What’s small, mighty, and probably on your fingertips right now? We handle more chips every day, a figure that accumulates into the thousands over the course of a typical lifetime.
You can find chips in cars, dishwashers, microwave ovens, coffee makers and smartphones. “Today, chips are in almost every device that has an on/off switch,” says Chris Miller, author of Chip War: The fight for the world’s most critical technology and associate professor at Tufts University.
But we almost never see them because they’re buried deep within the devices we rely on. “It’s a piece of silicon, about the size of a fingernail, that has carved out millions or billions of tiny circuits,” Miller describes. And the most advanced chips have the most computing power.
A trillion dollar market
The number of chips we rely on in our daily lives is growing every year, making it an extremely lucrative market.
In fact, the chip industry is projected to reach trillions by 2030. From an industry worth $412 billion (€380 billion) worldwide in 2019, its share of the value has risen to 580 billion dollars (535 billion euros) in 2022.
Its exponential growth has fueled a global arms race between superpowers.
But not all chips are created equal – and money isn’t the only reason why China, the US and Europe are fighting over what has been dubbed ’21st century oil’.
There is a direct relationship between computing power and military power, according to Miller.
“Advanced computing has always been exploited by government intelligence and military weapons, whether it be the British computers at Bletchley Park that cracked codes during WWII or the US use of supercomputers in Soviet memory during the Cold War”.
And the United States has taken unprecedented steps to lead the world in advanced chip production.
Its $280 billion (€258 billion) Chips and Science Act aims not only to boost its domestic chip production but also to limit the sale of advanced chips to China to prevent them from advancing advanced computing. in artificial intelligence or even in weapons of war.
Pursuing “geopolitical goals”
“We now see that policies pursue not only industrial policy objectives, but also geopolitical objectives,” explains Niclas Poitiers, a researcher at Bruegel.
In the technological cold war among global superpowers, Europe is also on the move. The European Commission has unveiled its 43 billion euros Potato chips law in February 2022. An ambitious plan that may not be enough to develop digital sovereignty.
There is not a single semiconductor plant in the world that can produce chips on its own
“This is too weak a reaction compared to the reactions of other countries,” says Jean-Pierre Raskin, a semiconductor specialist at the Catholic University of Louvain in Belgium. “Of the 43 billion investments, only 15 are new. The rest has already been invested_”_.
While global players are all investing heavily in chip manufacturing, at present “there is not a single semiconductor plant in the world that can produce chips in a self-sufficient way,” says Miller.
A fragile and interconnected supply chain
The highly complex and interconnected nature of global semiconductor manufacturing causes these global players to rely on each other.
“As a result, we see a global division of labor with different countries and different economies playing specific roles in the value chain,” says Niclas Poitiers.
The first part of the “21st century oil” value chain, the planning stage, takes place primarily in the United States. But the chips are then produced on the other side of the world in East Asia. Taiwan accounts for more than 65% of the manufacturing market, while South Korea accounts for more than 15%.
And China is at the end of the supply chain, where chips are assembled and packaged into products that consumers will ultimately buy.
But China and the United States also depend heavily on Europe to create the “brains of modern electronics”. “You can’t make advanced chips anywhere in the world without machines from the Netherlands,” Miller says. Dutch company ASML is the sole supplier of the lithography machines used to produce high-end semiconductors.
The pandemic has exposed the fragility of an interconnected global supply chain. “The semiconductor shortage has impacted the automotive industry, causing more than $200 billion in losses for automakers worldwide_”_ adds Miller.
“Devices that rely on chips make up the majority of manufacturing output.”
And now, rising geopolitical tensions between China and Taiwan could affect people’s daily lives globally.
“If there is a blockade or war in the Taiwan Strait, the production of all kinds of goods will be immediately stopped and we would be facing the biggest manufacturing crisis since the Great Depression of the 1920s,” Miller warns.
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