Chip War Part 8: The Chip Choke

Part 8 explores the intricate and strategic dynamics of the global semiconductor industry, focusing on the escalating U.S.-China rivalry in technology, the geopolitical implications of semiconductor production and supply chains, and the specific challenges faced by key players and nations in this high-stakes arena.

This post is part of the following series:

• Chip War: The Fight for the World’s Most Critical Technology

• “Everything We’re Competing On”
• Fujian Jinhua
• The Assault on Huawei
• China’s Sputnik Moment?
• Shortages and Supply Chains
• The Taiwan Dilemma

“Everything We’re Competing On”

Chapter 49 addresses the growing concerns in the U.S. about China’s advances in the semiconductor industry. Intel CEO Brian Krzanich, in his role as chairman of the Semiconductor Industry Association in 2015, expressed anxiety over China’s push to seize a larger share of the global chip industry. The chapter discusses the U.S. semiconductor firms’ dilemma of relying on China as a crucial market while facing the threat of being cut out of China’s supply chain due to its massive semiconductor subsidies. The chapter also touches on the Obama administration’s slow response to the semiconductor issue, the Pentagon’s concerns over China’s computing power in new weapons systems, and the shift in U.S. policy under the Trump administration towards a more combative approach to technology policy.

Ideas

1. The U.S. semiconductor industry’s increasing anxiety over China’s growing presence in the global chip market.
2. The complex relationship between U.S. chip firms and China, where China is both a key market and a competitive threat.
3. China’s formal policy to reduce reliance on foreign semiconductors and develop its own chip industry.
4. The Obama administration’s initial underestimation of the importance of semiconductors in geopolitical competition.
5. The Pentagon’s concern over China’s use of computing power in developing new weapons systems.
6. The Trump administration’s shift to a more aggressive stance on technology policy, particularly regarding China.
7. The strategic importance of semiconductors in global power dynamics and the U.S.-China rivalry.
8. The semiconductor industry’s fear of Chinese retaliation and the dilemma faced by U.S. firms operating in China.
9. The perceived need for stronger export control regimes to prevent technological leakage to China.
10. The increasing focus of the U.S. government on semiconductors as a critical component of national security and global competitiveness.

Facts

1. The U.S. semiconductor industry is increasingly concerned about China’s growing influence in the global chip market.
2. U.S. semiconductor firms face a complex dynamic with China, balancing market opportunities with competitive threats.
3. China’s government has implemented policies aimed at reducing reliance on foreign semiconductors.
4. The U.S. government initially underestimated the strategic importance of semiconductors in global competition.
5. The Pentagon is concerned about China’s application of computing power in new military technologies.
6. The Trump administration adopted a more aggressive technology policy stance towards China.
7. Semiconductors are increasingly viewed as critical to national security and global power dynamics.
8. U.S. semiconductor firms are cautious about Chinese retaliation and face dilemmas in their operations in China.
9. The U.S. government has recognized the need for stronger export controls to limit technological transfer to China.
10. Semiconductors have become a central focus of U.S. national security and competitiveness strategies.

Recommendations

1. Analyze the strategic implications of China’s growing influence in the semiconductor industry for U.S. firms and national security.
2. Study the evolving U.S. government policies towards semiconductor technology and export controls in response to China’s advances.
3. Investigate the role of semiconductors in the U.S.-China technology rivalry and its impact on global power dynamics.
4. Examine the challenges faced by U.S. semiconductor companies operating in the Chinese market.
5. Assess the impact of China’s semiconductor development on the global technology landscape.
6. Explore the implications of semiconductor technology on military and intelligence applications in the context of U.S.-China competition.
7. Consider the effectiveness of U.S. strategies in maintaining a competitive edge in semiconductor technology.
8. Understand the complexities of the semiconductor supply chain and its geopolitical significance.
9. Reflect on the broader implications of the semiconductor industry’s evolution for global economic and technological leadership.
10. Evaluate the long-term consequences of the U.S.-China semiconductor rivalry on the global technology industry.

Fujian Jinhua

Chapter 50 recounts the espionage incident involving Micron Technology, an American semiconductor company, and Fujian Jinhua, a Chinese state-backed firm. Kenny Wang, an employee at Micron’s Taiwan facility, downloaded confidential files related to Micron’s DRAM technology and transferred them to Google Drive before moving to United Microelectronics Corporation (UMC), which was in partnership with Fujian Jinhua. This case highlights the intense competition and espionage activities in the semiconductor industry, reflecting broader geopolitical tensions and the strategic importance of advanced technology in global power dynamics.

Ideas

1. The theft of Micron’s DRAM technology by Fujian Jinhua illustrates the high stakes and aggressive tactics in the semiconductor industry.
2. Kenny Wang’s role in downloading and transferring Micron’s confidential information to UMC and subsequently to Fujian Jinhua.
3. Fujian Jinhua’s strategy of partnering with UMC to acquire DRAM technology, despite UMC not being in the DRAM business.
4. The involvement of multiple employees from Micron’s Taiwan facility in the espionage, highlighting the vulnerability of intellectual property in global companies.
5. The Taiwanese government’s response to Micron’s complaint about the intellectual property theft.
6. The broader context of China’s efforts to develop its semiconductor industry and reduce reliance on foreign technology.
7. The implications of the case for U.S.-China relations and the semiconductor industry’s global landscape.
8. The impact of intellectual property theft on the competitive dynamics of the semiconductor industry.
9. The strategic importance of DRAM technology and its role in the global semiconductor market.
10. The case as an example of the complex interplay between corporate espionage, international law, and global technology competition.

Facts

1. Fujian Jinhua, a Chinese state-backed semiconductor firm, was involved in the theft of DRAM technology from Micron Technology.
2. Kenny Wang, a former employee at Micron’s Taiwan facility, played a key role in downloading and transferring confidential information.
3. UMC partnered with Fujian Jinhua to acquire DRAM technology, despite not being in the DRAM business.
4. The case involved multiple individuals from Micron’s Taiwan facility, suggesting a coordinated effort to acquire Micron’s technology.
5. The incident led to legal actions and raised serious concerns about intellectual property theft in the semiconductor industry.
6. The case reflects the intense competition and strategic importance of semiconductor technology in global markets.
7. China’s efforts to develop its semiconductor industry involve significant state investment and strategies to acquire foreign technology.
8. The incident has implications for U.S.-China relations and the global semiconductor industry.
9. DRAM technology is a critical component in the global semiconductor market, with significant competitive implications.
10. The case exemplifies the challenges of protecting intellectual property in a globalized and highly competitive technological environment.

Recommendations

1. Analyze the strategic implications of intellectual property theft in the semiconductor industry.
2. Study the legal and geopolitical aspects of the Fujian Jinhua case and its impact on U.S.-China relations.
3. Investigate the role of state-backed companies in China’s semiconductor strategy.
4. Examine the challenges faced by global companies like Micron in protecting their intellectual property.
5. Assess the importance of DRAM technology in the competitive landscape of the semiconductor industry.
6. Explore the broader implications of corporate espionage on international trade and technology competition.
7. Consider the impact of such incidents on global semiconductor market dynamics and company strategies.
8. Reflect on the role of technology in national security and global power dynamics.
9. Understand the complexities of intellectual property protection in a highly competitive and globalized industry.
10. Evaluate the long-term effects of state-backed industrial strategies on global technology markets and competition.

The Assault on Huawei

Chapter 51 focuses on the U.S. government’s actions against Huawei, a leading Chinese technology company. The chapter outlines the Trump administration’s efforts to restrict Huawei’s access to U.S. technology, particularly semiconductors, citing national security concerns and allegations of Huawei’s involvement in espionage. It discusses the broader context of the U.S.-China technology rivalry, Huawei’s significant role in global telecom infrastructure, and the geopolitical implications of the U.S.’s actions. The chapter also explores the global reactions to the U.S. campaign against Huawei, including varying responses from allies, and the impact on Huawei’s business operations and China’s technological ambitions.

Ideas

1. Huawei became a focal point in the U.S.-China technology rivalry, with the U.S. government citing national security concerns.
2. President Trump’s administration took significant steps to restrict Huawei’s access to American technology, particularly in the semiconductor sector.
3. Huawei’s critical role in global telecom infrastructure, particularly in 5G networks, was a key factor in the U.S.’s actions.
4. The U.S.’s campaign against Huawei reflected broader efforts to curb China’s technological rise and influence.
5. The restrictions on Huawei had significant implications for the company’s operations, including its smartphone and server businesses.
6. The U.S. government’s actions were part of a broader strategy to maintain technological superiority over China.
7. Huawei’s position as a leading global tech firm made it a target for U.S. efforts to limit China’s access to advanced technology.
8. The global response to the U.S. campaign against Huawei varied, with some countries following the U.S.’s lead and others resisting.
9. The chapter discusses the impact of U.S. restrictions on the global semiconductor ecosystem and supply chains.
10. The U.S. actions against Huawei were seen as a move to send a message worldwide, influencing other countries’ technology policies and alliances.

Facts

1. The U.S. government targeted Huawei with restrictions, citing national security concerns.
2. Huawei is a major player in the global telecom infrastructure, especially in 5G technology.
3. The Trump administration’s actions against Huawei were part of a broader U.S.-China technology rivalry.
4. The restrictions had a significant impact on Huawei’s business operations and its ability to access critical semiconductor technology.
5. The U.S. aimed to maintain its technological superiority and curb China’s technological advancements.
6. Huawei’s global influence made it a strategic target in the U.S.’s efforts to limit China’s technological rise.
7. Responses to the U.S. campaign against Huawei varied globally, affecting international technology policies and alliances.
8. The U.S. restrictions influenced the global semiconductor ecosystem and supply chains.
9. The U.S.’s actions against Huawei were intended to influence other countries’ technology policies and alliances.
10. The U.S. strategy against Huawei was part of a broader effort to control key points in the global technology supply chain.

Recommendations

1. Analyze the strategic reasons behind the U.S. government’s actions against Huawei.
2. Study the impact of U.S. restrictions on Huawei’s business and the global semiconductor industry.
3. Investigate the role of Huawei in the global telecom infrastructure and its significance in the U.S.-China technology rivalry.
4. Examine the global responses to the U.S. campaign against Huawei and their implications for international technology alliances.
5. Assess the broader implications of the U.S.-China technology rivalry on global technological advancement and supply chains.
6. Explore the impact of national security concerns on technology policies and the semiconductor industry.
7. Consider the effectiveness of U.S. strategies in maintaining technological superiority over China.
8. Understand the complexities of the global technology market and the geopolitical implications of U.S. actions against Huawei.
9. Reflect on the broader context of U.S.-China relations and their impact on global technology dynamics.
10. Evaluate the long-term consequences of the U.S. campaign against Huawei on the global technology industry and international relations.

China’s Sputnik Moment?

Chapter 52 explores China’s ambitious efforts to develop its semiconductor industry, especially during the COVID-19 pandemic. The chapter focuses on Yangtze Memory Technologies Corporation (YMTC) in Wuhan, China’s leading NAND memory producer, as a symbol of China’s push for technological independence. Despite the pandemic lockdown, YMTC continued operations, reflecting the government’s prioritization of semiconductor development. The chapter also touches on China’s response to U.S. export controls, viewing them as a catalyst for accelerating its quest for tech dominance. The narrative delves into the risks and challenges China faces in this endeavor, highlighting failed projects and the complexities of achieving technological independence in the semiconductor industry.

Ideas

1. YMTC’s continued operation during the COVID-19 lockdown in Wuhan illustrates China’s commitment to semiconductor development.
2. U.S. export controls on semiconductor technology have spurred China’s efforts to boost its domestic chip industry.
3. The chapter suggests that China’s response to these controls mirrors the U.S.’s reaction to the Soviet Union’s Sputnik launch, triggering significant investment in technology.
4. Despite substantial government support, including billions in funding, China’s path to semiconductor independence faces hurdles, including failed projects and technological challenges.
5. The narrative questions whether China’s massive investment in semiconductors will yield successful technological advancement or lead to wasteful expenditure.
6. China’s goal of technological independence is complicated by the multinational nature of the semiconductor supply chain and the country’s current technological capabilities.
7. The chapter discusses China’s interest in developing alternative architectures, like RISC-V, to reduce reliance on foreign technology.
8. China’s semiconductor strategy involves not only cutting-edge technology but also investment in older process technologies and emerging materials like silicon carbide and gallium nitride.
9. The chapter analyzes the geopolitical implications of China’s semiconductor ambitions and their potential impact on the global technology landscape.
10. The narrative explores the intersection of China’s national goals and commercial interests in the semiconductor sector, highlighting the government’s influence on chip companies.

Facts

1. YMTC in Wuhan symbolizes China’s focus on developing its semiconductor industry.
2. U.S. export controls have intensified China’s efforts to establish technological independence in semiconductors.
3. China’s response to these controls is likened to the U.S.’s reaction to the Sputnik launch.
4. Despite heavy investment, China’s semiconductor independence efforts face significant challenges.
5. The narrative questions the effectiveness of China’s massive investment in the semiconductor industry.
6. China’s pursuit of technological independence is hindered by the global nature of the semiconductor supply chain.
7. China is exploring alternative architectures like RISC-V to reduce foreign dependency.
8. China’s strategy includes investment in various semiconductor technologies and materials.
9. The chapter highlights the geopolitical implications of China’s ambitions in the semiconductor field.
10. The government’s influence in China’s semiconductor sector is a key theme in the chapter.

Recommendations

1. Study the strategic implications of China’s semiconductor industry development, particularly in response to U.S. export controls.
2. Analyze the challenges and risks associated with China’s massive investment in semiconductor technology.
3. Investigate the role of companies like YMTC in China’s quest for technological independence.
4. Explore the geopolitical and economic impacts of China’s semiconductor ambitions.
5. Assess the potential of alternative semiconductor architectures and materials in reducing China’s reliance on foreign technology.
6. Consider the effectiveness of China’s national strategies in achieving semiconductor independence.
7. Examine the global semiconductor industry dynamics in the context of China’s technological efforts.
8. Reflect on the broader implications of China’s semiconductor strategy for international technology competition.
9. Understand the complexities and potential outcomes of China’s investment in the semiconductor sector.
10. Evaluate the long-term effects of China’s pursuit of semiconductor independence on global technology leadership and market dynamics.

Shortages and Supply Chains

Chapter 53 discusses the semiconductor shortages and supply chain issues, particularly during the COVID-19 pandemic. It highlights President Biden’s emphasis on the need for the U.S. to boost its investments in technology to compete globally. The chapter delves into the semiconductor supply chain problems, exacerbated by the pandemic and strategic stockpiling by countries like China. It also covers the impact of these shortages on various industries, especially the automotive sector, and the U.S. government’s response to address these challenges. The chapter underscores the complex dynamics of the global semiconductor industry, including geopolitical aspects and the shifting landscape of chip manufacturing.

Ideas

1. The COVID-19 pandemic revealed the fragility and significance of semiconductor supply chains.
2. President Biden’s focus on strengthening U.S. investments in technology to maintain global competitiveness.
3. The impact of semiconductor shortages on industries like automotive, leading to significant production and revenue losses.
4. China’s strategic stockpiling of chips and the U.S.’s export controls contributing to global semiconductor shortages.
5. The shift in demand for various types of chips during the pandemic, including a surge in demand for PCs and servers.
6. The U.S. government’s interpretation of the chip shortage as a supply chain problem and its efforts to address it.
7. The broader implications of semiconductor supply chain issues for the global economy and technological advancement.
8. The dynamics between different countries and regions in the semiconductor industry, including the U.S., China, South Korea, and Taiwan.
9. The role of national policies and government interventions in shaping the semiconductor market and supply chains.
10. The challenges and strategies of semiconductor companies in navigating the complex and changing landscape of chip manufacturing and supply.

Facts

1. The COVID-19 pandemic significantly impacted semiconductor supply chains.
2. The U.S. government, under President Biden, focused on addressing technology investment to compete globally.
3. The automotive industry faced substantial losses due to semiconductor shortages.
4. China’s stockpiling and U.S. export controls contributed to global chip shortages.
5. There was a significant increase in demand for chips used in PCs and servers during the pandemic.
6. The U.S. government interpreted the chip shortage as a supply chain issue and initiated measures to address it.
7. The semiconductor shortage highlighted the interconnected nature of global supply chains.
8. The global semiconductor industry experienced a record production year in 2021.
9. National policies and government interventions play a crucial role in the semiconductor market.
10. The global reliance on Taiwanese semiconductor production continues to increase.

Recommendations

1. Analyze the impact of the COVID-19 pandemic on global semiconductor supply chains.
2. Study the U.S. government’s response to semiconductor shortages and its strategy to enhance technology investments.
3. Investigate the causes and consequences of semiconductor shortages in various industries.
4. Explore the geopolitical aspects of semiconductor production and

trade, especially between the U.S. and China.

5. Assess the effectiveness of national policies and government interventions in addressing semiconductor supply chain issues.
6. Consider the changing demand dynamics for different types of semiconductor chips during the pandemic.
7. Examine the role of Taiwan in the global semiconductor industry and the implications of its central position.
8. Reflect on the broader implications of semiconductor shortages for global economic stability and technological advancement.
9. Understand the complexities of managing semiconductor supply chains in a globalized economy.
10. Evaluate the long-term effects of the pandemic on the semiconductor industry and global technology markets.

The Taiwan Dilemma

Chapter 54 discusses the geopolitical tensions surrounding Taiwan, focusing on its critical role in the global semiconductor industry. The chapter highlights TSMC (Taiwan Semiconductor Manufacturing Company), the world’s largest contract chipmaker, as a central figure in these tensions. It delves into the risks posed by China’s increasing military activities near Taiwan and the potential implications of a conflict for the global semiconductor supply chain. The narrative explores various scenarios of how a conflict over Taiwan could unfold, emphasizing the strategic importance of the island due to its semiconductor production capabilities and the global reliance on these technologies.

Ideas

1. TSMC’s pivotal role in the global semiconductor industry makes Taiwan a focal point in U.S.-China geopolitical tensions.
2. China’s military activities near Taiwan, including exercises and drills, heighten the risk of conflict and global economic disruption.
3. The potential scenarios for a conflict over Taiwan range from a full-scale invasion to limited military pressure.
4. The global economy’s dependency on Taiwan’s semiconductor industry is a significant factor in the geopolitical calculus of the U.S. and China.
5. The chapter discusses the strategic importance of TSMC’s chip manufacturing facilities and the risks posed by their location in a geopolitically sensitive area.
6. A conflict involving Taiwan could severely disrupt global semiconductor supply chains, impacting a wide range of industries.
7. The U.S. and China’s military strategies in the region are influenced by the strategic value of Taiwan’s semiconductor production.
8. The chapter examines the challenges in ensuring the security of Taiwan and its semiconductor industry.
9. The implications of Taiwan’s geopolitical situation extend beyond military concerns to global technological and economic stability.
10. The narrative explores the complex interplay between global technology markets, military strategy, and geopolitical dynamics centered around Taiwan.

Facts

1. Taiwan, home to TSMC, is crucial to the global semiconductor industry.
2. The island is a focal point in the geopolitical tensions between the U.S. and China.
3. China’s military activities near Taiwan raise the risk of conflict.
4. The global economy heavily depends on Taiwan’s semiconductor production.
5. TSMC is the largest contract chipmaker in the world.
6. A conflict involving Taiwan could disrupt global semiconductor supply chains.
7. The U.S. and China’s military strategies consider the strategic value of Taiwan’s semiconductor industry.
8. Taiwan’s geopolitical situation is complex and has far-reaching implications.
9. The security of Taiwan’s semiconductor industry is a significant global concern.
10. The stability of global technology markets is closely tied to Taiwan’s geopolitical situation.

Recommendations

1. Study the strategic implications of Taiwan’s role in the global semiconductor industry.
2. Analyze the potential impact of geopolitical tensions involving Taiwan on

global technology markets.

3. Explore the scenarios and consequences of a military conflict over Taiwan.
4. Assess the global economic risks associated with disruptions in Taiwan’s semiconductor production.
5. Investigate the strategies of the U.S. and China regarding Taiwan and its semiconductor industry.
6. Examine the challenges in ensuring the security and stability of Taiwan’s semiconductor supply chain.
7. Consider the broader implications of Taiwan’s geopolitical situation for global technology and economic stability.
8. Reflect on the interplay of military strategy, technology markets, and geopolitics in the context of Taiwan.
9. Understand the complexities of managing global technology supply chains in a geopolitically sensitive environment.
10. Evaluate the long-term effects of Taiwan’s situation on global semiconductor production and technology leadership.