The world is going through another revolution and this time the war is not for gold, spices, or oil. It’s for such a small product that is 10,000 times thinner than human hair, but so powerful that the biggest economies in the world are running behind this trivial product. This is so important that it could spark another world war. This product is a microchip.
All modern electronics from your toothbrush to refrigerators, light bulbs to vacuum cleaners, mobile phones to supercomputers, and even NASA’s rover to fighter jets, today the world runs on microchips. In this decade and many others to come, who will have control of the microchip industry will rule the world. But the strange part of the story is that right now no superpower rules microchip manufacturing. The USA, Europe, China, Japan, and Russia of them are dependent on a small country in East Asia named Taiwan. Companies like Apple, Microsoft, Intel, Tesla, AMD, Nvidia, and many others companies existence is dependent on this country.
We have been hearing for many years now that the next war will be digital. The 2 superpowers of the world, the US and China are already in the cold war of microchips. Both countries are doing everything in their capacity to win this war. While on one hand, China is doing military operations near Taiwan to take control of microchip manufacturing. On the other hand, the US is protecting Taiwan at its full capacity. US President Joe Biden has even applied new regulations on US chip makers exporting the chips to China.
In this story, we will talk about this new age of digital war between the superpowers in the world. We will see why these chips are so important. What is the role of Taiwan in this? What are the US and China up to? And finally, we’ll see what this new age war looks like and how it can impact us. So if you are interested to know about this digital war with microchip weapons, then stick around.
The Beginnings
The wars between the countries are not new. Power struggles between rich nations were the reasons for major wars in history. Whether it’s for oil, species, gold, industries, coal, or weapons, all countries want that power to dominate the globe. After WWII, the US rose as an undisputed power in the world. From computers to the world wide web and semiconductors all were born and brought up in the US. The US has been the brightest and farthest on this journey of digital civilization. In the 1990s, it was the US only where the semiconductor boom started. With companies like Intell, Applied Materials, and Micron, the US was the winner in the semiconductor industry as well. Silicon Valley was named after these silicon-made chips only.
During this time Asian countries also started manufacturing the chips and due to cheap labor and advanced technologies soon they left behind the US chip industry. Today the US, which once dominated the design and production of semiconductors, is producing only 13% of the global chips market and does not produce any advanced chips. 65% of all the chips in the world are manufactured in Taiwan with 54% coming only from a single company named Taiwan Semiconductor Manufacturing Company, also known as TSMC. For advanced chips, the world is dependent on 2 companies only, the first one is Taiwan’s TSMC and the second one is South Korean company Samsung. TSMC produces 92% of advanced chip demand in the world.
Why does the world need these chips?
All consumer electronic goods such as phones, laptops, cars, TVs, and drones, have 2 important elements – Batteries & Chips. While batteries are the heart of these devices, chips are the brain. An organ that is responsible for all the computation in these gadgets. While the covid pandemic has accelerated the growth in the demand for electronic devices, global issues like the Russia-Ukraine war also brought the world to think about alternative power sources. Today most countries want to become self-sufficient in manufacturing microchip technology. In fact the more the world is moving towards AI-powered gadgets and technologies, the demand for microchips increases. Companies need these microchips in order to store & process the large volume of data.
Complexities Involved
Although these chips are made from silicon which comes from sand and is the 2nd most available resource on the earth after oxygen. But the technology to make the chips from silicon is complicated. The process has hundreds of steps and needs temperature, air & dust controls in place. Even a small speck of dust can damage the microchip. Also, the fabrication plants to manufacture these microchips are resource-heavy and cost billions of dollars and take many years to build. And that’s why these chips are referred to as digital gold. Taiwanese companies have spent billions of dollars and many years to create their dominance in this space.
Major companies today need these chips to enhance the processing power of their devices. Everyone from phone manufacturers to gaming consoles, from drones to car manufacturers, and medical equipment to solar panel companies are eyeing microchips. But this is not all. The major governments need these microchips in the country to become more powerful. In the last few decades, the oil & gas-rich countries had the power to run the largest economies of the world. In the next many decades, microchips will run the economies. The future of countries from the militaries to exploring new planets everything is dependent on these advanced chips.
US vs China
Currently, the microchip industry is very fragmented and there are many concerns in the supply chain. The technology, microchips & processors ship back & forth between America, Asia & Europe. The US & China, the tech superpowers, want to close this gap and become self-sufficient with advanced microchips. US President Joe Biden introduced the CHIPS and Science Act in August last year to provide $52.7 billion for American semiconductor research, development, manufacturing, and workforce development. The US has also introduced restrictions on domestic companies like Nvidia exporting GPUs to China. China is not happy about the restrictions and says it is a “technological blockade” on their country.
Restrictions
Right now TSMC is the only company the world relies on for advanced chips. TSMC has branches in both the US and China. But now the US has tightened the law for TSMC as well to sell the chips to China if any US technology is involved in the chip manufacturing process. China also makes a lot of semiconductors, but they import the equipment and technology to manufacture the advanced chips from Taiwanese companies like TSMC, US companies like NVidia, Intel, and AMD & Netherland-based companies like ASML.
The US government has put restrictions on these companies to export to China if there are any US technologies in the process. This made it hard for Chinese companies to move further in this technology. As per US lawmakers, these restrictions are important for national security purposes and “keep advanced technologies out of the wrong hands.”
The US has concerns about China doing military operations near Taiwan. The US is worried that if China took control of Taiwan, it would cut off the chip supply, or sell it more expensively and it would be a bigger threat than the oil exporters. But the US itself is working closely with TSMC in growing the microchip technology in the US. TSMC initially had plans to invest in a $12 billion facility in Arizona. But in December last year, TSMC increased the investment to $40 billion with another facility.
Future of Chips
To date, we have witnessed wars of natural resources, but this time we are in a war of human-made technological resources. The digital gold of microchips is going to give birth to the future superpower. The US and China are already in the cold war over Taiwan which right now holds this super weapon of microchips. Both nations have their reasons. The US wants its glory of being a pioneer in the microchip industry back. China on the other hand has its reasons to empower its country with advanced technologies.
We have been hearing about nuclear war for many decades now. But let’s accept this. Nucs means destruction and everyone knows this. So no matter how many nuclear weapons countries build to show their power, in reality, the next war will be with digital weapons. Where there won’t be humans on the borders but AI-powered robots who will be handled by more sophisticated technologies in the backend. There won’t be the destruction of civilizations but the showcasing of powers. And in no doubt, the winner will be the microchip superpower.
So, that’s about the microchip war today. Let us know what you think about who will be the winner of this new-age weapon. The US, China, Taiwan, or someone else? Let us know in the comments below.