The race for semiconductor supremacy | FT Film

The sleeping giant that is the United States has finally woken up. Chips are now at the very heart of tensions between the United States and China. America's technological leadership has been the source of America's strength since World War II. We should not depend on any port, any country, any island or any island. Economic competition that is manageable could become something bigger, hotter, and unmanageable. um the American manufacturing industry, the backbone of our economy began to hollow out. Companies move jobs abroad. Today, we only produce about 10 percent of the world's chips, despite being a world leader. in research and design of new chip technologies, but friends, where is it written, where is it written that the United States cannot lead the world in manufacturing again?

It is difficult to think of a component of any product that is truly more ubiquitous and essential than the

semiconductor

. Nowadays, almost any device with an on-off switch has one or often dozens or hundreds of

semiconductor

s inside it that power our cars, planes, trains. Communications depend on them. Factories, companies, finances and banks move money thanks to these chips. The United States no longer makes the most innovative chips. seven nanometers or less Taiwan makes 92 percent of those chips, eight percent of those chips were made in South Korea and none are made in the US, we just want more of the new manufacturing that's online happen in the US there was a sense that globalization is inevitable, we should offshore these jobs, it's no big deal if the Rust Belt empties, that decision is one of the reasons America elected Donald Trump and That's why Joe Biden is pushing for an industrial strategy and that's why we're in a pendulum shift in the political economy not just in the US but in many developed countries, when people think about industrial policy, it's been a bit of a dirty word in US politics and hey, the free market should reign, this isn't like any other industry.

It's so critical for the future and I think that's why it really deserves unique attention from an industrial policy perspective. The privilege of Congress and it is to present to you the president of the United States. We're going to make sure that the US supply chain. It starts in America, which is why we came together to pass the bipartisan Chips and Science Act. This really is the crown jewel of Biden's policy. So what's behind the Chip Act is an attempt to protect US economic security until the end. Going forward the entire Chip Bill is $52.7 billion, $39 billion is for subsidies, on top of this there is an investment tax credit that gives a 25% tax credit to any factory that is built or improve under the Chip Act's focus on producing the chips the United States needs for its National Security requirements Department of Defense, intelligence agencies and partner companies will build products for them as the United States seeks to once again become a A true leader in global chip manufacturing, it is looking to create centers across the country where it can leverage the skills of both people and local suppliers that are needed around these large chip factories.

These are manufacturing plots. These are the big factories and they produce wafers like large silicon disks on which the chips are placed. They are printed and then cut, so this is really the heart of all chip manufacturing and these plants cost tens of billions of dollars. They have some of the largest industrial projects ever undertaken and they are building the smallest things ever undertaken. built on Earth and if we get there, we have good transistors and a good cost structure, we are going to gain foundry customers and manufacturing will return to the US today the Rust Belt ends today the Silicon Heartland begins is one of the five centers of the US workforce focused on manufacturing jobs, it is truly an exciting day to be here and this builds on 40 years that Intel has been in Arizona, we put our chips on the table with this investment, now let's go to put our shovels in the ground and get This is underway and we are excited for the opportunity to expand and now we have over 50 billion dollars of capital invested in the state of Arizona.

Arizona has been a US semiconductor manufacturing hub for several decades, but recent years have seen significant new investments from both Intel and tsmc, both of which are building new state-of-the-art chip manufacturing facilities. Advanced manufacturing has been an incredible industry for Arizona and part of the reason I am so focused on it as mayor is that I feel that we will develop a healthier and more diverse economy and that much of the future of the world's technologies will need chips that will be manufactured here in Phoenix. The Chip Act will change Phoenix forever. We have seen unemployment rates change and we are also working on the workforce side and we were recently selected by the White House as one of five workforce centers.

I am very focused on trying to create a knowledge-based economy with well-paying jobs, which is why I am betting on the semiconductor industry. Arizona State University has been a key partner in our semiconductor expansion. The speed at which technology moves, that is, the smallness of features. You hear about three nanometers, you hear about two nanometers. This is going well and they are really pushing the limits of what will physics allow? Well, how do we solve that problem that excites an engineering student? Engineering and these students want to solve foreign problems. I was really interested in working in the semiconductor industry.

I chose Materials Science because Materials Science is something that people in the industry are looking for. I am interested in being an inventor and doing technology in a specific area inventing new materials to improve chips trying to have an impact on our society now I feel that I I'm getting very close to that dream, so this is our clean room and we have a lot of tools, but you might notice one of the things that you would start to notice right away: this area is wide, that area is yellow and again like when you do any type of lithography work when you are exposing like a

film

and you are developing it.

You want to have ultraviolet light like no other. The United States does not have all the talent to staff these factories. In the next year you will need about 27,000 people with fairly high technical skills. five to ten years because we are going to need thousands of people from outside the US with the right skills, which means we are going to have to facilitate the immigration of these people that the US has in an environment in that you can be successful if you want to, if you really work hard at something you can achieve it and that's what attracts me to the US.

I didn't feel the same way back home. Talent is a great challenge that we must overcome, so there are two sides, one that we need. work harder on radical education, which is one side of the coin and which is going to fix the medium and long term, in the short term we need to make some modifications to our immigration policy, which is very, very deficient for highly qualified immigration If we look at the founding of Silicon Valley there were workers from Europe, from Korea and from Egypt, for example, at the founding of some of the first companies in Silicon Valley, it is an area of ​​concern, it is an area of ​​priority and chips act and fund some of that skill development, but at the same time, I look at this and the response that we've received, for example, from the university system in the US, you know, at the community college level, at the college, you know, the top-tier schools have been phenomenal.

Intel is one of the most underrated stories in the tech industry and that's saying a lot given how prominent it has been and everyone knows the brand, but what I don't think people appreciate is that for about half a century this company was the absolute leader in an entire industry. he invented integrated circuits, which are what we think of as microprocessors like chips, and he basically led that industry in manufacturing for half a century, and what that meant was that with every new generation of chips that he designed, he also developed the manufacturing processes to build them. and he was developing things that were smaller and faster than anyone else could design and he was typically two or three years or even more ahead of the entire global chip industry, but what happened more recently is a different story in the last five to eight.

During the years that Intel lost its Edge, it lost its ability to continue to be one step ahead of its rivals, if you will, and other companies followed the plan that I have presented to Intel, which says that we will invest about 30 billion capital per year. year for five years 150 billion dollars these are extraordinary investments and when you look at the ones you know, tsmc or Samsung, you know they are similar, we have been declining for 30 years, can we start leaning over the next 30 years? a world where material is converted into crystals with controlled impurities with molecular and even atomic intolerances, the target semiconductors, transistors and diodes needed by the millions, so at the beginning of the chip era, Gordon Moore, one of the founders of Intel was looking for a way to explain to people how the chips were going to be in everything, how electronics, the entire world of electronics was about to go through a revolution that no one could fully understand.

In 1965, Gordon Moore laid out in an article. what became known as Moore's Law the idea behind it was that the number of transistors per chip would double every one or two years and that was just a prediction, it is not a law of nature, but it has been proven correct for more than half a century. The basic objective, whatever the product, is to make it smaller, more reliable, more economical. extend its function if you go to the store and buy a new smartphone, the main semiconductor of the phone alone will have 10 or 20 billion tiny transistors carved into the silicon and each of those transistors is so small that it is about the size of a coronavirus and There is no device that we have produced on such a large scale using such microscopic components.

Now that transistors are getting smaller and smaller, it's becoming harder than ever to shrink them even further. Large companies like Intel or Tsmc have outlined very clear paths to maintain Moore's Law. I live for years to come until the periodic table runs out. Moore's Law isn't finished, is it? We're just going to keep digging into the science to figure out how to keep these advancements going for the future of AI for the future of all kinds of technological advancements, it's absolutely critical that we keep this pace of innovation as fast as possible for many years into the future. .

Travel has been at the center of electronics and computing since the beginning and it has been very easy to ignore it. We are just there, we take them for granted, but all that has changed. We all discovered during the pandemic that a disruption in chip supply can affect everything, it can affect all manufacturing industries, so suddenly the chip world is turning upside down and Intel is turning upside down. The purpose chip world is really trying to rethink what's wrong: six million vehicles were pulled from production plans in 2021 due to semiconductor shortages. Over the course of 2021 and 2022, automotive companies around the world suffered several hundred billion dollars in lost sales because they couldn't. get the chips they needed to finish their cars, car lines closed just because there weren't enough chips available, car makers reduced their chip purchases thinking they would sell fewer cars, so all the chip makers sold to chip companies PC and suddenly there it was whiplash how do we eliminate risk how do we ensure that we have multiple suppliers so that we are not dependent on a single supplier and how do we ensure that there is enough capacity in the current supply chain 90 of the world's most advanced processors, The types of chips in your smartphone or PC or in data centers and telecom infrastructures can only be produced by TSMC, which has all of its most advanced production in Taiwan in 1990 we make 37 semiconductors here on US shores now we manufacture 12 percent and falling into concentration in manufacturing in East Asia is not good for our national security or economic security. tsmc, the world leader right now, basically focuses most of its manufacturing close to home and operates absolutely massive plants withenormous production when the company was founded in In 1987 it had a truly unique business model: it only manufactured boats, it did not design any in-house, and that business model allowed it to serve a wide variety of customers, companies like Apple or Nvidia and, like As a result, it has grown much larger than any other chipmaker. of its kind and due to its scale, it has been able to reduce costs but also perfect its technology because for every silicon wafer it produces, it collects data and perfects its production processes, so it is no coincidence that tsmc is at the same time the largest boat manufacturer in the world.

The world's advanced chipmaker should have 92 percent of all semiconductors in Taiwan, maybe not a good idea. It's an incredible vulnerability and it really makes you stop and think about how we got to a place where countries and companies thought it was okay. I know I think a lot about what would happen in this country around the world if there was a blockade of Taiwan, if there was a hot war in the South China Seas. The only short-term comparison we have to something like this is the war in Ukraine that created a global market event, we had inflation, you know, we had huge corrections, you know, both in companies and in countries, a disruption of supply chains not just on ships but throughout the South China Seas would be a thousand times over this is a bad day for President XI and the Chinese Communist Party, the sleeping giant that is the United States has finally woke up to the challenge we face from the People's Republic of China, their aggressive posture in the region and the potential they would have to cut off our access to advanced semiconductors.

The predictable Chinese exercises around Taiwan this morning pretending to seal off this autonomous island of Taiwan. says dozens of Chinese fighter jets have once again crossed the highly sensitive Taiwan Strait de facto maritime border over the past decade. Chinese military power in the Taiwan Strait has grown dramatically as China increased its military spending and focused almost all of its military efforts on threats. Foreigners in Taiwan imagine what would happen today if instead of an oil embargo like the one we had in the 1970s there was a chip embargo, if the economy collapses and if there are major disruptions to daily life and the functioning of the society, you could essentially expect production lines through The world is just beginning the global paradigm is changing and that creates obstacles and can create conflicts and there is a real risk right now that an economic competition that is manageable could turn into something more bigger, hotter and unmanageable and that really worries me.

What would happen if China somehow gained control of Taiwan? It doesn't have to be an invasion, but a much lower budget approach would be to ensure the right people win the next Taiwanese election and what happens if the Taiwanese government tells the United States? Thank you very much, you can go now. The conflict does not have to be a military conflict and that is a point that is missed. We have the opportunity to manage that conflict using things like export controls using things like industrial policy, but conflict is inevitable and that's where the semiconductor industry and the chips act on the tension that has arisen between the US. and China, the computer industry in the technology industry is at the heart of future global competitiveness and national security and in that technological rivalry that has emerged, chips are right in the center, the US has realized It is China's lack of any real ability to make advanced chips that is the only thing preventing it from becoming an advanced technological power, which is why the United States is actively acting to prevent China from obtaining that chip technology.

We are not interested in providing technology to China. that could be used against us and at a time when it is developing its nuclear weapons program in a very opaque way, today China is a relatively minor player in the chip industry. China spends the same amount of money each year importing semiconductors and suspends oil imports. and China has to buy all these semiconductors overseas because their domestic capabilities at The Cutting Edge are quite limited, in addition to the 25 to 30 percent that they consume, you know they have another 25 to 30 percent of the global supply chain that goes through for China, for what it plays.

It also plays a critical role in the supply chain. In 2014, Chinese President Xi Jinping identified semiconductors as a core technology that China should produce domestically, and since then China has invested tens of billions of dollars a year (about one ship act a year ) to subsidize their own production. domestic production foreign industry has become a symbol of whether China can build its own self-sufficient technology industry at the center of the government-led investment is the national integrated circuit fund known as the big fund, so the big funds have been raising 340 billion renminbi. which is 47 billion dollars since 2014 and so far with many fruits of such a large investment, so Beijing basically has to rethink whether this approach is useful as a whole.

The Chinese chip industry is still lagging behind technologically despite all these generous subsidies and when you look across the supply chain China is years behind The cutting edge in Taiwan Korea or other countries the big change we are seeing is more of a bifurcation between China's Focus chip industry and the chip industry that sells to the rest of the world, it's not just the basic science that needs to be assimilated, but there are many alternative tests if you want to have knowledge in the workshop on how to make it work, that is very difficult to replicate. tsmc has a huge amount of knowledge on the shop floor that is tacit knowledge of its workers on how to do it.

To make those processes really work and produce high yields, the US is considering tightening restrictions on chip exports to China. Advanced semiconductors are a key development and national security priority in China. um foreign foreign and we see competition, not conflict, investing in our alliances and working with our allies to protect advanced technologies from being used against us. The chip world is now moving towards specialized chips for specialized AI purposes, which means gpus, a different type of chip that was originally designed for gaming but has now been repurposed for AI and we have seen Nvidia, which actually leads the world in GPUs, becoming the most valuable chip company in the world, and actually reaching a trillion-dollar valuation just because of these single-purpose chips that do well in AI.

It used to be that emerging technology, especially in the United States it came out of the Department of Defense, think about satellite systems in general, semiconductors themselves, but also things like radar, sonar, GPS, which now we can't live without, but because they came out of the government's National Security Enterprise, there was an opportunity for them to slowly diffuse into civilian life and the US government could manage any risk it had of its adversaries using the same technology. Today, there are a lot of technologies: artificial intelligence is just one of them where the initiative for this is actually happening.

The private sector and the US government are playing catch-up, and as the government appreciates what the implications of these technologies are for national security, how does it now try to put the rabbits back in the game? box or manage the risks that these technologies have for competing national security? with China requires everyone on the ground to operate as a full government and work in a bipartisan manner with Congress requires the use of our full economic diplomatic and military tools in 2022 the US imposed new restrictions on the transfer of certain used ships To train artificial intelligence systems in China today, almost all of the world's advanced AI chips are designed by American companies and manufactured in Taiwan, and the data centers in China that were training AI systems also used these ships and EE The US wants to limit China's access to these high-end ships with the goal of limiting China's ability to deploy artificial intelligence systems for defense and intelligence use cases.

Technological leadership has been the source of US strength. The US since World War II and that's when the US discovered that if you have the most advanced technology you could create your own security, you could achieve leadership in the world and much of what has happened since then has been an effort to maintain the technological

supremacy

of the United States. The United States and China have been dancing in the supply chain for a couple of decades, maybe four decades. Sometimes it's been good, other times it's been more dysfunctional and I think we're really approaching day zero where we're starting to understand that we can no longer have the status quo and what supply chains are going to look like globally.