy secure and trustworthy Information and Communications Technology (ICT) networks and services through new programs and initiatives with our allies and partners.”
The partnerships follow the first North America Semiconductor Conference, held in Washington, D.C., in May, organized by the United States, Mexico and Canada, part of a series of U.S.-led efforts to strengthen the resilience of the North American semiconductor supply chain. The three governments also established the North American Ministerial Committee on Economic Competitiveness to enhance regional productivity and competitiveness across industries, including semiconductors, clean energy, critical minerals, biomanufacturing, and information and communications technology.
Through these hemispheric initiatives, President Joe Biden is actively pursuing a clear goal: to decrease technological production dependence on Asia and strategically relocate semiconductor manufacturing closer to home. However, these efforts are challenged by China’s growing footprint in the region’s technology sector.
China’s presence in Latin America spans multiple technological sectors, from telecommunications infrastructure and surveillance to data centers and cloud services.
In the telecommunications sector, as of 2019, Huawei operated in 20 Latin American countries with market shares exceeding 20% in four of them. In Brazil, Huawei held a 50% market share in telecommunications equipment. Huawei leads the deployment of 5G network equipment in Latin America, particularly in Chile, Peru and Brazil.
Concerning surveillance systems, Chinese companies such as Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology entered Latin American markets in 2007. In 2022, Hikvision acquired Mexico’s largest security systems company, Syscom. Chinese security camera systems have been deployed in Mexico City; Georgetown, Guyana; Jujuy, Argentina; and Colón, Panama.
These facts illustrate China’s growth and penetration in Latin America. However, these investments and technological advances have not only a significant economic impact but also raise questions about security and sovereignty concerning critical infrastructure and data.
China and Honduras began negotiating a free trade agreement after the Central American country established diplomatic relations with Beijing in late March, ending its ties with Taiwan. The move makes Honduras the ninth nation in the world and the fifth in Latin America to cut ties with Taiwan since 2016 in favor of establishing connections with China. And it reduces the number of countries maintaining official diplomatic ties with Taipei to 13.
Earlier this year, Chinese President Xi Jinping and his Brazilian counterpart, Luiz Inácio “Lula” da Silva, signed 15 tech-related agreements, including a commitment to set up a working group to pursue collaboration on semiconductors. The move comes as no surprise, as Brazil and China are long-time friends. China is Brazil’s top trading partner, and Brazil is the largest recipient of Chinese investment in Latin America.
The working-group agreement with Brazil allows China to access Latin American markets and resources, while also potentially leveraging Brazil’s workforce and research capabilities to strengthen its semiconductor industry. For its part, Brazil is seeking to attract Chinese investment and advance scientific and technological research and innovation.
In May 2022, China announced the launch of the China-Argentina Bi-National Center for the Study of Policies for Innovation and Technology. China also built its first international deep space ground station in Neuquén, in operation since 2018, and is in talks to develop a facility to produce lithium in Catamarca, both in Argentina.
China’s involvement in Chile’s technology and energy sectors has also been steadily growing. It controls a significant portion of Chile’s regulated energy distribution, it has backed various renewable energy projects in the country, and it seeks to tap into the country’s abundant lithium reserves. Recently, the two countries hosted their fourth Strategic Dialogue on Economic Cooperation and Coordination with China, where they discussed collaboration on mining, infrastructure, energy, innovation, and technology.
Latin America has, historically, attracted significant interest from both the U.S. and China. In recent years, China has invested heavily in the region, financing infrastructure projects and securing access to raw materials. During the pandemic, China and Russia became critical allies to the region, exerting influence through vaccine diplomacy.
The strengthening of diplomatic ties and economic relations between China and Latin America has gradually eroded America’s historical influence over the region, which diminished during the previous U.S. administration. President Biden has sought to improve relations with the region, though many argue that these efforts — such as the appointment of key diplomats, the announcement of sanctions on individuals involved in corruption, and the hosting of the Ninth Summit of the Americas — leave much to be desired.
At best, the Biden administration has shifted its rhetoric and mended diplomatic relations. At worse, it has failed to fill the vacuum needed for Latin America to close its doors to China.
On one hand, such alliances can bolster technological advancements, economic growth and job creation. But on the other, Latin American countries risk becoming pawns in a broader game of power. Ultimately, governments may have much bigger fish to fry.
Paramount among them is tackling the region’s staggering levels of inequality, where the richest 10% of the population holds a staggering 75% of the region’s wealth, while the poorest 50% possesses only 2%. Notably, the share of wealth controlled by Latin American multimillionaires increased by a troubling 14% between 2019 and 2021, indicating a widening wealth gap exacerbated by the COVID-19 pandemic. This level of inequality, deeply rooted in historical legacies and economic models, poses a specific challenge to building cohesive societies and safeguarding political pluralism.
An unprecedented number of migrants, refugees and asylum-seekers are crossing the Darién jungle on their way to North America, raising humanitarian concerns, straining resources and demanding urgent attention. Costa Rica declared a state of emergency on Sept. 27. Climate change in Central America is forcing people to flee due to the threat of starvation and water scarcity, warns the U.N. Human Rights Office. The political crisis in Venezuela, overwhelmed neighboring countries and unclear U.S. immigration policies further fuel organized crime along the Venezuela-U.S. route.
In this new era of heightened geopolitical competition and technological advancement, Latin America finds itself at the intersection of evolving global dynamics. The region’s leaders must prioritize economic development, social equality, and political stability while carefully managing their relationships with both the U.S. and China. It is a complex balancing act, but one that is essential for securing a more prosperous and secure future for Latin America and its people.
Ultimately, governments must be wary of becoming overly reliant on a single foreign power, safeguarding their sovereignty and autonomy in technology development and manufacturing. (https://www.dallasnews.com/opinion/commentary/2023/10/28/us-china-race-for-latin-america-semiconductors/)
