BackChip wars: Cold battles over tiny wafers could spark hot hostilities
Geopolitical tensions over semiconductors are nearing extremes that may have deadly consequences
PremiumHumans have fought wars among themselves since the beginning of their evolution. Many of them have been fought over territory, such as those around Palestine, many more for Empire as the British did or as Russia is doing now. Some wars have been fought for strange or stupid reasons—over pastries involving the French, over pigs and potatoes between the British and Americans, and famously over football between El Salvador and Honduras. Geopolitical experts say that the next one could be fought over something we cannot even see with a microscope—a semiconductor transistor or chip.
These chips power almost everything that makes the modern world, from mobile phones to cars to fighter jets. They make possible things we increasingly cannot live without: social networks, GPS turn-by-turn instructions, email, and artificial intelligence, such as the latest boy wonder, ChatGPT. We never see chips and hardly think about them, though the global chip industry produced “more transistors in 2021 than the combined quantity of all goods produced by all other companies, in all other industries, in all human history" (Chris Miller, Chip Wars)! This infinitely tiny sliver of silicon powers the world today, will build our technological future, and potentially spark off World War III.
Chip-making is an almost impossibly intricate and capital-intensive activity, perhaps the toughest manufacturing feat that humans have been able to achieve. A chip fabrication factory, or ‘fab’, can cost upwards of $20 billion to build, and requires a complex supply chain ecosystem. Few companies and countries have been able to master this byzantine manufacturing process, especially that of super-advanced 3 and 5 nanometre chips; 92% of these are made by just one company, Taiwan Semiconductor Corporation Ltd (TSMC ). This company also sits at the heart of the most significant geopolitical conflict between the two global superpowers, US and China, the winner of which will apparently rule our technology-driven future. While the battle might be for the future, its roots lie in political history, with China refusing to recognise Taiwan’s independence and claiming it to be an ‘inalienable’ part of itself. It has long coveted Taiwan’s territory. Now it also seems to covet its superconductors.
While this battle has been brewing for decades, a few recent events have pushed it front and centre on the world stage. One is the parallel battle for supremacy in artificial intelligence (AI). This fundamental general-purpose technology is reshaping every part of our lives, and every powerful country wants to control it. Vladimir Putin has declared that the nation that leads in AI “will be the ruler of the world." Both Xi Jinping and Joe Biden have brought national policies to win the AI race. They have also realized that the engine that makes AI possible, the ‘new oil’, are semiconductors, and the country that controls chips will shape the future. Second, are the unprecedented moves that the US has made to corral chip production assets worldwide into its own camp. It has decided that it is not content being merely two generations ahead of China in chip-making, but must be as advanced as possible. It has set up a $52 billion fund to incentivize chip-making in the US and enacted a law banning exports to China not only of high-end chips but also the equipment used to make them. Most of the chip supply chain is controlled by the US and the West, notably the US, Netherlands and Japan, and they have united towards this effort. Biden has gone as far as to disallow US citizens and even Green Card holders working for Chinese chip companies. The US hopes that this will choke the supply chain and talent to cripple high-end chip production in China, something that Xi has made a national mission. The third significant event is the Russian invasion of Ukraine, providing a precedent for another war for territorial reclamation.
A Chinese invasion or even blockade of Taiwan would have unprecedented ripple effects on the world economy, with the production of most high-end electronics, weapons and data centres that run the internet grinding to a halt. Logic dictates that TSMC diversify its production base; and it is opening fabs in the US and elsewhere. But TSMC intends to keep its highest end chip production restricted to Taiwan, not only because its supply chain and talent there make it the most economical, but perversely because it will force the US to defend Taiwan were China to attack it. This chip war, currently being fought over trade and talent, has the potential to explode over an actual ‘hot’ war, to add to the strange and stupid reasons that Homo sapiens fight.
Jaspreet Bindra is the founder of Tech Whisperer Ltd, a digital transformation and technology advisory practice
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