67 pages • 2 hours read
Chip War
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Part 5Chapter Summaries & Analyses
Part 5: “Integrated Circuits, Integrated World?”
Part 5, Chapter 29 Summary: “We Want a Semiconductor Industry in Taiwan”
In Chapter 29, Miller details the formation of Taiwan’s semiconductor industry under the leadership of Morris Chang, who was recruited by Taiwan’s minister, K. T. Li, in 1985. Chang, a former Texas Instruments executive, was tasked with transforming Taiwan’s role in the global chip supply chain, which had been limited to basic assembly. His vision led to the founding of the Taiwan Semiconductor Manufacturing Company (TSMC), a revolutionary chip foundry that manufactured chips designed by other companies, a new business model that reshaped the industry. TSMC’s rise was supported by the Taiwanese government’s financial backing and close ties to the US chip industry. Chang’s leadership and the foundry model helped Taiwan secure a dominant position in the global semiconductor market, especially as the demand for outsourced chip manufacturing grew in the 1990s.
Part 5, Chapter 30 Summary: “All People Must Make Semiconductors”
Chapter 30 examines the challenges faced by China in its efforts to develop a domestic semiconductor industry. In contrast to Taiwan’s successful chip-making advancements, led by Morris Chang and Taiwan Semiconductor Manufacturing Company (TSMC), China was technologically backward and impoverished in the 1980s. Mao Zedong’s radical policies, particularly the Cultural Revolution, destroyed much of China’s scientific and technological capabilities. Scientists were persecuted, sent to farms for reeducation, and the idea of self-reliance in chip production was promoted, but China lacked the expertise and infrastructure to compete with global leaders in semiconductors. When Mao’s successor Deng Xiaoping came to power, China started to reopen itself to the world, recognizing the strategic importance of semiconductors for its economic modernization. However, China’s ambitions were hampered by its dependence on foreign technology and the bureaucratic nature of its governance, leaving it trailing behind in the semiconductor race as Taiwan and other neighbors thrived.
Part 5, Chapter 31 Summary: “Sharing God’s Love with the Chinese”
Chapter 31 explores the rise of China’s domestic semiconductor industry, focusing on the efforts of Richard Chang, a devout Christian and Texas Instruments-trained engineer, to establish chip manufacturing in China. After returning to Shanghai, Chang founded Semiconductor Manufacturing International Corporation (SMIC) in 2000, with the goal of transforming China into a semiconductor powerhouse. Despite the substantial support from China’s government and international investors, Chang faced significant challenges competing with the already dominant Taiwan Semiconductor Manufacturing Company (TSMC) and other global competitors. However, SMIC made considerable progress by hiring foreign-trained engineers and adopting near-cutting-edge technology. The chapter also discusses the geopolitical shift in semiconductor production during the 1990s and 2000s, as US dominance waned while countries like Taiwan, South Korea, and China increased their output. Although China made strides in chipmaking, it remained dependent on foreign technology and expertise, with SMIC emerging as a potential rival to TSMC.
Part 5, Chapter 32 Summary: “Lithography Wars”
Chapter 32 recounts the “lithography wars” of the 1990s and early 2000s, where companies competed to develop the next generation of semiconductor manufacturing technology. Intel, led by figures like John Carruthers, made a significant investment in extreme ultraviolet (EUV) lithography, despite the high costs and risks involved. The chapter highlights the struggles to innovate as Moore’s Law demanded increasingly precise lithography. ASML, a Dutch company, emerged as the leader in this race, building on its ability to integrate global components and forge partnerships, notably with Taiwan’s TSMC. While the US was at its peak post-Cold War, geopolitical concerns around relying on foreign technology surfaced, but ultimately, the push for efficiency in chip production overrode those worries. ASML’s rise in the industry marked the consolidation of the lithography market, leaving it as the sole producer of EUV tools essential for future semiconductor development.
Part 5, Chapter 33 Summary: “The Innovator’s Dilemma”
Chapter 33 focuses on Intel’s dominance in the PC and server chip markets, highlighting its reliance on the x86 architecture and the company’s growing struggle to innovate beyond it. Steve Jobs’s 2006 decision to use Intel chips in Apple’s Mac computers cemented Intel’s dominance in the computing space. However, Intel’s missed opportunity to produce chips for the iPhone, which used ARM’s architecture instead, became a major turning point. This chapter reveals how Intel’s leadership, under CEO Paul Otellini, became overly focused on short-term profits and maintaining its market share in PCs and servers. Intel’s fixation on preserving its profit margins prevented it from embracing emerging mobile technologies, leading to missed opportunities in the rapidly growing smartphone market. This reluctance to innovate exemplifies the “innovator’s dilemma,” where Intel prioritized protecting its existing business model over investing in future trends.
Part 5, Chapter 34 Summary: “Running Faster?”
Chapter 34 describes the growing concerns about the offshoring of US manufacturing, particularly in the semiconductor industry, voiced by former Intel CEO Andy Grove. As Grove observed the shifting economic landscape, he warned that offshoring, which began with low-skill jobs, was now threatening advanced manufacturing and technological leadership. Despite Intel’s profitability and strong position, Grove foresaw dangers in relying heavily on foreign production, particularly as Chinese companies like SMIC began rising. While US semiconductor companies remained strong, some experts, including Pentagon advisor Richard Van Atta, echoed Grove’s concerns, warning that the Defense Department’s access to cutting-edge technology could become dependent on foreign entities. The chapter highlights how the US government’s “run faster” strategy, which prioritized technological advancement over trade restrictions, might not be enough to maintain semiconductor dominance, especially as the global supply chain shifted and new competitors emerged.
Part 5 Analysis
The emergence of new leadership styles and strategies during this era underscores the pivotal role of visionary decision-making in shaping the trajectory of the semiconductor industry. Morris Chang’s establishment of TSMC in Taiwan highlights the transformative impact of embracing novel business models. Despite initial skepticism from figures like Gordon Moore, who famously remarked, “Morris, you’ve had a lot of good ideas in your time […] This isn’t one of them” (195), Chang’s foundry model proved revolutionary. This shift not only redefined industry norms but also positioned Taiwan as a critical hub in the global semiconductor supply chain, exemplifying how innovation in business models can rival technological advancements. By focusing on manufacturing chips for external designers, TSMC redefined industry norms and reshaped global competition. Miller uses this moment to illustrate the underestimation of disruptive ideas, emphasizing the industry’s susceptibility to dismissing radical innovation that challenges the status quo.
The challenges faced by China during the same period reveal the consequences of earlier policy missteps. Miller’s depiction of Mao Zedong’s Cultural Revolution highlights how ideological fervor devastated China’s intellectual and technological infrastructure. The imagery in the quote “Mao’s partisans waged war on the country’s educational system. Thousands of scientists and experts were sent to work as farmers in destitute villages. Many others were simply killed” (200) illustrates the long-term damage inflicted on China’s ability to innovate. This analysis reflects the theme of Innovation as a Driver of National Security, demonstrating how a nation’s failure to foster intellectual and industrial growth can undermine its competitive position in critical technologies. This historical context underscores the importance of a stable intellectual and industrial base in driving technological progress, offering a stark contrast to Taiwan’s deliberate and forward-thinking investments.
Miller explores the emergence of SMIC in China under Richard Chang as an example of strategic imitation and adaptation. Chang’s approach, encapsulated in the quote “Chang’s strategy was simple: do as TSMC had done” (208) reflects the practical challenges of replicating Taiwan’s success in a fundamentally different environment. This highlights the limitations of imitation in the absence of complementary factors like a robust supply chain, international trust, and domestic technical expertise. By highlighting China’s reliance on foreign-trained engineers and government subsidies, Miller underscores the interplay between state support and private ingenuity in the semiconductor race. This dynamic also sheds light on The Impact of Semiconductor Supply Chains on International Relations, as China’s progress depended on navigating global partnerships and leveraging external expertise.
The technical challenges faced by the semiconductor industry during this period serve as a reminder of the relentless pace of innovation required to sustain Moore’s Law. The race to develop extreme ultraviolet (EUV) lithography, described in the quote “The chip industry would either learn to use ever smaller wavelengths for lithography, or the shrinking of transistors—and the law named after Moore—would come to a halt” (212), exemplifies the existential pressures on chipmakers to push the boundaries of manufacturing technology. Miller’s discussion of EUV lithography underscores the critical role of multinational collaboration, with companies like ASML harnessing global expertise to overcome technical barriers, thereby reinforcing the interconnected nature of the semiconductor ecosystem. Miller emphasizes the stakes of these advancements, illustrating how breakthroughs in lithography became a cornerstone of maintaining technological leadership and fostering Innovation as a Driver of National Security.
Intel’s strategic decisions during this time highlight the tension between short-term profitability and long-term innovation. Miller’s observation that “the problem wasn’t that no one realized Intel ought to consider new products, but that the status quo was simply too profitable” (223) encapsulates the innovator’s dilemma faced by the company. By prioritizing its dominance in the PC market over emerging opportunities in mobile technologies, Intel inadvertently ceded ground to competitors, demonstrating how financial success can sometimes hinder adaptability. This case study serves as a cautionary tale for companies relying too heavily on legacy markets, illustrating the importance of preemptive innovation to maintain competitiveness in fast-evolving industries. This insight further ties into The Strategic Importance of Technology in Global Politics, as Intel’s choices reflected broader concerns about maintaining US leadership in a rapidly changing industry.
Finally, Andy Grove’s warning about the dangers of offshoring serves as a prescient critique of globalization’s impact on American manufacturing capabilities. His assertion that “[a]bandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry” (226) underscores the irreversible consequences of losing production expertise. Miller uses Grove’s insights to frame the long-term risks of prioritizing cost-cutting over strategic independence, highlighting how decisions made in the semiconductor industry resonate across broader economic and geopolitical contexts.
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