The recent earthquake in Taiwan (3rd April 2024) served as a stark reminder of the world's precarious dependence on a tiny island for its computer chips. Losing access to TSMC, the Taiwanese foundry responsible for nearly 40% of global chip production, could be far more disruptive than the COVID-19 lockdowns. This incident underscores the critical vulnerability of the global chip supply chain.
Chris Miller's "Chip War" delves into the intricate and fiercely competitive world of semiconductor technology. The book traces its evolution from bulky and unreliable components to the indispensable engines driving modern society. The narrative highlights the perpetual struggle for dominance between companies and nations.
Beginning with the early days of computing, characterized by cumbersome machines requiring frequent maintenance, World War II accelerated the need for computational power. This need became even more critical during the Lunar Race between the US and the Soviet Union. The intense demand fostered economies of scale and enabled chip miniaturization through discoveries like Lathrop's photo-lithography.
Gordon Moore's observation, famously known as Moore's Law, became a guiding principle for chip development. It shifted the focus of semiconductor manufacturers like Fairchild, from military clients to civilian markets. This led to the emergence of Silicon Valley as a hub of innovation. However, geopolitical tensions during the Cold War led to a diffusion of knowledge. Both official student exchange programs and unofficial espionage contributed to the spread of semiconductor technology.
As production costs soared in the US, companies turned to offshore assembly lines in countries like Japan, Hong Kong, South Korea, and Taiwan. These locations offered cheaper labor and more supportive government policies. The author's narrative highlights America's first-mover advantage, fueled by innovation and a symbiotic relationship in semiconductor production with Asian economies.
However, complacency and a focus on short-term profits led to challenges from East Asia, particularly Japan and South Korea. These countries replicated American technology and capitalized on cheaper labor, threatening US leadership. While the US championed free markets, its Asian counterparts received significant government backing, propelling them forward. Japan's rise as a major player in the chip industry, particularly in consumer electronics, exemplifies this dynamic.
The post-Cold War era ushered in increased globalization, introducing vulnerabilities in the chip supply chain. This is exemplified by the emergence of choke points such as Taiwan's TSMC in chip manufacturing and Netherlands ASML's dominance in EUV lithography machines.
Intel's strategic challenges in adapting to market shifts, particularly in the mobile computing segment, are a case in point. Its fixation on its x86 architecture hindered its adaptability, allowing competitors like ARM to thrive, especially with the rise of mobile computing epitomized by Apple's iPhone. This ultimately cost Intel its technological leadership.
China's chip-making industry, meanwhile, is grappling with its dependence on foreign technology, particularly from its geopolitical rivals. Despite strides in AI, this reliance on semiconductors, especially for advanced manufacturing processes like EUV lithography, remains a vulnerability. Since the offshoring of chip fabrication coincided with a concentration of these chokepoints, primarily controlled by the USA or its allies, it hinders China's geopolitical ambitions.
The book concludes with the ongoing struggle for dominance. Intel's attempt to regain its lead, China's struggle to achieve technological self-sufficiency, and the US's efforts to reduce reliance on Taiwan showcase the ever-present competition. Miller warns of the catastrophic consequences of a disruption to chip production, highlighting the need for international collaboration and a diversified supply chain.
Miller reminds us that technological leadership is not a guaranteed privilege. Constant innovation, strategic partnerships, and a long-term vision are crucial for success in this ever-evolving landscape. The future of the global economy and geopolitical order hinges on who comes out on top in the ongoing "Chip War."
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