Mr Chang, I presume?

 

UnHerd´s YouTube channel, featuring Freddie Sayers, has interviewed Chris Miller, an expert on the microchip situation and its geopolitical consequences. Still, Miller´s research into the question does give us *some* ground for optimism, although the stakes are quite high!

The government-connected Taiwanese company TSMC has a virtual global monopoly on high-quality microchips. Most such chips are made at one single location in the world (let that sink in), the place in question being TSMC´s foundry at the Hsinchu Science Park on Taiwan (a foundry is a special industrial plant for the production of microchips). The entire world economy is dependent on the semiconductors produced there. Microchips, after all, are found pretty much everywhere: computers, I-phones, microwave ovens, but also cars or military technology. What would happen if Taiwan is attacked by China tomorrow morning and the foundry is destroyed? A world without high tech semiconductors would be plunged into a global crisis similar to the Great Depression. And a world in which China controls the entire semiconductor industry (by capturing the Hsinchu plant) would perhaps be even worse! And building a new foundry somewhere else would, while not impossible, be an extremely expensive undertaking.

Still, the situation isn´t as bleak as I first expected. While the foundry is Taiwanese, the machines employed in the complicated manufacturing process are made in the United States, Japan and the Netherlands. Thus, even if China would somehow capture the semiconductor plant, they can´t get the technology to make it work (the machines need to be replaced quite often). The United States, by contrast, could – albeit with difficulty – build a new foundry on its own territory, and equip it with tools made in America. And at present, the US is engaged in a creeping blockade against China´s ability to import and/or manufacture cutting edge technology from the West and its allies. The goal is to create a kind of microchip alliance between the United States, Taiwan and Japan (and, I suppose, the Netherlands). The long term goal of this alliance would be to stop the Chinese from developing Artificial Intelligence, or at least cripple their ability to compete with the American sphere of influence.

That being said, the problems are huge, too. No surprise there! For instance, smuggling microchips isn´t particularly hard. Russia gets chips through nations like Turkey or Kazakhstan, which don´t care about the US sanctions. And, somewhat ironically, from China. Chris Miller points out that China doesn´t fundamentally care about Taiwan´s semiconductor capacity anyway: the goal to “re-unite” Taiwan with China existed before semiconductors were even invented, after all. It wouldn´t change even if TSMC would build a secret plant in Alaska or whatever. Miller estimates the risk of an armed confrontation between the United States and China over Taiwan at 20% within the next five years.

Sayers also points out a more general problem with the Western attitude to things: instead of relying on our own resources and government power, the Western elites have a tendency to “offshore” everything for short term gain (in the name of the hallowed free market), creating geopolitical problems further down the road. Taiwan may be a Western ally, but in hindsight, perhaps a foundry in Texas would have been a better idea? (The founder of TSMC, Morris Chang, used to work for Texas Industries!) So the next great depression and a People´s Liberation Army equipped with sophisticated AI might still be just around the corner…

One problem not mentioned in UnHerd´s interview is climate change. The Taiwanese foundry run into problems a couple of years ago due to water shortages, which in turn were caused by global climate change affecting the weather patterns in the Pacific Ocean. Presumably, these kinds of problems could also affect foundries in, say, Japan or the United States.

That being said, I suppose a dose of cautious optimism is good from time to time. The honeybees are still around, too.