Chip War: The Fight for the World's Most Critical Technology

by Chris Miller

Otellini, Intel’s CEO from 2005 to 2013, admitted he turned down the contract to build iPhone chips because he worried about the financial implications. A fixation on profit margins seeped deep into the firm—its hiring decisions, its product road maps, and its R&D processes. The company’s

leaders were simply more focused on engineering the company’s balance sheet than its transistors. “It had the technology, it had the people,” one former finance executive at Intel reminisced. “It just didn’t want to take the margin hit.”

China’s problem isn’t only in chip fabrication. In nearly every step of the process of producing semiconductors, China is staggeringly dependent on foreign technology, almost all of which is controlled by China’s geopolitical rivals—Taiwan, Japan, South Korea, or the United States. The software

building blocks of transistor patterns from which many chips are designed, China’s market share is 2 percent; most of the rest is American or British. China supplies 4 percent of the world’s silicon wafers and other chipmaking materials; 1 percent of the tools used to fabricate chips; 5 percent of

the market for chip designs. It has only a 7 percent market share in the business of fabricating chips. None of this fabrication capacity involves high-value, leading-edge technology. Across the entire semiconductor supply chain, aggregating the impact of chip design, intellectual

property, tools, fabrication, and other steps, Chinese firms have a 6 percent market share, compared to America’s 39 percent, South Korea’s 16 percent, or Taiwan’s 12 percent, according to the Georgetown researchers. Almost every...

advanced logic, memory, and analog chips, however, China is crucially dependent on American software and designs; American, Dutch, and Japanese machinery; and South Korean and Taiwanese manufa...

Chinese leaders recruited Richard Chang to found SMIC and “share God’s love with the Chinese.” He built a capable foundry, but it struggled to make money and suffered a series of bruising intellectual property lawsuits with TSMC. Eventually Chang was

ousted and private-sector investors were displaced by the Chinese state. By 2015, a former official from China’s Ministry of Industry and Information was named chairman, solidifying the relationship between SMIC and the Chinese government. The firm continued to lag meaningfully behind

TSMC in manufacturing...

At IBM, Rometty announced a change of strategy that would appeal to Beijing. Rather than trying to sell chips and servers to Chinese customers, she announced, IBM would open its chip technology to Chinese partners, enabling them, she explained, to “create a new and vibrant ecosystem of Chinese companies producing homegrown computer systems for the local and international markets.” IBM’s decision to trade technology for market access made business sense. The firm’s technology was seen

as second-rate, and without Beijing’s imprimatur it was unlikely to reverse its post-Snowden market shrinkage. IBM was simultaneously trying to shift its global business from selling hardware to selling services, so sharing access to its chip designs seemed logical.

Cell networks will identify a phone’s location and send radio waves directly toward a phone, using

a technique called beamforming. A typical radio wave, like one that sends music to your car radio, sends signals out in every direction because it doesn’t know where your car is. This wastes power and creates more waves and more interference. With beamforming, a cell tower identifies a device’s location and sends the signal it needs only in that direction. Result: less interference and stronger signals for everyone.

autonomous drones to invisible battles in cyberspace and across the electromagnetic spectrum, the future of war will be defined by computing power.

What’s new today is that America now

has a credible challenger. The Soviet Union could match the U.S. missile-for-missile but not byte-for-byte. China thinks it can do both. The fate of China’s semiconductor industry isn’t simply a question of commerce. Whichever country can produce more

1s and 0s will have a serious military a...

In 2018, researchers discovered two fundamental errors in Intel’s widely used microprocessor architecture called Spectre and

Meltdown, which enabled the copying of data such as passwords—a huge security flaw. According to the Wall Street Journal, Intel first disclosed the flaw to customers, including Chinese tech companies, before notifying the U.S. government, a fact that only intensified Pentagon officials’ concern

about their declining influence over the ...

“Unilateral action is increasingly ineffective in a world where the semiconductor industry is globalized,” the Obama administration’s semiconductor report declared. “Policy can, in principle, slow the diffusion of technology, but it cannot stop the spread.” Neither of

these claims was backed by evidence; they were simply assumed to be true. However, “globalization” of chip fabrication hadn’t occurred; “Taiwanization” had. Technology hadn’t diffused. It was monopolized by a handful of irreplaceable companies. American tech policy was held hostage to

banalities about globalization that were easily s...

level playing field. A laissez-faire system works if every country agrees to it. Many governments, especially in Asia, were deeply involved in supporting their chip industries. However, U.S. officials found it easier to ignore other countries’ efforts to grab valuable chunks of the chip industry,

instead choosing to parrot platitudes about free trade and open competition. Meanwhile, America’s position was eroding.

In polite company in Washington and Silicon Valley, it was easier simply to repeat words like multilateralism, global...

that were too vacuous to offend anyone in a position of power. The chip industry itself—deeply fearful of angering China or TSMC—put its considerable lobbying resources behind repeating false platitudes about how “global” the indu...

internationalist ethos that guided officials of both political parties amid America’s unipolar moment. Meetings with foreign companies and governments were more pleasant when everyone pretended that cooperation was win-win....

faster, blindly ignoring the deterioration in the U.S. position, the rise in China’s capabilities, and the staggering reliance on Taiwan and South Kore...

Efforts by the Obama administration to cut a deal with China’s spy agencies whereby they agreed to stop providing stolen secrets to Chinese companies lasted only long enough for Americans to forget about the issue, at which point the hacking promptly restarted.

Micron had little reason to expect a fair trial in China. Winning court cases in Taiwan or California meant little when kangaroo courts in Fujian could lock the company out of its biggest market.

machine. Even if a future Chinese