Explain how the petroleum industry and the semiconductor chip industry compare with each other with regards to their sensitivity to geopolitical development.
The petroleum industry and the semiconductor chip industry are very different in nature and profile. However, there is a lot of structural commonality within the two industries.
Common link between petroleum and chip industry:
- Both are dominated by a few countries and companies.
- Supply of petroleum is dominated by the OPEC and mega-sized public and private sector companies, whereas every chip produced in the world has a direct or indirect connection with the US and US-based companies.
- Both require a huge capital investment.
- Both are cyclical in nature.
- Both have geopolitics involved to its core. Countries have tried to weaponize oil and similarly the semiconductor chip industry has also been a part of “technology Cold War”.
- Both the sectors have a global footprint.
- The global value chain of both industries extends across the globe.
- Both are at the heart of interdependent global relations.
- Chip industry also mimics the economic dynamics of the petroleum industry.
- Both industries are marked by technological change.