Chip War

The Fight for the World’s Most Critical Technology

by Chris Miller

[Texts]

A gripping thriller from the subject matter, not the prose. The workhorses of the digital age do not disappoint.

TSMC replicated this process at a scale previously unparalleled in human history. Apple sold over 100 million iPhone 12s, each powered by an A14 processor chip with 11.8 billion tiny transistors carved into its silicon. In a matter of months, in other words, for just one of the dozen chips in an iPhone, TSMC’s Fab 18 fabricated well over 1 quintillion transistors – that is, a number with eighteen zeros behind it. Last year, the chip industry produced more transistors than the combined quantities of all goods produced by all other companies, in all other industries, in all human history. Nothing else comes close.

The Japanese asset bubble was in large part due to their burgeoning chip industry. Unlike the Soviets (copycats barred from American markets), the Japanese were copycats with access to American markets – Uncle Sam wanted a democratic, capitalistic counterweight in the Far East to the USSR and Communist China. 1946: Sony was founded; 1953: Sony began manufacturing transistors; 1964: Japan produced more transistors than the US.

Sony excelled by identifying new markets and targeting them with impressive products using Silicon Valley’s newest circuitry technology. “Our plan is to lead the public with new products rather than ask them what products they want,” Morita declared. “The public does not know what is possible, but we do.”

Sony’s dominance of the electronics market didn’t come into full effect until the 1970s, when Texas Instruments missed its opportunities with handheld consumer markets. But even before this, both countries began to engage in protectionist policies – chip firms began to lobby against offshoring production, and Japan pumped money into its consumer electronics market (and then it crashed :P).

In the early 1960s, it had been possible to claim the Pentagon had created Silicon Valley. IN the decade since, the tables had turned. The U.S. military lost the war in Vietnam, but the chip industry won the peace that followed, binding the rest of Asia, from Singapore to Taiwan to Japan, more closely to the U.S. via rapidly expanding investment links and supply chains. The entire world was more tightly connected to America’s innovation infrastructure, and even adversaries like the USSR spent their time copying U.S. chips and chipmaking tools. Meanwhile, the chip industry had catalyzed an array of new weapons systems that were remaking how the U.S. military would fight future wars. American power was being recast. Now the entire valley dependent on Silicon Valley’s success.

We know the story from here: Silicon Valley began desigining, rather than manufacturing chips; chip production got offshored to Asia, notably to Morris Chang’s TSMC in Taiwan; Intel rose from Fairchild’s founding team to become the dominant chip designer and the only American chip manufacturer.

I want to jump to 1992, when Intel started dumping R&D funding into EUV. EUV (extreme ultraviolet) machines are the reason why TSMC is able to make sub 7nm nodes, and they’ve been in development for well over thirty years. The only manufacturer of EUV lithography in the world is the Dutch company ASML. The same ASML that Intel’s been funding for nearly thirty years to produce EUV tech.

Without ASML, TSMC can’t produce NVIDIA’s new GPUs. While it is true that TSMC’s fabs are the only chip fabs currently at the frontier, it is important to notice that they are not the only chokepoint for chip production (relevant for compute governance). Notably, the Netherlands are more beholden to the EU than the USA. To produce better and better chips, the world needs access to better and better lithography manufactures. These manufacturers are located in neither the US nor Taiwan. Perhaps targeting these with regulation is viable.

Intel is dead now, especially after they turned down the chance to manufacture mobile chips. Even recently, AMD beat them at their consumer hardware CPU game, and they’re desperately playing catchup with their new GPU and CPU lines. The bread and butter of chip innovation now happens offshore – in Taiwan, the Netherlands, or elsewhere – and America should be wary.

(It will still take China years to catch up. But good chips are in the West, not the US, and this is good to keep in mind).