The future of smartphones and AI — and a USD 500 bn industry — is up for grabs.Intel, Samsung, and the Taiwan Semiconductor Manufacturing Company (TSMC) are in a race to make the fabled 2-nanometer processor chip. Whichever company leads the race to produce a functioning chip will effectively dominate the industry.

TSMC is (unsurprisingly) the analyst favorite as of now: TSMC — the world’s largest semiconductor manufacturer — has already completed testing for their 2-nanometer chip prototype, with results to show their biggest clients, which include Apple and Nvidia, reports the Financial Times. As the demand for data center chips that power generative AI services like ChatGPT grows, so will the already lucrative field, worth USD 500 bn, as of last year.

…but Samsung is gaining ground. Samsung and Intel are hoping to close the gap, with Samsung trying to undercut TSMC by snagging Nvidia as a major client, two sources confirmed to the FT. The question, according to US hedge fund analyst James Lin, is whether Samsung can execute the migration to 2-nano better than TSMC, of which he and other experts are doubtful.

Intel has high hopes as well, making bold claims about going into production by the end of 2024. This would put it ahead of its rivals, but confidence in the US company’s performance isn’t much to bet on. TSMC plans to enter mass production in 2025, with its first batches going to Apple for new iPhone models. High performance computing chips for PCs will come later.

Why the fuss? These processor chips are coveted because of their size. Since these small devices, which power smartphones, AI, and data centers, are more powerful the smaller they are. Since the smaller the transistors are on a chip, the lower its energy consumption and the faster its speed.

How small is a 2-nanometer transistor, really? In lieu of a visual comparison, imagine your typical garden ant. Pretty small, right? Those bad boys stand at 3-5 mn nanometers, over a mn times bigger than these microprocessor components. A single virus cell stands at 14 nanometers. Even a strand of DNA is just a bit wider, standing at 2.5 nanometers. 50 bn of these transistors can fit on an area the same size as your fingernail.

As US-China relations remain icy, India is trying to position itself as a top destination for Apple to reroute its manufacturing capabilities, reports the Financial Times. While China is likely to remain the company’s main manufacturing hub, India could become a “China plus one” market, although the country has several issues with its business environment that require addressing, the FT says.

The big questions: The dynamics + demographics of the labor market.Accommodation is a contentious issue, says the biggest manufacturer of the iPhone, Foxconn. The issue of living quarters must be settled where executives are hoping Indian workers will prove as willing as Chinese workers to leave their families and homes for the job. Women are also key contributors to the job market, particularly in electronics manufacturing, but are at a disadvantage in many ways due to social stigma and commuting safety questions.

Remember: This shift has been months in the making. Apple’s main suppliers have increasingly been moving away from China as prolonged issues with covid-19 led to supply chain disruptions and worker protests at the end of last year. In addition to looking at India as a potential alternative manufacturing destination to China, Foxconn and Pegatron also had their eyes on Vietnam, which had already begun attracting several other Apple suppliers.

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