More on this book
Community
Kindle Notes & Highlights
discipline alone couldn’t solve the Soviets’ basic problems. One issue was political meddling.
A second issue was overreliance on military customers. The U.S., Europe, and Japan had booming consumer markets that drove chip demand.
A final challenge was that the Soviets lacked an international supply chain. Working with America’s Cold War allies, Silicon Valley had forged an ultra-efficient globalized division of labor.
By the start of the Persian Gulf War, the Paveway had become the military’s weapon of choice for the same reason Intel’s microprocessors were used across the computer industry: they were widely understood, easy to use, and cost-effective.
Planes using laser guidance for their bomb strikes hit thirteen times as many targets as comparable planes without guided munitions.
U.S. airpower proved decisive in the Persian Gulf War, decimating Iraqi forces while minimizing U.S. casualties.
“What’s making all this work is weapons based on information instead of the volume of fire power,” one military analyst explained to the media. “It’s the triumph of silicon over steel,”
Japan. The country’s semiconductor firms spent the 1990s shrinking in the face of America’s resurgence. The technological basis for Japan’s challenge to American hegemony began to crumble.
After the easy defeat of Saddam Hussein’s Iraq, America’s vast new fighting power was visible to everyone. This caused a crisis in the Soviet military and the KGB, who were embarrassed yet afraid to admit how decisively they were outgunned.
The Cold War was over; Silicon Valley had won.
The job he’d wanted at TI—CEO—would have placed him at the top of the chip industry, on par with Bob Noyce or Gordon Moore. So when the government of Taiwan called, offering to put him in charge of the island’s chip industry and providing a blank check to fund his plans, Chang found the offer intriguing. At age fifty-four, he was looking for a new challenge.
He was arguably more Texan than Taiwanese. “Taiwan was a strange place to me,” he’d later recall.
As early as the mid-1970s, while still at TI, Chang had toyed with the idea of creating a semiconductor company that would manufacture chips designed by customers. At the time, chip firms like TI, Intel, and Motorola mostly manufactured chips they had designed in-house. Chang pitched this new business model to fellow TI executives in March 1976.
The idea of separating chip design and manufacturing had therefore already been percolating in Taiwan for several years before Minister K. T. Li offered Morris Chang a blank check to build Taiwan’s chip industry.
The rest of the capital was raised from wealthy Taiwanese who were “asked” by the government to invest.
From day one, TSMC wasn’t really a private business: it was a project of the Taiwanese state.
A decade earlier, Carver Mead had prophesied a Gutenberg moment in chipmaking, but there was one key difference. The old German printer had tried and failed to establish a monopoly over printing. He couldn’t stop his technology from quickly spreading across Europe, benefitting authors and print shops alike.
In the chip industry, by lowering startup costs, Chang’s foundry model gave birth to dozens of new “authors”—fabless chip design firms—that transformed the tech sector by putting computing power in all sorts of devices. However, the democratization of authorship coincided with a monopolization of the digital printing press. The economics of chip manufacturing required relentless consolidation. Whichever company produced the most chips had a built-in advantage, improving its yield and spreading capital investment costs over more customers.
Morris Chang wanted to become the Gutenberg of the digital era. He ended up vastly more powerful. Hardly anyone realized it at the time, but Chang, TSMC, and Taiwan were on a path toward dominati...
This highlight has been truncated due to consecutive passage length restrictions.
In 1965, Chinese engineers forged their first integrated circuit, a half decade after Bob Noyce and Jack Kilby. However, Mao’s radicalism made it impossible to attract foreign investment or conduct serious science.
Just as Mao was sending China’s small set of skilled workers to the countryside for socialist reeducation, the chip industry in Taiwan, South Korea, and across Southeast Asia was pulling peasants from the countryside and giving them good jobs at manufacturing plants.
Mao Zedong died the year after Bardeen’s visit to China. The old dictator was replaced, after a few years, by Deng Xiaoping, who promised a policy of “Four Modernizations” to transform China. Soon China’s government declared that “science and technology” were “the crux of the Four Modernizations.”
When rising entrepreneurs like Huawei’s Ren Zhengfei began building electronics businesses in the late 1980s, they had no choice but to rely on foreign chips. China’s electronics assembly industry was built on a foundation of foreign silicon, imported from the United States, Japan, and increasingly Taiwan—which
unofficial government pressure on South Korea’s banks to provide credit. This financing mattered because Samsung’s main product, DRAM memory chips, required brute financial force to reach each successive technology node—spending that had to be sustained even during industry downturns. The DRAM market was like a game of chicken,
Richard Chang saw bringing chips to China as his life’s calling. Born in 1948 to a military family in Nanjing, the former capital, his family fled China after the Communists took power, arriving in Taiwan when he was only one year old.
Chang’s strategy was simple: do as TSMC had done. In Taiwan, TSMC had hired the best engineers it could find, ideally with experience at American or other advanced chip firms. TSMC bought the best tools it could afford. It focused relentlessly on training its employees in the industry’s best practices. And it took advantage of all the tax and subsidy benefits that Taiwan’s government was willing to provide.
The company’s success in domesticating technology was only possible thanks to this foreign-trained workforce.
Unlike rivals who focused more on hiring politicians’ children than on manufacturing quality, Chang ramped up production capacity and adopted technology that was near the cutting edge. By the end of the 2000s SMIC was only a couple years behind the world’s technology leaders.
The “war” to find the next, best type of beam to shoot at silicon wafers was only one of three contests underway over the future of lithography. The second battle was commercial, over which company would build the next generation of lithography tools.
Building vast in-house manufacturing processes for lithography tools would have been impossible. Instead, the company decided to assemble systems from components meticulously sourced from suppliers around the world.
Both ASML and TSMC started as small firms on the periphery of the chip industry, but they grew together, forming a partnership without which advances in computing today would have ground to a halt.
ASML was the only lithography firm left. The idea of giving a foreign company access to the most advanced research coming out of America’s national labs raised some questions in Washington.
Claims that the decline of America’s lithography industry would imperil security were seen as out of touch with this new era of globalization and interconnection. The chip industry, meanwhile, simply wanted to build semiconductors as efficiently as possible. With no large-scale U.S. lithography firms remaining, what choice did they have but to bet on ASML?
Anyone who raised the question of how the U.S. could guarantee access to EUV tools was accused of retaining a Cold War mindset in a globalizing world. Yet the business gurus who spoke about technology spreading globally misrepresented the dynamic at play. The scientific networks that produced EUV spanned the world, bringing together scientists from countries as diverse as America, Japan, Slovenia, and Greece. However, the manufacturing of EUV wasn’t globalized, it was monopolized. A single supply chain managed by a single company would control the future of lithography.
The x86 architecture dominated PCs not because it was the best, but because IBM’s first personal computer happened to use it.
In the years since Intel first adopted the x86 architecture, computer scientists at Berkeley had devised a newer, simpler chip architecture called RISC that offered more efficient calculations and thus lower power consumption. The x86 architecture was complex and bulky by comparison. In the 1990s, Andy Grove had seriously considered switching Intel’s main chips to a RISC architecture, but ultimately decided against it. RISC was more efficient, but the cost of change was high, and the threat to Intel’s de facto monopoly was too serious. The computer industry was designed around x86 and Intel
...more
This may be changing in light of Apple's switch to ARM's RISC-based chips in their Apple Silicon devices.
Some companies tried challenging x86’s position as the industry standard in PCs. In 1990, Apple and two partners established a joint venture called Arm, based in Cambridge, England. The aim was to design processor chips using a new instruction set architecture based on the simpler RISC principles that Intel had considered but rejected.
He understood the limits of relying on in-house manufacturing. “Silicon is like steel,” he insisted in the early debates over Arm’s strategy. “It’s a commodity…. We should build chips over my dead body.” Instead, Arm adopted a business model of selling licenses for use of its architecture and letting any other chip designer buy them. This presented a new vision of a disaggregated chip industry.
the idea of pouring money into mobile devices seemed like a wild gamble at a time when there was far more money to be made selling processors for PCs. So Intel decided not to enter the mobile business until it was too late.
“They wanted to pay a certain price,” Otellini told journalist Alexis Madrigal after the fact, “and not a nickel more…. I couldn’t see it. It wasn’t one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100× what anyone thought.” Intel turned down the iPhone contract.
Apple looked elsewhere for its phone chips. Jobs turned to Arm’s architecture, which unlike x86 was optimized for mobile devices that had to economize on power consumption. The early iPhone processors were produced by Samsung, which had followed TSMC into the foundry business. Otellini’s prediction that the iPhone would be a niche product proved horribly wrong. By the time he realized his mistake, however, it was too late.
Since the late 1980s, Intel has made a quarter trillion dollars in profit, even before adjusting for inflation, a track record that few other companies have matched. It has done this by charging a ton for PC and server chips. Intel could sustain high prices because of the optimized design processes and advanced manufacturing that Grove had honed and bequeathed to his successors. The company’s leadership consistently prioritized the production of chips with the highest profit margin. This was a rational strategy—no one wants products with low profit margins—but it made it impossible to try
...more
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.”
Grove didn’t view Intel’s past success as an argument for complacency. He was as paranoid as ever. Seeing Chinese venture capitalists investing in Palo Alto made him wonder: Was Silicon Valley smart to be offshoring production at a time of mass unemployment?
His solution: “Levy an extra tax on the product of offshored labor. If the result is a trade war, treat it like other wars—fight to win.”
Grove wasn’t convinced. “Abandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry,” he declared, pointing to the electric battery industry.
risks of relying so heavily on a couple of facilities in Taiwan to manufacture a large share of the world’s chips. In 1999, an earthquake measuring 7.3 on the Richter scale struck Taiwan, knocking out power across much of the country, including from two nuclear power plants. TSMC’s fabs lost power, too, threatening the company’s production and many of the world’s chips. Morris Chang was quickly on the phone with Taiwanese officials to ensure the company got preferential access to electricity.
consensus in Washington was that trade and investment would encourage China to become a “responsible stakeholder” of the international system, as influential diplomat Robert Zoellick put it.
Washington concluded that export controls would do more harm than good, hurting U.S. industry without preventing China from buying goods from firms in other countries.
A new consensus in Washington formed around the idea that the best policy was to “run faster” than America’s rivals. “The likelihood that the United States will grow dependent on any one country, much less China, for any one product, especially semiconductors, is exceedingly small,”
