Book Summary: Chip War by Chris Miller | by Karthik Chidambaram

I was at a community event in Chicago, IL early this year and chatted with Ramki Krishnan who works and has spent many years at TSMC (Taiwan Semiconductor Manufacturing Company) in Taiwan. We were chatting about NVIDIA and also the importance of TSMC. Not many people talk about TSMC, however, it is one of the most important companies in the world. Ramki suggested that I read Chip War to learn more about the rise of Taiwan and understand the semiconductor business, manufacturing, and more. You have to be very thankful to someone who recommends a great book. I am very thankful and glad that I got to read Chip War written by Chris Miller. 

This book is more like a novel (a nonfiction novel). It starts off with brief intros of the most important people who led the semiconductor revolution. It also helped that I read Walter Isaacson’s Innovators. Because I read the Innovators and read about the invention of transistors, the people behind it, and more, I was able to relate to Chip War even better. Here are some of my learnings and notes from Chip War.

Why Semiconductor?

The book begins with an introduction of Semiconductors and why they define the world we live in today. China is building its own semiconductor technology in a bid to free itself from the US. 1/4th of the Chip industry revenues comes from phones. Apple sold over 100 million iPhone 12s, powered by an A14 processor chip with 11.8 billion tiny transistors carved into its silicon. Most of American semiconductor firms have built supply chains across the world driving the costs of the chips down. Most of the world’s GDP is produced with devices that rely on semiconductors. Taiwan’s TSMC builds almost all of the world’s advanced processor chips. Chips from Taiwan provide over 37% of the world’s computing power each year. The Dutch company ASML builds 100% of the world’s extreme ultraviolet lithography machines without which cutting-edge chips are impossible to make. 

Morris Chang was born in Mainland China, educated at Harvard, MIT, and Stanford, and helped build America’s early chip industry while working for Texas Instruments (TI). Semiconductors define the world we live in. He said that he studied Stalingrad (the bloodiest battle of World War 2) for lessons about business. 

The book begins by giving a backdrop of some of the key people in the technology space during World War II. Akio Morita (Co-Founder of Sony), Morris Chang (TSMC), Andy Grove Budapest). All these key people were born and lived in different parts of the world during World War II. New Technologies were transforming military power. 

1950’s:

Transistor:

A transistor is a semiconductor device used to amplify or switch electrical signals and power. It is considered one of the biggest inventions and one that changed the world. When the world-changing invention transistor was invented, The New York Times buried the story on page 46.  Bell Labs scientists John Bardeen, Walter Brattain, and William Shockley won the 1956 Nobel Prize in Physics for their invention of the transistor. 

Semiconductor/Chips:

After World War II, Texas Instruments (TI) executives realized that electronics expertise will be useful for military systems and they hired people like Jack Kilby. The eight people who left Shockley’s Lab are widely credited with the creation of Silicon Valley. One of the eight Eugene Kleiner would go on to found Kleiner Perkins, Gordon Moore who went on to run Fairchield’s R&D and also the one who coined the concept Moore’s Law (The number of transistors in an integrated circuit (IC) doubles about every two years. It became Moore’s Law). Multiple electrical components on a single piece of semiconductor material is an Integrated Circuit. The integrated circuit that Kilby and Noyce had developed would become known as the semiconductor or chips. 

Sputnik, Yuri Gagarin and Space

Sputnik, the first artificial Earth satellite was launched by the Soviet Union in 1957 and four years later Russian cosmonaut Yuri Gagarin became the first person in space.  This is around the same time that Noyce and Moore founded Fairchild Semiconductor. As the USSR was ahead of the space race John F Kennedy declared that the US would send a man to the moon. Bob Noyce had a market for Integrated circuits.

Morris Chang, Andy Grove:

Mass Production works when everything is standardized. Morris Chang started work at Texas Instruments in 1958, the same year Jay Lathrop was put in charge of the production line of transistors. With Chang’s efforts, the yield on his production line of transistors jumped 25%.

Andy Grove after fleeing Hungary’s Communist Government in 1956, arrived in New York as a refugee and worked his way to a PhD program at Berkeley. Andy improved Fairchild’s manufacturing process. Fairchild was still owned by an East Coast multi-millionaire, paid employees well, however would not give Stock options. Soon everyone started looking for an exit.

Part II

Soviet Union Silicon Valley: 

The Soviet Union was creating its own Silicon Valley with engineers like Anatoly Trutko, Joel Barr, and Alfred Sarant. The USSR created something similar in the city of Zelenograd, the Russian word for Green City. They tried to copy what was happening in the US, however, they were lagging behind. 

Japan:

When Japanese Prime Minister Hayato Ikeda met French President Charles de Gaulle in November 1962, he brought Sony Transistor Radio as a gift for his host. Japan’s success in selling semiconductors made it wealthier.  Akio Morita partnered with Masaru Ibuka to create Sony (a Latin word: meaning – Sound). Their first device was an electric rice cooker, however, the tape recorder worked and sold better. The transistors on silicon chips would create unimaginable new devices. Sony’s first major success was transistor radios. Calculators were another consumer device transformed by Japanese firms. Japan’s Sharp Electronics put the California chips in a calculator and produced cheap calculators. Japan’s exports of electronics boomed from $600 million in 1965 to $60 billion two decades later. Morita and TI formed a deal where TI would produce the chips in Japan and Sony would manage the bureaucracy. Joint ventures were made and TI was permitted to open a semiconductor plant in Japan.  

Globalization – Supply Chains:

Charlie Sporck was hired by Fairchild Semiconductor to work on manufacturing chips. Most of the chip manufacturing assembly lines had women in manufacturing. Silicon Valley was getting expensive and Sporck set up a facility in Maine. There were Union problems and they began looking at Asia. Bob Noyce had made a personal investment in a radio assembly factory in Hong Kong. Fairchild was the first semiconductor firm to offshore assembly to Asia, soon, TI, and Motorola followed. Hong Kong’s 25-cent hourly wages was a 10th of the US labor cost, Taiwanese workers made 19 cents an hour, Malaysians 15 cents Singaporeans 11 cents, and South Koreans 10 cents. Supply chains started spreading across Asia in the 1960s, globalization was happening. 

Flash Drives:

Japan had become prosperous and Thanks to Sony Morita had gotten rich. However, Japan hit a crisis in the 1990s and its financial markets crashed. The Tokyo stock market was trading at half of its 1990’s level. Fujio Masuoka developed a new type of memory chip in 1981 (remembering data even after powering off), however, Toshiba ignored the invention. Intel brought this to the market (flash or NAND) to the market. Morita suffered a stroke in 1993 causing deteriorating health and died in 1999 in Hawaii. 

Taiwan: 

Mark Shepard played a key role in building TI’s semiconductor business. He met with the powerful and savvy Taiwan’s economy minister K. T. Li. Li realized that Taiwan would benefit immensely by integrating deeply with the US.  Li knew there were plenty of Taiwanese – American semiconductor engineers willing to help. In Dallas, Morris Chang urged his colleagues at TI to set up facilities in Taiwan. After accusing Shepard of being an imperialist, Minister Li changed his tune and realized that a relationship with Texas Instruments would change Taiwan’s economy. A new facility in Taiwan was constructed, and by August 1969 the plant was assembling its first devices and by 1980 had shipped its billionth unit. This made Taiwan a partner to Silicon Valley and also protected the Chinese invasion of Taiwan. 

The supply chains also expanded to Singapore, Korea, Malaysia, and more. 

Part III:

Competition:

The competition for the US was getting tough. Japan was not just producing chips designed by the US, however, they also started coming up with their own design and products. Sony CEO Akio Morita knew that he had to drive innovation. Sony sold 385 million devices of the Walkman, one of the most popular consumer devices in history. Chips were not the only industry in the US that was facing Japanese competition. American industries from cars to steel were facing stiff competition from Japan. The strategy of empowering Japanese businesses seemed to undermine America’s economic and technological edge.  Jerry Sanders CEO of Advanced Micro Devices did not think it was a fair competition.

Japan not just exported, however also consumed its products.It had its market. In the 1980’s the US Interest rates reached 21.5 percent as the Federal Reserve sought to fight inflation.  In 1985, Japanese firms spent 45% of world’s capital expenditures on semiconductors compared to US’s 35%

Japan became the world’s second-largest economy. Bob Noyce also wondered if Silicon Valley would end up like Detroit?  Silicon Valley complained that the Japanese Government helped companies coordinate their R&D effort and also provided capital.  In 1986, Japanese government agreed to put a quota on its exports. In 1987 a group of leading chipmakers and the Defense Department in the US created Sematech, funded half by the industry and half by the Pentagon (similar to the Japanese strategy). Bob Noyce led Sematech.

Sony had become a global brand and Morita redefined Japan’s image. In 1989 Morita shared his views in a collection of essays titled (The Japan that can say No) – why Japan will be first among equals? He co-authored with Shintaro Ishihara, a controversial politician.  Ishihara argued that American military strength required Japanese chips. The Japan that can say No was controversial not because of its opinions, but because of the facts. 

Part 4:

Micron:

The Idaho entrepreneur Jack Simplot invested $1M in a company called Micron. Silicon Valley offshored more production to Taiwan and South Korea.  Jack Simplot saw that the Japanese competition has turned DRAM into a commodity market. Micron had a knack of cost cuts that the Silicon Valley or Japanese Customers could not match. Jack believed in being the lowest cost producer of the highest-quality product. Simplot’s $1M investment turned into a billion-dollar stake. This also helped the resurgence of the US in DRAM. 

Intel – Chips for Personal Computers:

In 1980, Intel won a contract to make chips for a new product (personal computer). IBM contracted with a young programmer Bill Gates to write software for the Operating System. On August 12, 1981, IBM announced the launch of a personal computer priced at $1565. Intel decided to leave memories surrendering the DRAM market to the Japanese and instead focussed on Microprocessors for the PC’s. Except for Apple, almost every computer used the Intel Chip and Microsoft Windows software. 

Samsung, Korea:

Silicon Valley did not want to just depend on Japan and was looking for cheaper sources in Asia. Lee Byung  Chul (Founder of Samsung) born in 1910 launched his business career in 1938 when he was 28 years old. During this time, Korea was a part of the Japanese empire. He started off by selling dried fish and vegetables (to feed Japan’s war machine). He had a good nexus with the Government and by 1960 had become the richest person in South Korea. He insisted that Samsung was working for the good of the nation. Lee wanted to replicate the Silicon Valley success and toured to learn.  Korean tech companies emerged from cheap bank loans and government support.  US-Japan trade tensions helped the Korean companies. Intel cheered. The US not only provided the market for South Korean DRAM chips but also provided the know-how/technology. 

Qualcomm:

As the number of transistors on a square inch of silicon was increasing exponentially, the amount of data that could be through a slice of the radio spectrum was about to take off too. Jacobs, Viterbi, and several colleagues set up Qualcomm (Quality Communications), betting that even more powerful microprocessors would let them stuff more signals into the existing spectrum bandwidth. 

USSR:

The USSR could not keep up with the pace of the US or the Asian countries in Chip design and manufacturing. They lagged behind.  Chips played a major role in the Iraq war in 1991. The newspapers awarded it the War Hero Title ‘ War Hero Title Possible for the Computer Chip’. World-leading optics was produced by Carl Zeiss company in the city of Jenna. 

Part 5

Taiwan, Morris Chang, and TSMC:

Morris Chang was passed on for the CEO job at Texas Instruments. In 1985, Taiwan’s Minister K.T Li called Morris Chang and asked him to set up Semiconductor manufacturing in Taiwan. They were able to leverage several Taiwanese engineers who worked and trained in the US. The Government provided all the support needed. Chang founded TSMC (Taiwan Semiconductor Manufacturing Company) with the strong support of the Taiwanese government. Minister Li was a visionary and he believed that for Taiwan’s economy to grow, Taiwan should not just assemble chips, but also manufacture them. The Taiwanese government provided 48% of the start-up capital for TSMC. Chang convinced Philips, the Dutch Semiconductor company to put in $58 million for a 27.5% stake. The Taiwanese government provided generous tax benefits for TSMC. Chang promised never to design chips, however only to build them. The ties with the US helped Taiwan.

PRC (People’s Republic of China) also tried to make chips. However, it lagged behind by 10+ years. The Communist Party still considered Taiwan as part of China, but it remained outside of its control. 

The key to software is hardware. It is the hardware revolution that happened before this that led to the software boom. The US needed the semiconductor chips for precision strikes. Russia was also investing in it. The US wanted to be ahead of the game. There were a lot of people required to manufacture these chips.  It was getting expensive to make these chips in the US. Companies like Intel looked up to Taiwan, Malaysia, and Singapore to manufacture these chips. This is another great example of globalization (very similar to the software outsourcing India went through), chip manufacturing outsourcing to Asian countries. (India missed to be a part of this revolution). There were strategic ties between the US and the Asian countries. Taiwan as we know is always under threat from China. However, because of the strategic business ties with the US, the know-how, and business, they are able to sustain the different threats. The US is dependent on Taiwan today and vice versa. It is an interconnected world.

SMIC:

Richard Chang founded Semiconductor Manufacturing International Corporation (SMIC) in 2001 raising over $1.5 billion dollars from International investors like Toshiba, Goldman Sachs, and Motorola. His strategy was simple: Do what TSMC had done. Repeat it in China. Why couldn’t it be done in Shanghai? SMIC hired many engineers from Taiwan, the US, and across the world. Soon TSMC had competition. 

Lithography – ASML:

In the early days of chipmaking, the size of transistors was big and the size of lightwaves used by lithography tools did not matter. However, as the size of transistors got smaller, the scale of light waves – a couple of hundred nanometers impacted the precision of the circuits.  In 1984, Philips, the Dutch electronics company spun out its Lithography division creating ASML. Veldhoven, a town not far from the Dutch border with Belgium seemed an unlikely place for the world-class semiconductor company. Philips was a cornerstone investor in TSMC and this gave ASML a market. Both TSMC and ASML started as small firms and have advanced the chip industry. America’s Lithography firm Silicon Valley Group lagged technologically. In 2001, ASML bought SVG. ASML would control the future of Lithography.

Intel, Phones & dependence on Taiwan:

Intel with its X86 architecture dominated the PC market not because it was the best, but IBM’s first personal computer used it. It was highly profitable for Intel. Intel under the leadership of its new CEO Paul Otellini partnered with Apple on MAC, however missed partnering with Apple on the chips for the mobile phone. The CEO did admit that we did not see the scale of the opportunity. Intel turned down the iPhone contract.  Paul said that they (Apple) wanted to pay a price and not a nickel more. The volume was 100x of what anyone thought.  The early iPhone processors were produced by iPhone and later by TSMC, Intel in spite of spending billions of dollars could not make a dent in the mobile phone industry.

Andy Grove was concerned of the US losing out on manufacturing and the expertise moving out to the Asian Countries. There were risks in the dependency on Taiwan. In 1999 an earthquake measuring 7.3 on the Richter scale struck Taiwan knocking out power across much of the country. There were calls to impose tariffs on exports, however, with globalization, the US was of the view that it would do more harm than good.

Part 6:

Fabless, Nvidia, Qualcomm:

A Foundry like TSMC because they produce a large volume of chips, and weave out the inefficiencies. Companies just need to design the chips and can get manufactured elsewhere. 

Since the late 1980s, the number of fabless chip firms started to rise. It takes a lot of money and investment to build a fab. NVIDIA founded in 1993 by Chris Malachowsky, Curtis Priem and Jensen Huang (who remains the CEO) was a fabless firm. They did the design of the chips and most of the Nvidia chips are manufactured by TSMC. Nvidia’s GPUs can render images faster. Nvidia’s first set of customers included video and computer game companies.  Nvidia found a new market for parallel processing.  

Companies like Amazon and Google entered the chip design business to improve the efficiency of servers that run their clouds.  It is easy for anyone to access the Fastlane (fast processing) by buying an NVIDIA chip or by renting access to an AI-optimized cloud. 

Rather than keeping a given phone call on the same frequency, Irwin Jacobs (Co-Founder of Qualcomm)proposed moving call data between different frequencies, letting more calls into the available spectrum space. Qualcomm contributed key ideas about how to transmit more data via the radio spectrum. It is almost impossible to make phone calls without Qualcomm patents. Qualcomm does not fabricate any chips. They are designed in-house and are fabricated by companies like Samsung and TSMC.

Morris Chang’s Grand Alliance:

One big advantage for TSMC was that it was not designing the chips and was just manufacturing them. This way TSMC was not competing with the designers. They were working with major companies and this way they could coordinate between them and set standards. He called this TSMC’s Grand Alliance. Morris Chang also bet big on mobile. He told Forbes that ‘Mobile devices will be a game changer’ and invested heavily in it. AMD – which both designed and manufactured chips spun off its chip production into a new company ‘Globalfoundries’ with investments from the Abu Dhabi Government’s investment arm xxxx. TSMC has a new CEO, Rick Tsai. However, he was focused on cutting costs and things did not go that well.  Apple’s new iPhone launched in 2007 used its own operating system, however, outsourced the design and manufacturing to Samsung. Trying to win more business for the smartphone chips required more investments. Morris Chang took charge again and doubled down.

Apple announced that it had designed its own application processor the A4, which it used in the new iPad and iPhone 4. Design chips to run smartphones is expensive and this is why smartphone companies buy off-the-shelf chips from companies like Qualcomm. However, Apple invested heavily in R&D and chip design facilities in Bavaria and Israel. Today no company besides TSMC has the capacity to meet Apple’s needs. 

EUV 

Extreme ultraviolet radiation was needed for the chips. ASML, the Dutch company spent nearly two decades to get EUV to work. Intel invested $4Billion dollars in ASML in 2012. Cymer, a company founded by two laser experts from the University of California, San Diego, had been a major player in lithographic light sources since the 1980s.  ASML invested in its suppliers – It paid $1B to Zeiss (a German company building the world’s most advanced optical systems) to fund its R&D process. EUV lithography works reliably to produce chips cost-effectively. ASML’s AUV tools weren’t really Dutch (though they were largely assembled in the Netherlands). Crucial components came from Cymer in California and Zeiss and Trumpf in Germany. No single country can claim ownership and they are a product of many countries.  By Mid 2010s ASML’s EUV tools were ready to be deployed to the world’s most advanced chip fabs.

TSMC:

Morris Chang bet heavily on EUV.  TSMC’s Shang-yi Chiang, the engineer who headed TSMC’s R & D, was widely credited for TSMC’s top-notch manufacturing. He grew up in Taiwan, did Electrical Engineering at Stanford, and worked at TI and HP. He was called back to Taiwan to work at TSMC with a massive signing bonus in 1997 to help build the company. Morris Chang’s vision to be a leader was evident in TSMC’s R&D spend. TSMC’s R&D Team had 120 people in 1997 to 7000 in 2013. Chiang said that in the US if something broke at 1 am, the engineer would fix it the next morning, however, at TSMC, it gets fixed by 2 am (The same could be said of tech. engineers working in India as well). Samsung, Intel, and GlobalFoundries also adopted EUVs. IBM sold their chip division to Global Foundries. TSMC controlled over 50% of the world’s foundry market. Building cutting-edge processors was very expensive for everyone except the world’s largest chipmakers. 

Intel Forgot Innovation: 

Andy Grove died in 2016. Most of the population had a PC (Personal Computer) and it was highly profitable for Intel. It also had a lot of money to invest in R&D. Intel focussed on its integrated model. They both designed and produced chips (AMD was out of producing chips). Intel was competing with every other company. However, TSMC just focussed on producing the chips and everyone was their customers.  

A new trend – Artificial Intelligence (AI) was emerging. E.g. To train a computer to recognize a cat, you have to show it a lot of cats and dogs so it learns to differentiate between the two. The more animals your algorithms require, the more transistors you need. Chips designed and optimized for AI can work faster, take up less data center space, and use less power than Intel’s general-purpose CPUs. In early 2010 Nvidia, the designer of graphic chips, began hearing rumors that PhD students from Stanford were using Nvidia’s graphic chips (Graphic Processing Units) for something other than graphics. GPU’s are very flexible. Nvidia bet its future on AI and rolls out improvements to its special programming language CUDA that helps you write programs to Nvidia’s chips.  Intel was lagging behind. People in the industry attribute it to Intel’s delayed adoption of EUVs.

By the end of 2020, only two companies were major producers of chips (TSMC and Samsung). The chips were produced from Taiwan and S. Korea. This was a problem for the US, as both these countries were geographically closer to the People’s Republic of China. 

Part 7 China: 

Part 7 of the book discusses the Chinese Premier Xi Jinping and his policies when it comes to technology, hardware, and software. As written earlier in the book, China wanted a TSMC. China had equivalents of Google and Facebook in homegrown Baidu and Tencent. Companies like Microsoft and Apple were allowed into China only after they agreed on China’s censorship efforts. China’s data centers are dependent fully on foreign, largely US-produced chips. During the 2000s and 2010s, China spent more money on importing semiconductors than oil. 

Xi was also worried that most of the advanced chips were monopolized by a handful of companies located outside of China (mostly China’s geopolitical rivals – Taiwan, Japan, and South Korea). There was no Chinese firm producing GPU chips and they were dependent on Nvidia and AMD. As written earlier, Chinese leaders recruited Richard Chang to start SMIC and eventually, he was ousted from the company. 

Countries like Japan, South Korea, Netherlands, and Taiwan were integrated with the US chip industry and were able to grow. However, China wanted to do it independently and it posed a challenge for their Chip industry growth. The Government provided private companies vast government subsidies to set up factories. 

Technology Transfer to China: 

As businesses want to expand operations, they have to get into the Chinese market. This in a way also transfers technology to them. For a company to sell into the Chinese market, they may also have to accept Chinese capital. This is good for China and they have leverage. 

Huawei: 

Ren Zhengfei the Founder of Huawei looks like any other Silicon Valley executive. The author draws parallels between Huawei and Samsung. The model is similar – 1. Build nexcess with the Government for favorable policies and cheap debt, 2. Copy from the west and 3. Sell at lower cost and expand globally. Huawei took this approach. Huawei also heavily invested in R&D. The dominance of the US in SemiConductor was shrinking.  However, Huawei made less money per phone compared to Apple or Samsung.

5G and Phone Switching: 

In the early days of telephones, phone switching was done by hand by women seated who connected different callers. Today phone providers are reliant on Silicon. Huawei has mastered this act.  Semiconductors are the key to sending more data wirelessly. Companies like Qualcomm invest heavily in this where they can send and receive radio waves. Tesla is also a leading chip designer. By 2030, China’s chip industry might rival Silicon Valley for influence. 

Wars: 

The future wars will be fought on precision. They will rely on advanced technology, semiconductors and computing. The US has a threat. The country which can produce more Os and 1s is bound to have a strategic advantage. China could surpass the US as an AI superpower. 29% of world’s leading AI(Artificial Intelligence) researchers are from China. Russia has used different radar and signal jamming technology in its war against Ukraine. DARPA’s budget is $2 Billion Dollars a year less than the R&D budgets of most of the industry’s biggest firms. DARPA launched the Electronics Resurgence Initiative, to build the next wave of military and chip technology. Taiwan couold likely be the next battleground state in the future. 

Part 8: – 

Competition: 

Everything the top countries were competing on relied on chips. Intel’s CEO Brian Krzanich was the chairman of the Semiconductor Industry Association in 2015.  The senior officials in the Obama administration did not understand that chips were an important issue. The biggest competitor for the US (China) was also the biggest market for them. There were new attempts by China to acquire technology based on the government’s interests and not on commercial objectives. US Intelligence raised issues on concerns about Huawei’s alleged links to the Chinese government. Another company ZTE was state (Chinese) owned and there were restrictions imposed on it by the US government. ZTE later paid fines to settle the matter so it could regain access to US suppliers.

Fujian Jinhua:

China’s Fujian province is right across the straits from Taiwan. DRAM requires special know-how, advanced technology, and equipment. When Samsung entered the DRAM business, it licensed technology from Micron, and opened R&D facilities in Silicon Valley. Micron did not want to provide the same kind of assistance to Jinhua as it did as a dangerous competitor. There were also allegations of stealing Intellectual Property from Micron. Jinuua was cut off from buying US equipment for manufacturing chips.

The dominance of a few Companies:

From making simple phone switches in late 1980 Huawei had ascended to become by late 2010 to be an advanced telecom and networking gear company. The Australian Government had banned Huawei from its 5G network. (According to an Australian journalist, the Australian Prime Minister read a 474-page book A Comprehensive Guide to 5G Security so he can ask better questions). However many European countries did not want to take this route. 

Nearly every chip in this world uses software from at least 3 US-based companies, Cadence, Synopsys, and Mentor (owned by Germany’s Siemens). Excluding chips produced by Intel, almost all of the advanced chips are fabricated by just two companies Samsung and TSMC (both located outside of the US). Advanced processors require EUV Lithography machines produced by just one company in the Netherlands ASML (which in turn relies on its San Diego subsidiary – Cymer).  The global chip industry spends $100 Billion annually on capital expenditures. China’s share of fabrication is predicted to increase from 15% to 24% of global capacity by 2030. 

Semiconductor Shortage: 

During COVID the media interpreted chip shortage as a supply chain problem. However, the world produced more chips in 2021 than ever before (Over 1.1 trillion semiconductor devices according to research firm IC Insights). The semiconductor shortage is more a story of demand growth than a supply chain issue (new PCs, 5G Phones, AI-enabled Data centers). TSMC is planning on expanding a new fab in Arizona and Samsung expanding its facility near Austin, TX (Taylor, TX)

Taiwan: 

The idea that China would simply destroy TSMC’s fabs may not hold good, as the US and others will still have access to Intel and Samsung’s chip fabs. If the US did nothing about Taiwan should there be a crisis, it would not go well for the nation and it would need to heed China.  Taiwan produces 11% of the world’s memory chips and it fabricates 37% of the world’s logic chips. Anything done to Taiwan could be devastating for the world economy. (Airplanes, Autos, Microwaves, all kinds of manufacturing equipment), there will be all kinds of delays. If Taiwan’s production is stopped, we would find it even harder to buy dishwashers. Russia’s reliance on foreign chips is a powerful leverage for the United States. A new Taiwan Strait crisis will be very dangerous. 

My Take on the book:

I enjoyed reading ChipWar – For someone who did not know a lot about the different companies that dominate the semiconductor industry, this was a great and fascinating read. It also helped me understand the history of chip design, manufacturing, and production and also how politics is intertwined with a business like chips. It makes a lot of sense that the future will not be fought just with people, but with technology. This will be the biggest differentiator for nations. Thanks for writing a great book Chris.