The battle for the multi-billion-dollar struggle for semiconductor supremacy in an … [+]
From COVID-related microchip shortages, to the recently-passed CHIPS Act, to the latest round of Commerce Department export controls targeting China, the topic of semiconductors – and who makes them – is more relevant than ever. Many are familiar with the importance of the global chip ecosystem, and how it impacts their lives. But few know the remarkable history surrounding the semiconductor industry, and the trajectory of where it could be going. Enter Chip War, a fascinating new book by Chris Miller, a professor at Tufts University’s Fletcher School and a fellow at the American Enterprise Institute.
A historian by training, Miller walks the reader through decades of semiconductor history – a subject that comes to life thanks to Miller’s use of colorful anecdotes. We read, for instance, of Andy Grove and Morris Chang – both displaced by fighting as young boys during World War II – creating world-leading firms Intel and TSMC. Rivalries for market share in the chip business play out from South Korea to Silicon Valley. In the 1980s, America panics over the idea of Japan weaponizing its status as a world-leading semiconductor producer. Ultimately, the volume makes a compelling case for Miller’s thesis: “This book contends that semiconductors have defined the world we live in, determining the shape of international politics, the structure of the world economy, and the balance of military power.”
Like all good histories, Miller’s book allows us to examine patterns from the past as clues to the future. What’s clear is that the semiconductor sector has always been seen ebbs and flows of competition, even when certain industry-leading countries or companies seem too entrenched for any upstarts to dare put a dent in their business. In our time, chip competition substantially means China’s frontal assault on American and South Korean producers, with China working harder than ever to seize the commanding heights of chip production. Says Miller, “If only China wanted a bigger part in this ecosystem, its ambitions could have been accommodated. However, Beijing wasn’t looking for a better position in a system dominated by America and its friends….It was about remaking the world’s semiconductor industry, not integrating with it.”
For proof, take YMTC, the state-subsidized memory champion. To give an indication of the priority the Chinese government places on its success, Miller details how the entire city of Wuhan, China locked down in January of 2020 — except for YMTC’s facilities: “Trains passing through Wuhan carried special passenger cars specifically for YMTC employees, letting them enter Wuhan despite the lockdown…China’s leaders were willing to do almost anything in their fight against the coronavirus, but their effort to build a semiconductor industry took priority.” Miller also details the implication of a YMTC rise: “…But if more of the chip industry moves to China, the country will have more leverage in demanding technology transfer. It will become more costly for the U.S. and other countries to impose export restrictions, and China will have a broader pool of workers from which to draw.”
Unfortunately, YMTC has the luxury of time and a lack of urgency to turn a profit on its side. Writes Miller:
Almost all of China’s chip firms are dependent on government support, so they’re oriented toward national goals as much as commercial ones. “Making profits and going public…are not the priority” at YMTC, one executive told the Nikkei Asia newspaper. Instead, the copy’s focused on “building the country’s own chips and realizing the Chinese dream.”
The problem, of course, is that the Chinese Dream – especially in the technology sector – is America’s nightmare. Today the Chinese government runs an AI-powered techno surveillance state that oppresses millions of its own citizens. China-based TikTok is a Trojan Horse for spying and data theft. And products from companies like Huawei, YMTC, and CXMT present potential access points for the Chinese government to steal, coerce, spy, and blackmail.
Fortunately, last month the Commerce Department took the important steps of imposing punishing new export controls on American technologies bound for Chinese chip fabs. It’s a meaningful step for keeping important technologies (and the people that maintain them) away from dangerous rivals. But as China Tech Threat has emphasized, what matters now is for the Commerce Department to sustain pressure and follow through on enforcing export controls, visa restrictions for U.S. personnel, and Entity List designations for YMTC, CXMT, and other Chinese producers. Chip War makes clear that the battle for the multi-billion dollar struggle for semiconductor supremacy in an increasingly-digitized world will only intensify in the years to come. How America fights back will determine how a sequel to this fine book might read.