THE STRUGGLE FOR MASTERY
Semiconductors – aka computer chips – are the foundation of the digital economy, essential for everything from smartphones and the cloud to precision-guided weapons, artificial intelligence and autonomous systems. Chips underwrite revolutionary promise and peril: improved clean technologies and personalised medicine; but also autonomous weapons able to target individual people using biometric precision. A Turkish-made Kargu-2 drone reportedly became the first to hunt down individuals in North Africa,12 while adaptive armed drone swarms have moved from science fiction to science fact.13
No chips means no seat at the table. But their supply is extremely complex, costly and concentrated, as Chris Miller’s Chip War makes plain.
At the cutting edge, chips are fingertip cities with over 200 layers printed onto silicon wafers using extreme ultraviolet (EUV) light.14 The plasma required to create EUV light has to be around 220,000°C – almost 40 times hotter than the surface of the sun.15 Just the laser used requires 457,329 parts.16 Tools and production processes are fine-tuned to the level of the atom.
The semiconductor industry is a posterchild of hyper-specialised and efficient global supply chains. But both design and production are dominated by the US and its allies. Notably, Taiwan – which China considers a rogue province – produces 37% of all processing chips.17 TSMC, its flagship chipmaker, fabricates almost all of the world’s most advanced chips.18
As the new Cold War hots up, this is a huge risk for the global economy. Any Chinese blockade of Taiwan would make Ukraine-related disruption look decidedly nano. And China did a test run during then US House Speaker Nancy Pelosi’s visit in August 2022.19
ALL IN
So, with covid disruption, politics and wars both hot and cold focusing minds, the Biden administration has gone all in on the struggle for mastery over chips and next generation industry.
On 7 October 2022, the US Commerce Department dramatically escalated its tech war with China, unveiling fresh restrictions designed to “restrict [China’s] ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.” Measures included restrictions not just on technology transfer, but also on US persons working with China’s chip industry.
Biden has put flesh on Trumpian bones. Japan, South Korea and the Netherlands are all US allies and essential nodes in the semiconductor ecosystem. America – which underwrites security for all – expects them to fall into line.
But the White House’s new appetite for directing industry towards strategic objectives goes far beyond regulatory sticks. Congress has also passed several landmark bills to transform the American economy and secure technological supremacy with gargantuan carrots.
The Inflation Reduction Act provides $369 billion to dominate twenty-first century clean tech, supporting everything from solar, hydro and nuclear power to electric vehicles, strengthened electricity grids, carbon capture and green agriculture.
“Globalisation is almost dead and free trade is almost dead. A lot of people wish they would come back, but I don’t think they will.”
MORRIS CHANG
Meanwhile, the $280 billion CHIPS and Science Act provided a huge boost to scientific research budgets, plus $52 billion in subsidies for semiconductor research and manufacturing in the US – subsidies not available to any firm providing semiconductors under 28 nanometers to either China or Russia for a decade hence.20
When combined with a $1.2 trillion infrastructure blitz, that’s nearly $2 trillion of fiscal activism in the next decade from just 12 months of legislation. This is a step-change in US government involvement in the economy, designed to encourage private sector investment.
It’s already bearing fruit. “American manufacturing is back,” declared President Biden at TSMC’s new $12 billion Arizona chip manufacturing facility in late 2022. TSMC promptly tripled its investment to $40 billion.21 “And so is industrial policy,” he should have added.
Assessing the new era, TSMC founder Morris Chang said: “Globalisation is almost dead and free trade is almost dead. A lot of people wish they would come back, but I don’t think they will.” Yet the impact of America’s re-industrialisation effort and re-engineering of supply chains still seems under-priced by the market. Flows of money shape the investment landscape and the US government has just signalled it’s back in the business of terraforming.
America’s economic rivals – including China, Japan and the EU – have long been in this business and are doubling down. Everywhere you look, politics trumps profit.
THE MACHINE
Great Powers want to dominate advanced tech so that they can dominate each other. But what if technology increasingly controls us, and our ability to perceive reality?
We live in the Machine: the technological-industrial system which enmeshes us and upon which we depend.22 Think electricity, the internet etc. But it’s more than that – something better understood in its digital incarnation by the laws of biological evolution, secreting itself into all corners of existence, hoovering up data, demanding ever more processing and memory capacity, codifying everything into packets of digestible information of bits and bytes.
12 UN Panel of Experts on Libya | 13 Hambling (24 Oct 2022), Forbes | 14 Heyman (24 Aug 2022), Semiconductor Engineering
15 Li (13 Dec 2022), Financial Times, The global microchip race: Europe’s bid to catch up | 16 Miller (2022), Chip War
17 Ibid | 18 Ibid | 19 CSIS
20 White House briefing (9 Aug 2022)
21 TSMC (6 Dec 2022)
22 For more on the Machine, see the work of Jacques Ellul, Paul Kingsnorth and Kevin Kelly