This is a summary of book “Chip War – The fight for world’s most critical technology” by Chris Miller and published by Scribner in 2022. He teaches international history at Tufts University’s Fletcher School of Law and Diplomacy.

Even if it is tiny, silicon chips or integrated circuits are critical to strong national economies and modern military. Its history can be traced to 1960 when US firms started making chips in Taiwan. Now that the island’s future and the possibility of conflict with China may depend on whether China reduces its reliance on imported chips and other tech. The miniaturization and fabrication of silicon chips with the help of semiconductors is a modern-day engineering marvel. It has a rich tradition of innovations and while they have been incubated in the west, they have often been produced in the east. Taiwan Semiconductor Manufacturing Company aka TSMC in Taiwan handles much of the production of chips and is a subsidized success story. Notably China still depends on the tech products designed in the Silicon Valley.

The author says China was disadvantaged, by the government’s desire not to build connections to Silicon Valley, but to break free of it. Silicon Valley remains the epicenter of the chip industry. Since 1963 when Fairchild firm began to outsource fabrication to East Asia, innovations have fueled the chip industry. Gordon Moore, the co-founder of Fairchild, predicted the growth rate in chip power in terms of the maximum number of transistors on a single computer chip and that it would double every year between 1965 to 1975. This “Moore’s Law” has proven true for more than 50 years now.

After Bob Noyce and Gordon Moore founded the semiconductor company Intel in Silicon Valley, the first product was launched with a microprocessor or a computer-on-a-chip which included both logic and memory units. Initially, the US government advocated chip production to be sent to Japan as part of redevelopment initiatives, but when Japan surpassed the chip production of US in 1986, the posture was reversed. Cheaper alternatives were provided by Samsung whose leader Lee Byung-Chul consolidated demand from Silicon Valley and made chips under their brand names.

While Silicon Valley businessman William Perry introduced microprocessors to US military through DARPA when he joined as Undersecretary for Defense, Lynn Conway and Carver Mead developed a rules-based foundation for software that automates the task of designing chips. DARPA started financing a program that helped researchers to design chips for production, giving US a military advantage and keeping Moore’s law alive. The Russians had increased espionage to copy designs from Silicon Valley, but the mass production and adoption failed and the copy-it strategy backfired handing back the technological lead to US.

TSMC had a strong tradition of being a government backed success story. Globalization of chip fabrication had not occurred, but Taiwanization had. Morris Chang left Texas Instruments to take charge of the chip industry in Taiwan and envisioned a company that would fabricate chips its customers designed which would be a “foundry” serving “fabless” chips.

John Carruthers, an Intel R&D leader realized that new lithography tools were required to drive the next wave of Moore’s law and used Extreme UV light to make chips. Intel never came up with its own EUV lithography tools but neither did its rivals Nikon and Canon from Japan. The Dutch company ASML became the sole producer of EUV lithography tools. Today, building an advanced logic fab costs twenty billion dollars, a high barrier to entry for many US and global firms. “Fabless” chip firms that design semiconductors and outsource production to TSMC and other foundries have proliferated since the late 1980s. Apple has gained more than any other company from this outsourcing trend. Today only Samsung and TSMC produce most of the sophisticated processors. The Chinese government devised a plan named Made in China 2025 with a goal of increasing domestic chip production and reducing reliance on imported chips over ten years ending in 2025. The Chinese state owns and finances many entities that appear as private equity investment firms but constitute a collective effort to “seize foreign chip firms”. In this way, China seems to be playing a bigger role in producing non-cutting-edge logic chips.

As Chinese military stepped up development and display of technologically sophisticated weapons, the US Administration banned export of US chips to Huawei, a move that devastated the company. TSMC has agreed to open a fab in US but the national security officials would prefer to match capital expenditures in all geographies by TSMC. Until that happens, the world’s dependency on Taiwan deepens.