On Chip War
Recently I had the pleasure of reading “Chip War” by Chris Miller, a book that examines the crucial role of semiconductors in influencing modern technology, global economies, and international relations. The book offers a historical overview of the semiconductor industry’s evolution, underscoring its importance in global supply chains and the geopolitical tensions that have arisen, particularly between the United States and China.
With Google’s recent release of their quantum chip, Willow, and Nvidia’s Jetson Orion Nano making advanced chips more accessible, I thought of putting together a couple of the takeaways from “Chip War” along with other personal research.
Historical Evolution of the Semiconductor Industry
The semiconductor industry traces its origins to the invention of the transistor in 1947 at AT&T’s Bell Labs. This breakthrough was followed by the development of integrated circuits in the late 1950s, which set the stage for Silicon Valley’s recognition as a technology hub. Companies such as Fairchild Semiconductor and Intel emerged as leaders during this transformative period. Gordon Moore, co-founder of Intel, famously articulated Moore’s Law in 1965, predicting that the number of transistors on a chip would double approximately every two years. This principle has been a guiding force behind the industry’s growth and innovation.
The semiconductor market has evolved into a trillion dollar industry, with projections suggesting it could reach this milestone by 2030 driven by increasing demand across various sectors such as automotive, aerospace and defence, artificial intelligence, and consumer electronics[1]. In 2021 alone, semiconductor sales surged by over 20%, reaching approximately $600 billion, illustrating the sector’s vital role in contemporary economies[1].
Globalisation and Geopolitical Significance
As the semiconductor industry expanded, production facilities grew globally, particularly in East Asia. Taiwan Semiconductor Manufacturing Company (TSMC), established in 1987, has become a critical player, manufacturing a substantial share of advanced chips worldwide. This concentration of production raises significant geopolitical concerns, especially given Taiwan’s messy relationship with China. The book highlights China’s insecure position due to its heavy reliance on imported chips; its spending on chip imports surpasses its oil expenditures[2].
The geopolitical landscape is further and further complicated by the U.S and China rivalry over technological supremacy. The U.S. has enacted policies to limit China’s access to advanced semiconductor technologies, aiming to preserve its competitive edge while prompting China to invest heavily in developing its domestic semiconductor capabilities[4]. This strategic competition not only affects bilateral relations but also has broader implications for global supply chains.
Technological Advancements and Challenges
The relentless drive for miniaturization and enhanced performance has led to groundbreaking manufacturing techniques such as extreme ultraviolet (EUV) lithography. Companies like ASML play a huge role in supplying the advanced equipment necessary for producing state of the art chips. However, sustaining the pace envisioned by Moore’s Law is increasingly challenging due to physical limitations and economic factors. As a result, the industry is exploring alternative materials and architectures to push beyond traditional silicon based technologies[3].
Recent advancements include innovations in transistor design and packaging techniques that promise improved performance and efficiency. For instance, Intel Foundry recently showcased breakthroughs such as subtractive ruthenium for interconnects and silicon RibbonFET transistors at gate lengths of just 6 nm[2]. These developments are critical for maintaining competitiveness in times where AI is driving an enormous demand for advanced semiconductors.
US-China Technological Rivalry
The strategic significance of semiconductors has increased competition between the United States and China. The U.S. government has implemented strict export controls aimed at curtailing China’s access to cutting edge chip making technologies. In response, China is making substantial investments to bolster its domestic semiconductor industry with initiatives like the $47.5 billion Big Fund III aimed at enhancing legacy chip production[4]. This technological decoupling not only reshapes bilateral relations but also realigns global economic dynamics.
The implications of this rivalry extend beyond trade. They influence international alliances and policies as nations navigate their positions within this new geopolitical landscape. Countries are increasingly recognising the need for resilience in their supply chains and are investing in domestic manufacturing capabilities to mitigate risks associated with foreign dependence.
Supply Chain Vulnerabilities and Recent Developments
The COVID-19 pandemic exposed significant vulnerabilities within global semiconductor supply chains (this is one of my favorites and fascinates me to lengths), leading to widespread shortages that impacted various industries from automotive to consumer electronics. In response to these challenges, the U.S. government introduced the CHIPS Act in August 2022 to further strengthen domestic semiconductor manufacturing capabilities[3].
As demand continues to surge particularly for AI chips the semiconductor industry is experiencing a rebound with a reported 27% year over year growth in integrated circuit sales as of mid 2024[3]. This recovery reflects not only an increase in consumer demand but also strategic investments aimed at expanding manufacturing capacity.
Outro
“Chip War” presents an insightful analysis of the semiconductor industry’s trajectory, emphasizing its critical role in shaping technological advancements and geopolitical dynamics. One of those readings with impeccable level of detail. Understanding this history is essential for navigating future challenges and opportunities within the global technology landscape as nations grapple with issues of security, supply chain resilience, and technological innovation.
References:
[3] https://technologymagazine.com/articles/semiconductor-industry-rebounds-as-ai-fuels-record-sales
