Fishin’ for Chips

While we might not understand exactly how they are made, and most of us do not actually appreciate what they do, “contracted semiconductor microchips” are among the most significant drivers of modern technology, from smart phones to cruise missiles. They’re the tiny little microprocessors – literally microscopic – that enable exceptionally powerful computing, implement artificial intelligence, create tiny command and control systems, that enable everything from the mundane to the super-sophisticated. A nation seeking military supremacy and technological superiority without access to volumes of these chips is exceptionally vulnerable.

These chips are also at heart of the trade war between China and the United States. But China covets the island next door. That makes it tough for that little island nation – the Republic of China (“Taiwan”) – that may be in a whole heap of trouble as a result. Why? Specifically, because “Taiwan Semiconductor Manufacturing Co., or TSMC, makes more than half the world’s contracted semiconductor chips and lies at the center of the technology supply chain, churning out circuitry found in iPhones, Amazon cloud computers, graphics processors that power video games and even military drones and fighter jets such as Lockheed Martin’s F-35…

“TSMC is confronting problems it had never anticipated when a Taiwanese American engineer [Morris Chang, a Harvard- and MIT-educated engineer], who spent 25 years at Texas Instruments and is revered here like a hometown Bill Gates, founded it in the late 1980s… The company has been drawn into an increasingly bitter — and at times dangerous — rivalry between the U.S. and China that is forcing nations and corporations to choose sides in an era that is redefining the global order.” David Pierson and Michelle Yun writing for the December 18th Los Angeles Times.

Taiwan stares across the Taiwan Straits at the behemoth – the massive People’s Republic of China – that claims Taiwan as part of its territory. The PRC has gone so far as to threaten the possibility of an invasion someday. The PRC’s Xi Jinping has been amping up his nationalist rhetoric, making claims to a man-made island in the nearby Spratly chain and challenging the United States both regionally and around the world.

“Beijing’s suggestion that it might invade Taiwan and return it to Chinese dominion could further imperil TSMC’s freedom. China has long yearned for a company as advanced as TSMC. It has invested billions of dollars and poached hundreds of Taiwanese engineers in a national Manhattan Project-like bid to catch up to Taiwan, South Korea and the United States. Despite those efforts, China remains years behind and must import all but 15% of its semiconductors, spending more on the technology than on foreign crude oil each year…

“TSMC’s technical prowess is virtually unrivaled. It specializes in manufacturing the industry’s smallest chips — transistors with parts measuring 5 nanometers, the equivalent of two strands of human DNA. Work has already begun on 2-nanometer chips, which also require one of the most complex feats in engineering, an interplay of lasers, molten tin plasma and mirrors known as extreme ultraviolet lithography that a TSMC executive described as ‘close to black magic.’

“Once viewed benignly as an electronic commodity, semiconductors are now vital national security assets in the global race for tech supremacy. Last month, TSMC’s board approved a plan to open a $12-billion foundry in Arizona by 2024, a move seen as a way to placate Trump administration and Pentagon officials uneasy over TSMC’s trade relationship with China.” LA Times.

The PRC has made it a point not to give in to Donald Trump’s punitive tariffs, his bully tactics to force China into a trade agreement that has eluded the self-proclaimed dealmaker to this day. Trump has gone out of his way to blame China for what he calls the “Wuhan Virus,” even as the United States is suffering the worst outbreak of the coronavirus since the beginning of the outbreak and as China is almost back to normal with serious GDP growth forecast by the IMF. Indeed, China views the rise of Trump, even though he was not reelected, as a clear sign that the United States will continue to fall in global influence and economic power. But China feels the pain.

“U.S. restrictions on exports shattered Chinese-owned Huawei’s plans to roll out 5G networks worldwide and hobbled its once-thriving smartphone business… Whoever wins access to the leading semiconductors gains a critical advantage in technologies that will define the coming age including A.I., quantum computing and the ‘internet of things.’ These will affect everything from missiles to autonomous vehicles to cybersecurity to the development of new drugs.

“‘Semiconductors underpin all the ‘must win’ technologies of the 21st century,’ said Ashley Feng, a China and Taiwan expert formerly at the Center for a New American Security. ‘To both the United States and China, being able to dominate in the semiconductor space is crucial to winning the next generation of technology.’

“TSMC is entangled in this escalating struggle at a time when China, propelled by rising nationalism at home, regards the U.S. and other Western nations as in decline. The Trump administration has seized on semiconductors as a choke point to slow China’s progress. This year, it announced licenses would be required to export chips that contain American intellectual property, which most silicon wafers do, to Huawei and China’s top chipmaker, Semiconductor Manufacturing International Corp.” LA Times. China is convinced that they can wait us out, unless Joe Biden is willing to deal more pragmatically. But this complex, incredibly difficult to manufacture, technology sits like the Holy Grail, waiting for superpowers to come to terms or come to blows.

I’m Peter Dekom, and sometimes it is indeed the “little things” that count the most.