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

by Chris Miller

The United States wanted it that way: an industrial war was a struggle America would win.

The United States built more tanks than all the Axis powers combined, more ships, more planes, and twice the Axis production of artillery and machine guns. Convoys of industrial goods streamed from American ports across the Atlantic and Pacific Oceans, supplying Britain, the Soviet Union, China, and other allies with key materiel. The war was waged by soldiers at Stalingrad and sailors at Midway. But the fighting power was produced by America’s Kaiser shipyards and the assembly lines at River Rouge.

More accuracy required more calculations. Engineers eventually began replacing mechanical gears in early computers with electrical charges. Early electric computers used the vacuum tube, a lightbulb-like metal filament enclosed in glass. The electric current running through the tube could be switched on and off, performing a function not unlike an abacus bead moving back and forth across a wooden rod. A tube turned on was coded as a 1 while a vacuum tube turned off was a 0. These two digits could produce any number using a system of binary counting—and therefore could theoretically execute many types of computation. Moreover, vacuum tubes made it possible for these digital computers to be reprogrammed. Mechanical gears such as those in a bombsight could only perform a single type of calculation because each knob was physically attached to levers and gears. The beads on an abacus were constrained by the rods on which they moved back and forth. However, the connections between vacuum tubes could be reorganized, enabling the computer to run different calculations.

A state-of-the-art computer called ENIAC, built for the U.S. Army at the University of Pennsylvania in 1945 to calculate artillery trajectories, had eighteen thousand vacuum tubes.

“Doping” semiconductor materials with other elements presented an opportunity for new types of devices that could create and control electric currents. However, mastering the flow of electrons across semiconductor materials like silicon or germanium was a distant dream so long as their electrical properties remained mysterious and unexplained.

By January 1948, he’d conceptualized a new type of transistor, made up of three chunks of semiconductor material. The outer two chunks would have a surplus of electrons; the piece sandwiched between them would have a deficit. If a tiny current was applied to the middle layer in the sandwich, it set a much larger current flowing across the entire device. This conversion of a small current into a large one was the same amplification process that Brattain and Bardeen’s transistor had demonstrated.

The transistor could only replace vacuum tubes if it could be simplified and sold at scale.

Transistors soon began to be used in place of vacuum tubes in computers, but the wiring between thousands of transistors created a jungle of complexity.

Noyce used Hoerni’s planar process to build multiple transistors on the same chip. Because the planar process covered the transistor with an insulating layer of silicon dioxide, Noyce could put “wires” directly on the chip by depositing lines of metal on top of it, conducting electricity between the chip’s transistors. Like Kilby, Noyce had produced an integrated circuit: multiple electric components on a single piece of semiconductor material. However, Noyce’s

version had no freestanding wires at all. The transistors were built into a single block of material. Soon, the “integrated circuits” that Kilby and Noyce had developed would become known as “semiconductors” or, more simply, “chips.”

Winning the Minuteman II contract transformed TI’s chip business. TI’s integrated circuit sales had previously been measured in the dozens, but the firm was soon selling them by the thousands amid fear of an American “missile gap” with the Soviet Union. Within a year, TI’s shipments to the Air Force accounted for 60 percent of all dollars spent buying chips to date. By the end of 1964, Texas Instruments had supplied one hundred thousand integrated circuits to the Minuteman program. By 1965, 20 percent of all integrated circuits sold that year went to the Minuteman program. Pat Haggerty’s bet on selling chips to the military was paying off. The only question was whether TI could learn how to mass-produce them.

Marshall’s grim conclusion was that after a decade of pointless fighting in Southeast Asia, the U.S. had lost its military advantage. He was fixated on regaining it. Though Washington had been shocked by Sputnik and the Cuban Missile Crisis, it wasn’t until the early 1970s that the Soviets had built a big enough stockpile of intercontinental ballistic missiles to guarantee that enough of their atomic weapons could survive a U.S. nuclear strike to retaliate with a devastating atomic barrage of their own. More worrisome, the Soviet army had far more tanks and planes, which were already deployed on potential battlegrounds in Europe. The U.S.—facing pressure at home to cut military spending—simply couldn’t keep up. Strategists like Marshall knew the only answer to the Soviet quantitative advantage was to produce better quality weapons.

what would happen if all these new sensors, guided weapons, and communications devices were integrated. Called “Assault Breaker,” it envisioned an aerial radar that could identify enemy targets and provide location information to a ground-based processing center, which would fuse the radar details with information from other sensors. Ground-based missiles would communicate with the aerial radar guiding them toward the target. On final descent, the missiles would release submunitions that would individually home in on their targets. Guided weapons were giving way to a vision of automated war, with computing power distributed to individual systems in a way never before imaginable. This was only possible because the U.S. was on track “to increase the density of chips ten to a hundredfold,” as Perry told an interviewer in 1981, promising comparable increases in computing power. “We will be able to put computers, which only ten years ago would have filled up this entire room, on a chip” and field “ ‘smart’ weapons at all levels.”

who simply didn’t understand how rapidly chips were changing.

In the early 1960s, it had been possible to claim the Pentagon had created Silicon Valley. In the decade since, the tables had turned. The U.S. military lost the war in Vietnam, but the chip industry won the peace that followed, binding the rest of Asia, from Singapore to Taiwan to Japan, more closely to the U.S. via rapidly expanding investment links and supply chains. The entire world was more tightly connected to America’s innovation infrastructure, and even adversaries like the USSR spent their time copying U.S. chips and chipmaking tools.

The 1980s were a hellish decade for the entire U.S. semiconductor sector. Silicon Valley thought it sat atop the world’s tech industry, but after two decades of

rapid growth it now faced an existential crisis: cutthroat competition from Japan.

Hewlett-Packard, the company he worked for, had invented the concept of a Silicon Valley startup in the 1930s, when Stanford grads Dave Packard and Bill Hewlett began tinkering with electronic equipment in a Palo Alto garage. Now it was one of America’s biggest tech companies—and one of the largest buyers of semiconductors.

U.S. chipmakers were run by the people who’d invented high-tech. They joked that Japan was the country of “click, click”—the sound made by cameras that Japanese engineers brought to chip conferences to better copy the ideas. The fact that major American chipmakers were embroiled in intellectual property lawsuits with Japanese rivals was interpreted as evidence that Silicon Valley was still well ahead.

American DRAM chips worked the same, cost the same, but malfunctioned far more often. So why should anyone buy them? Chips weren’t the only U.S. industry facing pressure from high-quality, ultra-efficient Japanese competitors. In the immediate postwar years, “Made in Japan” had been a synonym for “cheap.” But entrepreneurs like Sony’s Akio Morita had cast off this reputation for low

price, replacing it with products that were as high quality as those of any American competitor.

America also had “a long tail” of people “with less than normal intelligence,”

When they returned to California, Sporck made a film about their experience. They reported that Japanese workers were “amazingly pro-company” and that “the foreman put a priority to the company over his family.” Bosses in Japan didn’t have to worry about getting burned in effigy. It was a “beautiful story,” Sporck declared. “It was something for all of our employees to see how that competition is tough.”

Japanese firms could sell to the U.S., but Silicon Valley struggled to win market share in Japan. Until 1974, Japan imposed quotas limiting the number of chips U.S. firms could sell there. Even after these quotas were lifted, Japanese companies still bought few chips from Silicon Valley, even though Japan consumed a quarter of the world’s semiconductors, which companies like Sony plugged into TVs and VCRs that were sold worldwide. Some big Japanese chip consumers such as NTT, Japan’s national telecom monopoly, bought almost exclusively from Japanese suppliers. This was ostensibly a

business decision, but NTT was government-owned, so politics likely played a role. Silicon Valley’s low market share in Japan cost American companies billions of dollars in sales.

Japanese companies had more debt than American peers but nevertheless paid lower rates to borrow.

It was popular to interpret the decline of GCA as an allegory about Japan’s rise and America’s fall. Some analysts saw evidence of a broader manufacturing decay that started in steel, then afflicted cars, and was now spreading to high-tech industries.

in 1986, Japan had overtaken America in the number of chips produced. By the end of the 1980s, Japan was supplying 70 percent of the world’s lithography equipment. America’s share—in an industry invented by Jay Lathrop in a U.S. military lab—had fallen to 21 percent.

Unlike in the days of the Apollo program, by the 1980s over 90 percent of semiconductors were bought by companies and consumers, not the military. It was hard for the Pentagon to shape the industry because the Defense Department was no longer Silicon Valley’s most important customer. Moreover, in Washington there was little agreement on whether Silicon Valley merited government help. After all, many industries were suffering from Japanese competition, from car factories to steel mills.

In 1987, a group of leading chipmakers and the Defense Department created a consortium called Sematech, funded half by the industry and half by the Pentagon. Sematech was based on the idea that the industry needed more collaboration to stay competitive. Chipmakers needed better manufacturing equipment, while the firms that produced this equipment needed to know what chipmakers were looking for.

Under Noyce’s leadership, Sematech was a strange hybrid, neither a company nor a university nor a research lab. No one knew exactly what it was supposed to do.

Yet The Japan That Can Say No was controversial not because of its opinions, but because of the facts. The U.S. had fallen decisively behind in memory chips. If this trend persisted, geopolitical shifts would inevitably follow. It didn’t take a far-right provocateur like Ishihara to recognize this; American leaders foresaw similar trends. The same year that Ishihara and Morita published The Japan That Can Say No, former defense secretary Harold Brown published an article that drew much the same conclusions. “High Tech Is Foreign Policy,” Brown titled the article. If America’s high-tech position was deteriorating, its foreign policy position was at risk, too.

“Disruptive innovation” sounded attractive in Clayton Christensen’s theory, but it was gut-wrenching in practice, a time of “gnashing of teeth,” Grove

remembered, and “bickering and arguments.” The disruption was obvious. The innovation would take years to pay off, if it ever did.

Grove’s restructuring of Intel was a textbook case of Silicon Valley capitalism. He recognized that the company’s business model was broken and decided to “disrupt” Intel himself by abandoning the DRAM chips it had been founded to build. The firm established a stranglehold on the market for PC chips, issuing a new generation of chip every year or two, offering smaller transistors and more

processing power. Only the paranoid survive, Andy Grove believed. More than innovation or expertise, it was his paranoia that saved Intel.

As in Japan, therefore, Korea’s

tech companies emerged not from garages, but from massive conglomerates with access to cheap bank loans and government support.

Lee was a canny entrepreneur, and South Korea’s government stood firmly behind him. Yet Samsung’s all-in bet on chips wouldn’t have worked without support from Silicon Valley. The best way to deal with international competition in memory chips from Japan, Silicon Valley wagered, was to find an even cheaper source in Korea, while focusing America’s R&D efforts on higher-value products rather than commoditized DRAMs. U.S. chipmakers therefore saw Korean upstarts as potential partners.

Japan’s strategy

of “dump no matter what the costs” wouldn’t succeed in monopolizing the world’s DRAM production, because the Koreans would undercut Japanese producers. The resu...

Yet Silicon Valley’s rebirth isn’t solely a story of heroic entrepreneurs and creative destruction. Alongside the rise of these new industrial titans, a new set of scientists and engineers were preparing a leap forward in chipmaking and devising revolutionary new ways to use processing power. Many of these developments occurred in coordination with government efforts, usually not the heavy hand of Congress or the White House, but the work of small, nimble

organizations like DARPA that were empowered to take big bets on futuristic technologies—and to build the educational and R&D infrastructure that such gambles required.

1971, Faggin had spent half a year crouched over his drafting table, sketching the design with Intel’s most advanced tools: a straightedge and color pencils. Then, this design was cut into Rubylith, a red film, using a penknife. A special camera projected the patterns carved in Rubylith onto a mask, a glass plate with a chrome covering that perfectly replicated the Rubylith’s pattern. Finally, light was shined through the mask

and a set of lenses to project a tiny version of the pattern on a silicon wafer. After months of sketching and carving, Faggin had created a chip.

Today, every chip company uses tools from each of three chip design software companies that were founded and built by alumni of these DARPA- and SRC-funded programs.

If you wanted a radio station at 99.5 FM, you had to ensure there wasn’t one at 99.7 already, or the interference would make yours incomprehensible. The same principle applied to other forms of radio communication. The more information that was packed into a given slice of spectrum, the less room there was for error created by muddled signals bouncing off buildings and interfering with each other as they careened through airspace toward a radio receiver.

Jacobs, Viterbi, and several colleagues set up a wireless communications business called Qualcomm—quality communications—betting that ever-more-powerful microprocessors would let them stuff more signals into existing spectrum bandwidth.

Jacobs initially won contracts from DARPA and NASA to build space communications systems. In the late 1980s, Qualcomm diversified into the civilian market, launching a satellite communications system for the trucking industry. But even by the early 1990s, using chips to send large quantities of data through the air seemed like a niche business.

By the end of the 1980s, a chip with a million transistors—unthinkable in the early 1970s, when Lynn Conway had arrived in Silicon Valley—had become a reality, when Intel announced its 486 microprocessor, a small piece of silicon packed with 1.2 million microscopic switches.