BIG TECH WatchBy Richard N. Madden
The invention of the solid-state transistor in the 1950s transformed the electronics and computing industries, and later, human society as a whole. The innovation and refining within the semiconductor manufacturing process drove the so-called "Third Industrial Revolution" from the 1950s to the 2000s.
Gordon Moore, founder of Intel, analyzed the rapid development trends within the computing industry and saw that the power of state-of-the-art processors effectively doubled every 18 months (by reducing the "feature-size" of the transistor). This observation – now famously and endearingly referred to as "Moore’s Law" – has become a self-fulfilling prophecy for the computing industry.
Indeed, the industry has perfected the "Two-Year Development Cycle" by setting internal targets and striving to meet the expectation predicted by Moore.
However, Moore’s prediction has a fundamental limit. In the past, this "doubling" of computing power has been achieved by shrinking the size of the transistor. Within the industry, each of these jumps is referred to as a "technology node." Having started as a palm-sized lab experiment, the modern transistor is now on the order of nanometers, and is quickly approaching its fundamental limit: the size of an atom.
The value of the supply chain required to design, develop and manufacture this incredible feat of human ingenuity is incalculable. And the expenditure required to remain competitive is enormous. Thus, innovation within the industry has shifted from chip manufacturing to chip design, which is considerably more cost-effective.
As a consequence, the manufacturing side of the semiconductor industry has consolidated to a few companies that are able to swallow the huge costs, with Taipei’s Taiwanese Semiconductor Manufacturing Corporation (TSMC) as the market leader.
TSMC is a giant among giants:
- It is the primary manufacturer of the world’s most advanced computer chips; its technology and expertise power virtually every smartphone, computer, server, network interface and radio.
- It is the primary contractor for Apple, AMD, Broadcom, Qualcomm and countless other companies.
- Moreover, it is the primary innovator within the manufacturing landscape; its state-of-the-art transistor is 5 nanometers, with plans to move to 3 nanometers in the next two years. Intel, TMSC’s primary competitor, is only now moving away from its 14-nanometer process to 7-nm.
Through strong leadership, innovation and economies of scale, TSMC has outmaneuvered its competitors and cornered the semiconductor market. However, for a global society increasingly reliant on computing, the shifting geopolitical situation within Asia stands to bring all of this to an end.
The Rising Dragon
China has experienced explosive growth following the liberalization of its markets in the 1990s. To further fuel this growth, the Asian superpower is well aware of the need to compete with the West, and semiconductors are a key input resource for many 21st century technologies, such as AI, 5G, IoT and autonomous vehicles.
Even before the 2018 U.S.-China trade war, the U.S. had been moving to limit China’s access to vital intellectual property and technologies.
The U.S. wishes to maintain its monopoly on these IPs and wants to shut China out completely from high-tech foundries like TSMC. So far, the U.S. has been fairly successful with this strategy, having pushed TSMC to severe ties with Chinese companies and made it nearly impossible for China to access foreign intellectual property. China’s own strategy of "trading for tech" has also backfired; many domestic companies relied too much on foreign expertise without investing in local innovation or R&D.
China is now backed into a corner.
Internally, the regime's leadership is determined to maintain the decades of growth and assert China as a global power.
Related: Increased Chinese incursions results in unprecedented Taiwan-Japan cooperation, September 8, 2021
Externally, the U.S. and the West are working to stop China, and the tension within the semiconductor industry could ignite into a wider conflict.
With no other viable options, it is conceivable that China’s next move would be against Taiwan. China has long viewed Taiwan as its rightful territory, and actively works to discredit the concept of an independent Taiwan. Following the takeover of Hong Kong, China has become increasingly hostile towards the island nation.
Chinese elites believe that unifying China and Taiwan would achieve "China’s Dream."
A CCP takeover of Taiwan would have devastating consequences for the world, both politically and economically.
China would effectively seize the most advanced semiconductor manufacturing technology on the planet and propel itself as the world leader in all areas dependent on high-tech silicon. The U.S. is pushing for TSMC to diversify its production base. TSMC has resisted, instead choosing to rely on the gambit that it is too big to fail (TSMC’s collapse would cripple some Chinese industries as well).
Given the Chinese leadership’s long-term outlook, any short-term fallout from a takeover of Taipei, from its point of view, could be ignored.
The U.S. and its allies must strengthen their position within East Asia to stop China.
Unchecked Chinese aggression will have devastating consequences on the global semiconductor supply chain with ripple effects heavily disrupting our way of life.
Richard N. Madden is a researcher in the fields of Cryptography and digital hardware design. He holds a Master’s degree in Computer Engineering with particular interest in security, data privacy and digital rights.