Absolutely Fabless

Chris Miller’s Chip War begins with a stirring account of US Navy operations in the Taiwan Strait in 2020. With China lobbing missiles into the sea, the USS Mustin toughs it out by flying the Stars and Stripes. The US government had recently revised its Entity List – previously a set of limits on exporting materials or technology with military applications, so, you know, please don’t send uranium to Iran or missiles to North Korea. But now the Entity List had been significantly tightened, and included a ban on shipping computer chips to China, itself a warning shot fired at Huawei, the Chinese manufacturer that was drastically under-cutting the international competition.

Miller links all this bluster to the “must-have” commodity of 2020, the Apple iPhone 12, an item crucial to the profits of its manufacturers in China and its distributors in the United States and all around the world. The iPhone 12, it turns out, is unable to function without something called the A14 chip, which at the time was exclusively made by the Taiwan Semiconductor Manufacturing Company (TSMC), a company that is responsible for 37% of the planet’s annual computing power. The Taiwanese chip fabrication market has a stranglehold on global commerce, and the power to shut down most modern production lines. It comes as no coincidence that the sabre-rattling in evidence began in the middle of the COVID-19 pandemic, when the fragility of the global supply chain had been amply demonstrated.

TSMC was founded in 1987 by Morris Chang, a man of Chinese extraction who had served for 25 years as a prominent figure in Texas Instruments. It had been Chang, in fact, who accompanied Texas Instruments’ Mark Shepherd to Taiwan in an almost-disastrous business trip in 1968, where the chippy Texan bristled at the serving of his steak with soy sauce, and almost lumped the economics minister for saying that intellectual property was a colonialist bullying tool. Despite such potential wrenches in the works, Texas Instruments had a Taiwanese chip factory by 1969. Passed over at TI for the job of CEO, Chang was eventually lured back to Taiwan to establish TSMC, for which a bunch of Taiwanese businessmen ponied up much of the funding, after some sinister arm-twisting from the Taiwanese authorities.

Miller suggests that the People’s Republic of China was aware of the implications and importance of semiconductors as early as the 1960s, but had already shot itself in the foot by sending all its best scientists into the countryside for “re-education”. It was only with the grand reforms of Deng Xiaoping in the 1980s, particularly the massive investment in high-tech industries around the soon-to-be-handed-over Hong Kong, that China really got going in high technology at all. But even then, its integrated circuits turned out to be sub-par, sometimes with only one in a thousand functioning as planned. Instead, China’s high-tech industries started to fudge the science part.

This, as Miller chronicles, turned many of them into “fabless” manufacturers – companies that lacked fabrication facilities to buy their own chips, but instead bought them in from somewhere else. As computer chips became crucial components in everything – not just computers, but also cars, fridges, and children’s toys (not to mention missiles), the PRC even leaned on its ideological enemies, bending over backwards to let Chang establish a Shanghai division of TSMC in 2000, even to the extent of allowing special permission for an on-site Christian church. But that was then; this is now, and the 2020s see a number of enclosures sweeping the world – of borders, of supply chains, and even of data. Xi Jinping is now scrambling to bring China’s chip manufacture up to a global standard.

“World War II was decided by steel and aluminium,” writes Miller, “and followed shortly thereafter by the Cold War, which was defined by atomic weapons. The rivalry between the United States and China may well be determined by computing power.” With Taiwan stuck in the middle.

Jonathan Clements is the author of A Brief History of China. Chris Miller’s Chip War: The Fight for the World’s Most Critical Technology is published by Simon & Schuster.

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