On December 6, US president Joe Biden joined Morris Chang, founder of Taiwan Semiconductor Manufacturing Company (TSMC) in Arizona for a symbolic “tool-in” ceremony to mark the latest step in the chipmaker’s investment in a new factory in the US. TSMC is tripling its previously planned investment at its new Arizona plant to $40 billion, among the largest foreign investments in US history, as President Joe Biden visited and hailed the project.
TSMC is the leading hi-tech chipmaker in the world, with both China and the US importing their products to process their manufactures. TSMC has become the battleground between the US and China in world trade and technology – with the added intensity of Taiwan being the hotspot for geopolitical conflict between the rising economic power of China and the (relative decline) of US dominance globally.
It is in this context that economic historian Chris Miller’s book Chip War has become so relevant. Chris Miller has just won the Financial Times Business Book of the Year Award for Chip War, his historical account of the global battle for semiconductor supremacy. In the book, Miller outlines the development of the semiconductor and how TSMC and a few other manufacturers came to dominate the global supply of advanced microchips. His main message is disturbing. Whereas during the ‘cold war’ between the US and the Soviet Union, nuclear weapons and the potential of mutually assured destruction created some sort of balanced truce that avoided outright conflict, in this ‘cold war’ between the US and China, there is no balance, but instead an unlimited race. “There’s a very clear threshold of nuclear use. [Nuclear weapons] are either used or not used, whereas in the economic interdependence space, there’s no threshold that [shows] you’ve crossed the line. And in fact, there’s lots of different lines one can cross.” (Miller).
Miller argues graphically that microchips are the new oil – the scarce resource on which the modern world depends. Today, military, economic, and geopolitical power are built on a foundation of computer chips. Virtually everything from missiles to microwaves, smartphones to the stock market runs on chips. Until recently, America designed and built the fastest chips and maintained its lead to maintain its lead as the superpower. But now America’s edge is slipping, undermined by competitors in Taiwan, Korea, Europe, and, above all, China. As Chip War reveals, China, which spends more money each year importing chips than it spends importing oil, is pouring billions into a chip-building initiative to catch up to the US. At stake is America’s military superiority and economic prosperity.
Miller explains how the semiconductor came to play a critical role in modern life and how the US become dominant in chip design and manufacturing and applied this technology to military systems. America’s victory in the Cold War with the Soviet Union and its global military dominance stems from its ability to harness computing power more effectively than any other power. But here, too, Miller says, China is catching up, with its chip-building ambitions and military modernisation going hand in hand.
Miller’s history traces chip development from their invention in America, in the 1950s, in the golden era of US capitalism to the establishment of a global supply chain concentrated in East Asia. Today, nearly all advanced processor chips are produced in Taiwan, and Miller mounts a convincing argument that shifting control of the industry could dramatically reshape the world’s economic and political orders. Even more than traditional trade and manufacturing production, and even more than financial might, Miller argues that who leads and dominates in chip production will dominate the global economy.
Chip development and production is now the key area in the US attempt to isolate, weaken and reduce the economic and military power of China and other countries that deem to oppose US global interests. In the past, the US has used the power of the dollar to cut adversaries off from global finance. The new US Chips Act aims to isolate Russia and China from the world’s tech economy and stymie their military capabilities. The Act is part of a wave of US and Western sanctions in retaliation for Russia’s invasion of Ukraine. The Act’s intent was made clear by Kevin Wolf, a former senior commerce department official. “What the administration has done here is set out a structure to cut Russia off from chips and said that this is a policy and a mission,” said Wolf. “And this isn’t going to go away. There is massive allied co-operation on this.”
The Chips Act is just the next stage in a series of measures to weaken China’s tech capabilities and global influence. It started with export control powers on the Chinese telecoms company Huawei during the Trump administration. After first restricting the sale the US technology to Huawei by putting it on its trade blacklist, Washington ratcheted up pressure by applying the so-called foreign direct product rule. This allowed the US to reach beyond borders and control products made outside the country if they are designed or manufactured using American technology. “Huawei was a trial run,” said Christopher Timura, a trade lawyer at Washington’s Gibson Dunn. “The US didn’t see a dramatic impact on Huawei until it developed the entity list foreign direct product rule.”
Using this same power against Russia broadly for some items, and more stringently against a specific list of 49 military entities, means Russia is now effectively denied access to high-end semiconductors and other tech imports critical to its military advancement. “Russia is very well prepared but over time this is going to degrade their military capabilities severely,” said Julia Friedlander, a former US Treasury official.
But China is the real target and the battle to crush China’s tech advancement is by no means won. Already, China is the world’s largest consumer of semiconductors. However, its self-sufficiency in manufacturing its own chips is extremely low. Chinese domestic firms had only a 6.6% self-sufficiency ratio in 2021, rising to 16.7% when including foreign firms located in China. Even including these multinational subsidiaries in China, the country’s chip production in 2026 is only likely to reach 6.6% of the global total. In the fabless semiconductor sector, China contributed 16% of the global market in 2020, but its share declined to only 9% in 2021 amid US-escalated export bans.
But Beijing’s policy is one a drive for self-sufficiency in chip production using all the financial and planing powers of the state. In 2014 China established a National IC Development Investment Fund. Later in 2015, the Made in China 2025 plan set an ambitious 70% self-sufficiency target by 2025, which given current progress, is not going to be met. So China’s dependence on the economies that supply it with semiconductors — Taiwan, South Korea, Malaysia, and Japan especially — will remain, with the risk that supplies will be totally cut off by the US plan.
The main goal of the US CHIPS Act is to fund $52 billion in manufacturing grants and research investment and to provide a 25% investment tax credit to chip producers in the US. But any entity that utilises CHIPS Act funding is prohibited from “engaging in any significant transaction involving the material expansion of semiconductor manufacturing capacity in China”. The US is planning more sanctions: an export ban of semiconductor manufacturing equipment for NAND memory chips with more than 128 layers. The aim is that by blocking China’s biggest NAND company and foreign company-owned memory chip fabs in mainland China, foreign memory chip makers will have to locate outside China, as TSMC is now doing.
Nevertheless, China-located chip production could increase to 21.2% of China’s demand by 2026 from 16.7% in 2021. Moreover, US chip sanctions hits the production and profits of U.S. companies, with some estimating that it could reduce US global market share 18% and hit 37% of their revenue in the long term.
No wonder US firms seem unwilling to restrict their tech exports to China. Also, TSMC may be investing in new plant in the US but this has neither the scale nor the technological level of TSMC’s newest fabs in Taiwan. “Progress on reducing the dependence on TSMC . . . for the most advanced processes will not be reduced significantly until TSMC, Samsung and Intel all site advanced facilities at scale in the US,” says Paul Triolo, a China and technology expert at Albright Stonebridge Group.
Even then, only part of the supply chain will benefit. The fabs that Intel, TSMC and Samsung are building in the US are all for advanced chips, so they will mostly support the PC, smartphone and server industry. However, automakers, which has seen production disrupted due to chip supply bottlenecks, use less advanced chips that struggle to be viable in the US, where costs are higher.
But this chip war in not only about economics; it is about political power in the 21st century – at least for the leaders of US imperialism. Miller makes that clear in his book and in his other works where he seeks to expose the autocratic and imperialist ambitions of Russia under Putin. The struggle to maintain US supremacy and reduce China’s development (and hopefully bring about ‘regime change’) will be very costly to the US economy, but apparently it is worth the cost at the expense of world trade and output – and even world peace.
The US couches this battle in terms of a fight between ‘Western democracy’ and Chinese (and Russian) ‘autocracy’; of a fight for human rights (as represented by US values) against the repression of minorities and dissidents (in China) and even ‘genocide’ (by Russia) in Ukraine. This takes the propaganda to new heights of hypocrisy. What is really at stake is US global supremacy. And that is more important than expanding trade and technology for the benefit of all.
US strategists fear that China can still overcome the blocks that the US is putting in its way. That fear is actually based China’s state-led investment planning that right-wing theorists have called ‘brute force economics’ because it does not rely on the ‘free market’. “In the semiconductor industry, for instance, Beijing’s playbook is on full display. It is leveraging massive amounts of state support, targeted intellectual property theft to aid national champions, knowledge transfer from technical experts trained in the United States and allied countries, and preferential treatment for domestic firms to tilt the playing field in its favor.” Liza Tobin, former China director during the Trump and Biden administrations and the CIA.
That view is also summed up by Keynesian Larry Summers’ comment on Miller’s Chip War (my emphasis underlined). “Semi-conductors may be to the twenty-first century what oil was to the twentieth. If so, the history of semi-conductors will be the history of the twenty-first century. This is the best chronicle of that history so far that we have had or are likely to have for a very long time. If you care about technology, or America’s future prosperity, or its continuing security, this is a book you have to read.”
Michael Roberts Blog 
It is certainly a very interesting topic. For me, the most difficult thing for China is to build. a lithography machine with a supply chain as local as possible. Within the microchip production chain, the United States dominates several key aspects, but advances have been discovered by Chinese companies such as YMTC, SMIC and AMC each in their respective fields that rival the collective West.
The notion that control of chip technology is like control of oil, therefore key to both economic dominance *and* military supremacy seems to me to need interrogation? It’s not clear that oil has been the key to wealth for imperialist countries. It’s not clear how the oil wealth of Saudi and Iraq and Iran have either. It is not clear to me either that the control of oil has ever been achieved sufficiently to even win the wars. It seems true that control of oil has had something to do with the occasions of many conflicts to be sure, but the implicit claim after all is that it is the key to winning them.
It’s not clear to me either that the ultimate goal of a monopoly on advanced chip production isn’t wealth production. That would imply the goal is to sell the advanced chips. Instead it seems at first glance the thought is to not sell them and cripple other economies, preparatory to using the advanced chips in weapon systems. These high tech Wunderwaffen are supposed to win the wars. At a glance it seems Miller shares the commitment to war against Russia and China. It’s hard not to worry that this commitment isn’t framing his study. I can’t see buying this book at this time.
If chips are indeed the future of everything, being the only one with unlimited access to distribution/military usage, will bring america on the one hand a lot of money from chosen “partners” (NATO, Eu, Latin America), since America can basically dictate the price (which in turn will them give even more influence over these countries). On the other hand by doing this they effectively restrict China etc from developing as fast as they used to in relation to arms, technology etc. So i think it goes both ways: military and financially.
“This takes the propaganda to new heights of hypocrisy. What is really at stake is US global supremacy. And that is more important than expanding trade and technology for the benefit of all.” Well summed up Michael. This autarchic restructuring of the international division of labour to isolate China will not only hurt US chip companies but all companies because it will increase cost prices throughout industry by raising the prices of electronic inputs. At a time when the global rate of profit is falling once more, to then deliberately increase cost-prices, undermines the very foundation of counter-vailing factors allowing capitalism to exit its crisis. In seeking to defend its hegemony the US is undermining capitalist reproduction itself. But this is the lengths it is prepared to go as evidenced by its bait and trap policies which provoked the Ukrainian war and which in the aftermath of a global pandemic, provoked the the cost of living crisis savaging the international working class. Let us not forget that it was the US embargo of oil and iron ore exports to Japan that provoked the Pacific War on the 7th December 1941, not the so called militarism of Japan as portrayed by Hollywood.
The key question is whether China can catch up to its competitors in the electronic chip race. If it does, the US will have no choice but to resort to military means, unless we stop them.
There are two levels of analysis that must be made here, dialectically.
The first and fundamental level is the material base one: after WWII, we entered in a historical era where the national interests of the USA and the historical task of capitalism perfectly aligned: what was good for the USA was automatically good for capitalism and vice versa.
This era ended, in my opinion, at 2008 the earliest (although the invasion of Iraq can be interpreted as a foreshadowing). After 2008, both historical movements disaligned: the USA now is a roadblock, a burden to capitalism.
That’s why I think the USA will ultimately fail. It simply isn’t in the right side of History anymore. It will be discarded like the British Empire before it
The second and least important level is the superestructuras one, that is, the geopolitical conflict happening right now between the USA and China and, on a shallower level, between the USA and Eurasia, that is, between Sea and Land.
My opinion here is that the USA will manage to slow down China’s endeavor to chip supremacy, but ultimately not stop it. China has learned from the mistakes of their predecessor (the USSR) and manage to not commit them. ASEAN (as opposed to Mercosur and Comecon) has a strong tradition of bilateralism, and will not fall to the USA like Latin America and Eastern Europe did. Last but not least, China has the domestic market, and the USA has already demonstrated weakness in the South China Sea, which it lost in a humiliating fashion, by W.O., as Obama and Trump watched powerlessly as the PLAN occupied and bulit one artificial island after the other there. The very plan to take the TSMC to Arizona is a sign the USN doesn’t envisage the possibility of winning a war against the PLAN in Taiwan – a sign of the beginning of the end of the USA as a cosmopolitan, universal empire.
It all amounts to another government subsidy to another industry plagued by overproduction. The manufacturing price index fell by 1/2 between 1993 and 2020 and in 2022 is barely off the 2020 low. IMO, like oil, this has nothing to do with “strategic control” but rather market share and profitability.
Michael. in the first paragraph you refer to the United States three times as “America”….perhaps unintentionally echoing the author’s prejudices and diction. I agree with StevenJohnson that Miller’s book is a piece of blatant propaganda and not worth reading.
Hi Mandm,
I was a bit confused by your comment on Michael’s use of the term “America” rather than United States. How does this reflect prejudices or diction?
Is there some secret difference that I and millions of native English speaking writers are unaware of?
I quickly checked Google on this and it responded: “The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or informally America, is a country in North America.”
No doubt, there was a time that “America” may have referred to all of North, Central and South America, plus the Caribbean. But language evolves and nowadays we use “the Americas” to cover all these territories.
Regards,
Pat (living in Brasilia, Brazil).
Chair of Labour International’s Americas Branch
Languages evolve!…. But socially conscious Latin Americans laugh off such “evolved” (but by now old fashioned) US hegemonic arrogations. By “territories” do you “native lands” or “countries”?
I left out “mean” in the last sentence…
“America’s victory in the Cold War with the Soviet Union and its global military dominance stems from its ability to harness computing power more effectively than any other power.” Rather a stretch. The Soviet Union lost because of its internal decay after its abandonment of the communist road.
As for “China’s state-led investment planning,” the phrase is vague, and where it is not vague, it is wrong. PRC industrial policy is common among capitalist economies. However, the corruption is immense. A series of chip top officials and executives were caught after seizing or wasting hundreds of millions of dollars of “state-led investment.”
While the post breathes heavy about U.S. imperialism, it ignores PRC technology theft, its creeping military aggression against Taiwan, its attempts to simply buy U.S. and European know-how instead of really developing its own workforce, etc. When PRC expansionism clashes with U.S. decaying imperialist dominance, chatting up one side is a recipe for error.
Either way, the American decline will continue, which makes the First World leftist argument/theory/strategy of “defending the lesser of the two evils” (i.e. if a world empire is to reign us all, better it be the American Empire) invalid.
“which makes the First World leftist argument/theory/strategy of “defending the lesser of the two evils” (i.e. if a world empire is to reign us all, better it be the American Empire) invalid.”
That’s not a “first world leftist” argument. That’s a liberal bourgeois pro-capitalist argument. You seems to be stuck in a time warp where official Social Democracy is still considered a “left,” a view that aligns well with that of Fox News.
Anti-capital, currently, there is no nationally organized marxist “left” in the United States that I’m aware of,–except for The Party for Socialism and Liberation and the Black Alliance for Peace. Both take the position that the “hot” war in the Ukraine and the “cold” economic war on both Russia and China are strategic US/NATO hegemonic aggressions. Both organizations want a peace that would leave the Donbas and Crimea part of Russia. The Black Alliance for Peace views the stuggle against US/NAT0 as a global anti-racist /anti-imperialst/anti-capitalist struggle taking place in Ukraine, Asia, Africa, and South America.
Living a loooooong time in the blatantly racist and war-mongering US, I see things similarly.
To view the current crisis as one between capitalist imperialisms is “fence sitting” in the Dantian sense.
mandm,
Thanks for the response, but I don’t see how it relates to my comment on VK’s claim re the “US left.” If Michael wants to throw this open to a debate about UKraine, Nato, and the greater evil, that’s fine but I said nothing about any of that, although I’m certainly willing to take it up.
It seems to me that you, among others, are the one(s) who adopt and adapt a “lesser evil” theory– i.e the US is the leading, worst, primary, most brutal — (pick one or more)– capitalist or imperialist with a big I power and therefore it is obligatory to support the lesser, trailing, secondary, not so bad capitalist or imperialist power– which seems to me a replay of trying to support “poor, little, Belgium” in WW1 (or 2) against the richer, bigger, badder Germany. Maybe that’s a “Marxist” strategy. Maybe not. In any case, it was a tough sell to the people of Africa who suffered under poor little Belgium, wasn’t it?
I’m not going to judge the American Left or anyone else’s ideology: at the end of the day, everybody can and do have an opinion and ideology of personal preference (which is predetermined by class, but let’s not delve into that because it is too complex to discuss in a blog’s comment section).
I will just constrain myself to state here that from a purely philosophical point of view the “lesser evil” theory in whatever of its variants is – even by present-day liberal standards – an inferior theory, in every sense of the term. It is simply intellectually inferior, there’s no other way to put it.
The only scenario such theory would have some validity is one where the cause of the decline of the American Empire was China/Russia, that is, if the causes for the fall of the Empire were exclusively exogenous. In such scenario, the lesser evil theory would be completely unnecessary, as this Empire would have domestic legitimacy to military invade and conquer the cause of its decline. In other words, a leftist version of a lesser evil theory would be redundant, as the course of History would proceed as normal.
Assuming the real scenario – that the decline of the USA is endogenous and not exogenous, i.e. the existence of China has nothing to do with it – then such lesser evil theory goes even lower than the superfluous level and acquires an outright reactionary, macabre tone, because, in such case, such theory can only lead to world war. Even assuming China is capitalist and that such world war would be an imperialistic war, we have the fact that this war would destroy and not develop the productive forces. It would give another life, not destroy, capitalism; or, even worse, throw humanity back to the proverbial Stone Age, if not outright extinguish the species.
But WWI generated the October Revolution, some far-leftists would say. However, if you assume China is capitalist, then you have to assume the USSR was not socialist, or that the October Revolution must have created socialism in impossible conditions to thrive, therefore a heavily distorted form of socialism, because the productive forces were too low. You would win the battle, but lose the war.
In such scenario, even a purely imperialistic theory – say, an “our system is better than theirs and we will fight to the very end to make it triumph over theirs” (a “zero sum” theory) – is more positive than a “lesser evil” theory, which is, evidently, a purely negative theory. So, even from a pure Game Theory standpoint, a lesser evil theory is stupid – the only explanation for its existence in the real world is sabotage.
Anti-capital, my response was as one US leftist (maxist) to another regarding VK’s views of the historic events taking place. My intent was to support VK and identify your position as, unfortunately, that of most US leftists. Your response is no surprise, and ends the “debate”.
In the cold war between USA and China for the production and use of Semi Conductors. what will be the fate of developing countries? Will they not be caught between in the cross fire? How long can the developing and the under developed countries live under the mercy of the super powers? In the 20th Century the super powers dominated the world with oil power and now in the 21st century they dominate the world with semi conductors. The UNO should intervene to save the poor countries from being crushed by the super powers in the name of Chip War.
Like other readers, I think that Michael’s analysis of the chip war has been limited by looking at it too much through the lens of this particular book rather than through a wider assessment of the semi-conductor industry.
The first aspect that needs to be recognised is that the high-end chips that TSMC specialises in and the US government is sanctioning are not the most important semi-conductors from an economic or technological standpoint. For one thing they only represent the 10% of the sector that requires very small and low-powered computing such as mobile phones, tablets, laptops and intensive PC servers. The much bigger part of the semi-conductor industry consists of larger-sized chips which are more than adequate for the rest of the electronic devices industry, including those used inside cars, household, industrial and military products. This makes up the bulk of the $300-350 billion worth of chips that China traditionally imports.
It is true as Michael reports that the Chinese government launched a £150 billion drive in 2016 to build up local semi-conductor design and fabrication. But this drive initially failed to engender a significant response from Chinese manufacturers. This was because those Chinese companies buying chips were happy enough to purchase them from abroad and thus take advantage of the international division of labour, investment and expertise. It was only the sanctions introduced by Trump and more recently intensified by Biden that has forced the Chinese chip sector to seriously take up the challenge. And for the Chinese government to increase R & D funding support yet further.
The result? A major growth of Chinese home-grown chip-making companies and their rapid mastery of the processes for the production of 14 nanometre and 28 nanometre and above larger-sized semi-conductors which form 80% of the market. These advances are now also about to enter the 7 nanometre sector of the chip making sector which accounts for the next 10% of the market.
Even more worrying for the United States is the fact that the software design and related aspects of chip production from which their companies make most of their money in this sector – US company Qualcomm alone makes $30 per chip from its patents – are also increasingly being mastered by Chinese companies. Thus, threatening America’s stranglehold over the sector.
The fundamental flaw in US efforts to stop China’s technological advance is that the Chinese market for chips is now the largest in the world. Failure to supply this market will possibly spell disaster for the leading international companies in this sector. That is why they are currently striving to either locate factories in China – Samsung is planning to build a $15 billion fabrication plant in Xian in central China – so that export controls no longer work. Or to produce versions of their products with all American components stripped out that they can supply without restriction. The CEO of Dutch chip- making equipment leader, ASML, has recently said that the company was looking at making its supply chains fully “U.S.-proof”. Given that these non US versions will inevitably be better value, the US risks losing most of its global sales and income from the semi-conductor market.
On the other side, China may go from being the world’s largest importer of semi-conductors to being the world’s largest producer and exporter of them. A disastrous outcome for both US and other chip producers.
Technological Development
Looking further ahead, both TSMC and Samsung are possibly nearing the end of the current process of improving chip fabrication technology. The 1 nanometre chip that TSMC is currently planning to produce may well be the smallest that is possible with traditional silicon wafer production. Now research and development efforts are focused on new technologies such as the photonic chip which uses light to transport data. And further ahead is the the field of Quantum Computing which offers dramatically improved speeds. On both fronts China appears to be in the lead. No doubt this has been helped by the return from the United States of many Chinese computer scientists who are leaving because of their persecution in America.
In summation, the American attempt to hold back Chinese industry and technology through the chip bans has only served to wake up the sleeping Chinese semi-conductor dragon. And who would like to bet against the Chinese in this as in other sectors?
What other books on the chip war are interesting to read besides Chris Miller’s book?