“When a normal person thinks of microchips, they usually think of the semiconductors that make smartphones, PCs or self-driving vehicles work. But when instead it is the ministers of defense or the military who think of semiconductors, they are wondering how they will use them in the war of the future».
On stage at the IFA in Berlin, Chris Miller speaks fast, yet manages to articulate every single word: as a seasoned speaker, he wants to make the most of the time available, but also make sure that those present understand everything, whatever their nationality. After all, the stakes are high: to make people understand why it exists, how it works and what what he calls the “war of microchips” entails, to which he has dedicated an essay entitled Chip War: The Fight For The World’s Most Critical Technology. The economic book of the year 2022, at least according to the Financial Times.
The war mentioned by Miller, who is a professor at The Fletcher School at Tufts University in Boston (Massachusetts), is not just a simple competition between technology companies for control of the market: with “Chip War” he identifies an ongoing merciless struggle between nations to ensure the availability of chips, microchips and the semiconductor materials needed to produce them. A silent conflict, aggravated by the recent pandemic, which sees the United States, Japan, Korea, Taiwan and the Netherlands at the forefront (i.e. the only 5 countries that together make up the very long supply chain for producing the most advanced microchips), which is shaping and transforming the economic balance of the entire planet, and where the global political and military primacy of the coming decades is at stake. «The whole world today stands on a fragile foundation made up of thousands and thousands of silicon chips – Miller says in fact – What I would like to suggest to you is that the semiconductor industry is increasingly politicized, as competition between countries has an impact on the entire electronics industry.
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The hi-tech war
To understand what we are talking about and what is at stake, we need examples. Miller chooses two: war (the real one, in Ukraine) and the ongoing race to develop artificial intelligence. Let’s start from the first: Miller reminds us that the production of chips in the 50s and 60s began precisely to make missile tracking and navigation systems. «Today we assume that the military can press a button and fly a rocket hundreds of kilometers hitting a target with almost perfect precision – he recalls – but this is only possible thanks to the many microchips and semiconductors present in the missiles themselves, as well as in the satellites that transmit tracking data and in the systems that drive them. And if you look at the geopolitical conflicts rocking the world today, you find that semiconductors play a central role in all of them.”
To support his thesis, the professor takes the example of the war between Ukraine and Russia, where the former stood up to the latter both because it managed to keep digital communications always operational (partly thanks to Elon Musk’s Starlink satellites) , and because it could count on Javellin anti-tank missiles and the more advanced Himars, which have a range of about 80 km and arrive behind enemy lines: «In other words, the war between Russia and Ukraine up to now has been defined in many ways by semiconductors, chips and microchips present in military systems used by both sides,” Miller explains. It is technological primacy given by access to chip production which turns into military primacy: a warning to all countries of the world.
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The other example takes into consideration the ongoing global competition for the development of artificial intelligence: “Over the past decade, the amount of data used to train the most cutting-edge artificial intelligence systems has doubled every six to nine months, with an extraordinary rate of increase. What has allowed AI systems to improve the most? Data quality? The ability of the smartest engineers?” asks Miller. The answer is another: «We owe this progress to the fact that thanks to Moore’s Law, according to which chips double their performance every two years, today AI systems have access to a computing power 16 times higher than that of a decade ago.” In short, it all depends on the hardware.
The problem, as well as the source of the growing geopolitical tensions underlying the “Chip War”, is that hardware is starting to run short. On the one hand, because the most advanced chips are difficult to produce: you need a machine called Extreme ultraviolet lithography (Euv), which is produced only by the Dutch company Asml and is the most complex machine ever built in human history. A forge that requires hundreds of thousands of components, which employs one of the most powerful lasers ever used in a commercial device and which, inside, “pulverizes tiny spheres of tin at a temperature about 40 times higher than that of the surface of the sun”. .
On the other hand, the United States, Japan, Korea, the Netherlands and Taiwan, which together have an absolute monopoly in the production of the most advanced microchips, have understood the strategic value of these technologies, and are now limiting the export of both chips, both the tools and the skills to produce them. Especially towards the People’s Republic of China, which has lagged behind in this sector despite the billions and billions of dollars invested in the last decade.
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An understandable choice by those who have an interest in containing China’s expansion, but which inevitably overheats another front of the global Chip War: Taiwan. Where is the Taiwan Semiconductor Manufacturing Company, or TSMC, which alone produces about 90% of the world‘s most advanced processors (the remaining 10% comes from South Korea), including those used for training artificial intelligence systems . Always the subject of Beijing’s territorial claims, today the island is obviously even more coveted by China, which could quickly bridge its technological gap by gaining control over it. “Imagine the global geopolitical and economic implications if the chip industry were to face blockade of the island,” underlines the professor.
A far from improbable scenario, as confirmed by the fact that the industry is already looking for solutions to adapt to the new, dramatic scenario: «The Chinese military threat to Taiwan, which increases with each new military exercise, is pushing the giants of the hi-tech to move the assembly of PCs, servers and components to other countries starting from Vietnam, which has been the major beneficiary of this new context, to India, Thailand and Mexico. The industry is changing rapidly, and so are investment flows,’ concludes Professor Miller. In short, the chip war is only just beginning.
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