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“Run faster” was an elegant strategy with only a single problem: by some key metrics, the U.S. wasn’t running faster, it was losing ground. Hardly anyone in government bothered to do the analysis, but Andy Grove’s gloomy predictions about the offshoring of expertise were partially coming true.
Van Atta reported that the Defense Department’s access to cutting-edge chips would soon depend on foreign countries because so much advanced fabrication was moving abroad. Amid the hubris of America’s unipolar moment, hardly anyone was willing to listen.
Van Atta saw few reasons for confidence and none for complacency. “The U.S. leadership position,” he warned in 2007, “will likely erode seriously over the next decade.” No one was listening.
By the 2000s, it was common to split the semiconductor industry into three categories. “Logic” refers to the processors that run smartphones, computers, and servers. “Memory”
third category of chips is more diffuse, including analog chips like sensors that convert visual or audio signals into digital data, radio frequency chips that communicate with cell phone networks, and semiconductors that manage how devices use electricity.
Fabs for these types of chips generally don’t need to race toward the smallest transistors every couple of years, so they’re substantially cheaper, on average requiring a quarter the capital investment of an advanced fab for logic or memory chips. Today, the biggest analog chipmakers are American, European, or Japanese. Most of their production occurs in these three regions, too, with only a sliver offshored to Taiwan and South Korea. The largest analog chipmaker today is Texas Instruments,
The memory market, by contrast, has been dominated by a relentless push toward offshoring production to a handful of facilities, mostly in East Asia. Rather than a diffuse set of suppliers centered in advanced economies, the two main types of memory chip—DRAM and NAND—are produced by only a couple of firms.
most DRAM manufacturing is in East Asia.
Sanders declared at one industry conference. “Real men have fabs.”
The company that eventually came to dominate the market for graphics chips, Nvidia, had its humble beginnings not in a trendy Palo Alto coffeehouse but in a Denny’s in a rough part of San Jose. Nvidia was founded in 1993 by Chris Malachowsky, Curtis Priem, and Jensen Huang,
Even as Nvidia was churning out top-notch graphics chips, Huang spent lavishly on this software effort, at least $10 billion, according to a company estimate in 2017, to let any programmer—not just graphics experts—work with Nvidia’s chips. Huang gave away CUDA for free, but the software only works with Nvidia’s chips. By making the chips useful beyond the graphics industry, Nvidia discovered a vast new market for parallel processing, from computational chemistry to weather forecasting. At the time, Huang could only dimly perceive the potential growth in what would become the biggest use case
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Jacobs, whose faith in Moore’s Law was as strong as ever, thought a more complicated system of frequency-hopping would work better. Rather than keeping a given phone call on a certain frequency, he proposed moving call data between different frequencies, letting him cram more calls into available spectrum space.
For each generation of cell phone technology after 2G, Qualcomm contributed key ideas about how to transmit more data via the radio spectrum and sold specialized chips with the computing power capable of deciphering this cacophony of signals. The company’s patents are so fundamental it’s impossible to make a cell phone without them.
The biggest change, however, wasn’t simply new types of chips. By making possible mobile phones, advanced graphics, and parallel processing, fabless firms enabled entirely new types of computing.
The new class of CEOs who took over America’s semiconductor firms in the 2000s and 2010s tended to speak the language of MBAs as well as PhDs, chatting casually about capex and margins with Wall Street analysts on quarterly earnings calls.
GlobalFoundries, as this new company that inherited AMD’s fabs was known, entered an industry that was as competitive and unforgiving as ever. Moore’s Law marched forward through the 2000s and early 2010s, forcing cutting-edge chipmakers to spend ever larger sums rolling out a new, more advanced manufacturing process roughly once every two years.
Around the early 2010s, it became unfeasible to pack transistors more densely by shrinking them two dimensionally. One challenge was that, as transistors were shrunk according to Moore’s Law, the narrow length of the conductor channel occasionally caused power to “leak” through the circuit even when the switch was off. On top of this, the layer of silicon dioxide atop each transistor became so thin that quantum effects like “tunneling”—jumping through barriers that classical physics said should be insurmountable—began seriously impacting transistor performance.
Chang realized that TSMC could pull ahead of rivals technologically because it was a neutral player around which other companies would design their products. He called this TSMC’s “Grand Alliance,” a partnership of dozens of companies that design chips, sell intellectual property, produce materials, or manufacture machinery.
“There was very, very little investment,” Chang told journalists afterward. “I had always thought that the company was capable of more…. It didn’t happen. There was stagnation.” So Chang fired his successor and retook direct control of TSMC.
So at the depths of the crisis Chang rehired the workers the former CEO had laid off and doubled down on investment in new capacity and R&D.
It was better “to have too much capacity than the other way around,” Chang declared. Anyone who wanted to break into the foundry business would face the full force of competition from TSMC as it raced to capture the booming market for smartphone chips. “We’re just at the start,” Chang declared in 2012, as he launched into his sixth decade atop the semiconductor industry.
As Jobs introduced new versions of the iPhone, he began etching his vision for the smartphone into Apple’s own silicon chips. A year after launching the iPhone, Apple bought a small Silicon Valley chip design firm called PA Semi that had expertise in energy-efficient processing. Soon Apple began hiring some of the industry’s best chip designers.
Now Apple not only designs the main processors for most of its devices but also ancillary chips that run accessories like AirPods. This investment in specialized silicon explains why Apple’s products work so smoothly. Within four years of the iPhone’s launch, Apple was making over 60 percent of all the world’s profits from smartphone sales, crushing rivals like Nokia and BlackBerry and leaving East Asian smartphone makers to compete in the low-margin market for cheap phones.
EUV was one of the biggest technological gambles of our time.
Using EUV light introduced new difficulties that proved almost impossible to resolve. Where Lathrop used a microscope, visible light, and photoresists produced by Kodak, all the key EUV components had to be specially created.
shoot a tiny ball of tin measuring thirty-millionths of a meter wide moving through a vacuum at a speed of around two hundred miles per hour. The tin is then struck twice with a laser, the first pulse to warm it up, the second to blast it into a plasma with a temperature around half a million degrees, many times hotter than the surface of the sun. This process of blasting tin is then repeated fifty thousand times per second to produce EUV light in the quantities necessary to fabricate chips.
Moreover, the precision Cymer demanded was more exacting than anything Trumpf had previously dealt with. The company proposed a laser with four components: two “seed” lasers that are low power but accurately time each pulse so that the laser can hit 50 million tin drops a second; four resonators that increase the beam’s power; an ultra-accurate “beam transport system” that directs the beam over thirty meters toward the tin droplet chamber; and a final focusing device
Zeiss began developing mirrors made of one hundred alternating layers of molybdenum and silicon, each layer a couple nanometers thick. Researchers in Lawrence Livermore National Lab had identified this as an optimal EUV mirror in a paper published in 1998, but building such a mirror with nanoscale precision proved almost impossible.
Ultimately, Zeiss created mirrors that were the smoothest objects ever made, with impurities that were almost imperceptibly small. If the mirrors in an EUV system were scaled to the size of Germany, the company said, their biggest irregularities would be a tenth of a millimeter. To direct EUV light with precision, they must be held perfectly still, requiring mechanics and sensors so exact that Zeiss boasted they could be used to aim a laser to hit a golf ball as far away as the moon.
ASML itself only produced 15 percent of an EUV tool’s components, he estimated, buying the rest from other firms. This let it access the world’s most finely engineered goods, but it also required constant surveillance.
ASML’s EUV lithography tool is the most expensive mass-produced machine tool in history, so complex it’s impossible to use without extensive training from ASML personnel, who remain on-site for the tool’s entire life span.
In 2006, he tried retiring in California, but when TSMC faced a delay with its 40nm manufacturing process in 2009, a frustrated Morris Chang ordered Chiang back to Taiwan and over a meal of beef noodle soup asked him to again take up the responsibility of managing R&D.
In the early 2010s, Nvidia—the designer of graphic chips—began hearing rumors of PhD students at Stanford using Nvidia’s graphics processing units (GPUs) for something other than graphics.
As investors bet that data centers will require ever more GPUs, Nvidia has become America’s most valuable semiconductor company. Its ascent isn’t assured, however, because in addition to buying Nvidia chips the big cloud companies—Google, Amazon, Microsoft, Facebook, Tencent, Alibaba, and others—have also begun designing their own chips, specialized to their processing needs, with a focus on artificial intelligence and machine learning.
the company’s foray into the foundry business in the mid-2010s, where it tried to compete head-on with TSMC, was a flop. Intel tried opening its manufacturing lines to any customers looking for chipmaking services, quietly admitting that the model of integrated design and manufacturing wasn’t nearly as successful as Intel’s executives claimed. The company had all the ingredients to become a major foundry player, including advanced technology and massive production capacity, but succeeding would have required a major cultural change.
Compared to making PC and data center chips—which remained highly profitable businesses—the new foundry venture had little internal support. So Intel’s foundry business won only a single major customer while in operation in the 2010s. It was shuttered after just several years.
As Intel approached its fiftieth anniversary in 2018, decay had set in.
As the decade ended, only two companies could manufacture the most cutting-edge processors, TSMC and Samsung. And so far as the United States was concerned, both were problematic for the same reason: their location. Now the entire world’s production of advanced processors was taking place in Taiwan and Korea—just off the coast from America’s emerging strategic competitor: the People’s Republic of China.
The question for China’s leaders was how to pivot to producing the kind of chips the world coveted.
When Japan, Taiwan, and South Korea wanted to break into the complex and high-value portions of the chip industry, they poured capital into their semiconductor companies, organizing government investment but also pressing private banks to lend. Second, they tried to lure home their scientists and engineers who’d been trained at U.S. universities and worked in Silicon Valley. Third, they forged partnerships with foreign firms but required them to transfer technology or train local workers. Fourth, they played foreigners off each other, taking advantage of competition between Silicon Valley
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With every year that passed, the precariousness of China’s technological position became clearer. China’s imports of semiconductors increased year after year. The chip industry was changing in ways that weren’t favorable to China.
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.
If China only wanted a bigger part in this ecosystem, its ambitions could’ve been accommodated. However, Beijing wasn’t looking for a better position in a system dominated by America and its friends. Xi’s call to “assault the fortifications” wasn’t a request for slightly higher market share. It was about remaking the world’s semiconductor industry, not integrating with it.
The dollar values at stake in China’s vision of reworking semiconductor supply chains were staggering. China’s import of chips—$260 billion in 2017, the year of Xi’s Davos debut—was far larger than Saudi Arabia’s export of oil or Germany’s export of cars. China spends more money buying chips each year than the entire global trade in aircraft. No product is more central to international trade than semiconductors.
If China’s drive for self-sufficiency in semiconductors succeeded, its neighbors, most of whom had export-dependent economies, would suffer even more. Integrated circuits made up 15 percent of South Korea’s exports in 2017; 17 percent of Singapore’s; 19 percent of Malaysia’s; 21 percent of the Philippines’; and 36 percent of Taiwan’s. Made in China 2025 called all this into question. At stake was the world’s most dense network of supply chains and trade flows, the electronics industries that had undergirded Asia’s economic growth and political stability over the past half century.
The problem wasn’t simply that Chinese government-linked funds were buying up foreign chip firms. They were doing so in ways that violated laws about market manipulation and insider trading.
Huawei is different from the world’s other big tech companies in one major way: its two-decade-long struggle with America’s national security state.
The ties between Huawei and the Chinese state are well documented but explain little about how the company built a globe-spanning business. To understand the company’s expansion, it’s more helpful to compare Huawei’s trajectory to a different tech-focused conglomerate, South Korea’s Samsung.
Lee built Samsung from a trader of dried fish into a tech company churning out some of the world’s most advanced processor and memory chips by relying on three strategies. First, assiduously cultivate political relationships to garner favorable regulation and cheap capital. Second, identify products pioneered in the West and Japan and learn to build them at equivalent quality and lower cost. Third, globalize relentlessly, not only to seek new customers but also to learn by competing with the world’s best companies. Executing these strategies made Samsung one of the world’s biggest companies,
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By contrast, Huawei has embraced foreign competition from its earliest days.
