In Chip War’s tracking of this strategically important sector’s development over six decades, the vital role played by Taiwan’s TSMC stands out.
Taiwan – and more specifically the Taiwan Semiconductor Manufacturing Co. or TSMC – holds center stage in Chip War: The Fight for the World’s Most Critical Technology, author Chris Miller’s skillful narrative of the semiconductor industry’s rocky but relentless rise to pivotal economic and strategic prominence. In an era of cloud computing, the Internet of Things, big data, and artificial intelligence, the sector has become more crucial than ever for both commercial and military applications.
Taiwan has managed to carve out a preeminent position in this vital industry. Miller, a scholar of economic history at Tufts University’s Fletcher School of Law and Diplomacy, states flatly that “today, no firm fabricates chips with more precision” than TSMC. The company accounts for more than a third of the new computing power supplied globally each year and makes almost all of the most advanced chips.
Although that accomplishment is a source of great pride within Taiwan, the island’s vulnerability to persistent military pressure from China, less than 100 miles away, has at the same time been a matter of growing concern for those dependent on TSMC for a reliable supply of an essential electronic component.
In the book’s final chapter, entitled “The Taiwan Dilemma,” Miller explores the complexity of the situation. Beijing constantly asserts its goal of gaining control over Taiwan, but armed conflict in the Taiwan Strait would also put the Chinese economy at huge risk with no certainty of success. As Chinese tech companies are currently as dependent as their counterparts around the world on chips from TSMC, China most likely will continue to pursue a strategy of limited military pressure with the aim of demoralizing Taiwan into submission, Miller concludes.
From an American perspective, revitalizing its domestic semiconductor to reduce the heavy current reliance on supplies from Taiwan would be no easy undertaking. As the author points out, it would take many years and a vast amount of capital to replicate TSMC’s chipmaking capacity, assuming it is even possible to find sufficient, dedicated engineering talent and build the needed network of trust with customers and critical suppliers.
Miller alludes briefly to TSMC’s project to build fabs in Arizona with the aim of decreasing American risk perceptions while continuing to keep highly advanced R&D and manufacturing in Taiwan. Since publication of the book last year, TSMC has doubled down on that strategy by expanding its plans in Arizona and announcing new investment projects in Japan and Germany.
Enter Morris Chang
While the final chapter addresses the nub of the conundrum – the possibility that the “beating heart of the digital world” could ever become a battlefield – earlier sections of the book explain how this situation came about. Miller keeps returning to the extraordinary influence of one man, TSMC longtime chairman Morris Chang, now an active 92 despite having retired (twice) from his formal position with the company he founded.
In a volume enlivened with anecdotes about the many colorful individuals who contributed to the sector’s development globally, Chang stands out as one of the industry’s chief heroes (along with such vivid personalities as Idaho billionaire Jack Simplot, who made a fortune in the potato business before rescuing a struggling Micron, and Hungarian refugee Andy Grove whose unrelenting sense of paranoia drove Intel to new levels of success).
Born in China, Chang started his studies at Harvard in the late 1940s as an English lit major, specializing in Shakespeare, before concluding that engineering offered more career opportunities. After earning B.S. and M.S. degrees from M.I.T. and a Ph.D. from Stanford, he became a top executive at Texas Instruments (TI), then at the forefront of the U.S. semiconductor industry. Miller describes how TI colleagues held the methodical, pipe-smoking Chang in awe for his intellect and depth of industry knowledge.
What has earned Chang his place in semiconductor history was his vision for a wholly new business model for the industry – a “foundry” dedicated solely to manufacturing chips for its customers according to their own designs rather than designing and marketing its own products. When Chang was lured to Taiwan in 1985 (where he had never previously lived), initially to head the government-funded Industrial Technology Research Institute (ITRI), he had the chance to implement that model, founding TSMC with strong governmental financial and administrative backing.
The foundry system revolutionized the industry. Outsourcing production to TSMC enabled companies to save the billions of dollars needed to build and operate their own chip fabs – and to do so without fear that their designs would be in the hands of a chipmaker who was simultaneously a market competitor. At the same time, TSMC was able to concentrate on constantly perfecting its manufacturing processes and technology. The new model spurred the rapid growth of “fabless” semiconductor operations designing innovative new types of chips to be turned over to a foundry for production.
As various rivals faded, TSMC has continued to flourish over the years based on its trusted relationship with customers (including giants like Apple) and its manufacturing prowess supported by massive R&D investments. Its position at the very cutting edge of technology remained assured as chip size inexorably grew smaller and smaller, with greater and greater computing power, in line with what became known as Moore’s Law. At least until China began ramping up efforts to intimidate Taiwan, TSMC’s tight connections with Silicon Valley kept the heavy U.S. reliance on offshore chip supply from being a major source of concern.
Today the superpower competition for technological supremacy appears to be an even bigger cause of U.S.-China friction than Beijing’s ambitions toward Taiwan. At the same time as China is chafing over its need to rely on other countries for supplies of advanced chips and chipmaking technology, the Biden administration – in response to unfair Chinese trade practices such as heavy government subsidies to core industries and trade-secret espionage – is moving to further restrict Chinese access to the most sophisticated products, especially those with military-use potential. Since the U.S. and China are both primary markets for Taiwan’s chips, this scenario will present a delicate situation for Taiwan to navigate.
The Taiwan angle aside, Miller offers valuable insights into the complicated character of the chip sector. Despite all the attention recently directed at supply chains, it is still eye-opening to learn the extent of the collaboration needed by so many different companies in different countries before a product can be brought to market. The book is also a reminder of how important the use of semiconductors for military applications has been in the industry’s development, and how chips have made possible today’s generation of high-precision missiles, drones, and other weapons. And it is a testament to the combination of dogged technical innovation, manufacturing and engineering capability, and marketing skills that have been necessary for the industry’s success.
Whether the reader’s main interest is the implications for Taiwan of current industry and geopolitical trends or gaining a fuller understanding of the ups and downs, challenges and breakthroughs, of the semiconductor sector over the decades, Chip War is packed with information that both techies and the technologically challenged will find enlightening.
