Chip War

In Chapter 22, Miller details how Intel, under the leadership of Andy Grove, shifted from memory chips (DRAMs) to microprocessors, a decision that saved the company from collapse. Grove, known for his intense management style, realized that Intel could not compete with Japanese firms in the DRAM market. He advocated for exiting the memory business, despite the risk of abandoning Intel’s core identity. The gamble paid off as Intel became dominant in microprocessors, especially after partnering with IBM for its personal computer launch in 1981. Grove’s restructuring methods, including ruthless layoffs and adopting Japanese manufacturing techniques, transformed Intel into a powerhouse in the PC era. By leveraging innovation, paranoia, and disciplined manufacturing processes, Intel disrupted its own business model and emerged stronger in the growing computer market.

Chapter 23 explores how Samsung, under the leadership of Lee Byung-Chul, entered the semiconductor industry and played a pivotal role in disrupting Japanese dominance in DRAM production. Samsung’s rise was bolstered by strategic partnerships with American firms, financial backing from the South Korean government, and support from Silicon Valley, which viewed Korean chipmakers as a counterbalance to Japan. Lee, who had previously succeeded in diverse industries, made a calculated gamble to enter the chip industry, leveraging government loans and US technology. US chipmakers like Intel collaborated with Samsung, providing them with technology and licenses to undercut Japanese competition. By aligning their interests with Korean firms, American chipmakers aimed to reduce Japan’s market share in semiconductors. Through this partnership, South Korea became a key player in the global semiconductor market, positioning Samsung as a formidable force in the industry.

Chapter 24 details the recovery of the US chip industry in the 1980s, driven by fierce competition, entrepreneurial grit, and cutting-edge innovation. While figures like Andy Grove and Jack Simplot were instrumental in reviving Silicon Valley, this chapter also focuses on the importance of new scientific breakthroughs in chip design. Notable contributors like Lynn Conway and Carver Mead revolutionized the process by standardizing design rules, paving the way for computer-aided chip design. Institutions like DARPA played a critical role by funding research and fostering collaboration between academia and industry, leading to innovations like Irwin Jacobs’s breakthrough in wireless communication, ultimately giving rise to Qualcomm. By the late 1980s, advancements in chip technology allowed the production of processors with millions of transistors, transforming the semiconductor industry and laying the groundwork for America’s technological leadership.

Chapter 25 explores the espionage tactics used by the Soviet Union to steal Western technology, particularly in semiconductors. Vladimir Vetrov, a disillusioned KGB officer, played a pivotal role in exposing the USSR’s Directorate T, a division tasked with acquiring Western technology. Vetrov’s dissatisfaction with his life led him to betray the Soviet Union, providing French intelligence with thousands of documents detailing the Soviet espionage program. Although the KGB stole chip designs and manufacturing equipment, the “copy it” strategy was largely unsuccessful because Soviet industries could not replicate the complex technology or maintain a stable production system. Operation Exodus, a US response to Soviet tech theft, sought to tighten customs checks, though it had limited success. By the 1980s, the Soviet Union was consistently lagging behind the West in semiconductor development, and despite their best efforts at theft, their microprocessors were always years behind.

In Chapter 26, Miller details the Soviet Union’s struggle to keep up with America’s advances in semiconductor technology and its impact on military power. Soviet Marshal Nikolai Ogarkov foresaw that precision-guided weapons, powered by advanced electronics, would transform conventional explosives into “weapons of mass destruction.” Despite the Soviet Union’s numerical advantage in tanks and troops, it lagged far behind the US in miniaturized electronics and computing power, vital for modern warfare. American systems, driven by Moore’s Law, far surpassed Soviet technology in accuracy, surveillance, and control. The US’s precision weapons and advanced antisubmarine warfare capabilities left the Soviets feeling vulnerable, unable to compete in both conventional and nuclear warfare. Despite Soviet efforts, political meddling, overreliance on military markets, and the lack of an international supply chain ensured that the USSR’s attempts to revitalize its microelectronics sector ultimately failed.

Chapter 27 describes how the Gulf War of 1991 marked a turning point in modern warfare, demonstrating the decisive role of precision-guided munitions powered by microelectronics. Led by General Norman Schwarzkopf, the US military relied on laser-guided bombs, like the Paveway and Tomahawk cruise missiles, to target Iraqi forces with unprecedented accuracy. Developed from Vietnam-era technologies, these weapons became crucial due to their low cost and reliability. Bill Perry’s “offset strategy,” which emphasized using advanced electronics to outpace adversaries, saw its first major test in this conflict, proving the superiority of US systems over Soviet-designed Iraqi defenses. The war showcased the growing importance of microelectronics in military strategy, from precision-guided bombs to communication and surveillance systems, fundamentally changing the nature of warfare.

In Chapter 28, Miller explores Japan’s rapid economic decline in the early 1990s, symbolized by Sony’s Akio Morita. Japan’s once-dominant semiconductor industry, which had previously been heralded for its global influence, faltered as overinvestment and poor financial decision-making undermined long-term success. The chapter contrasts Japan’s decline with the resurgence of the American tech industry, particularly its semiconductor sector, which reclaimed global leadership. The chapter also recounts Soviet leader Mikhail Gorbachev’s 1990 visit to Silicon Valley, seeking to modernize the USSR’s technology, only to confirm the Soviet Union’s technological inferiority. Soviet Marshal Ogarkov had recognized that semiconductors would be key to military and technological dominance, and by the early 1990s, it was clear that the US had won the Cold War, not just militarily but through its superior semiconductor industry.