Microchips, the consequences of the technology war between the United States and China according to Maurice Zhang

Microchips, the consequences of the technology war between the United States and China according to Maurice Zhang

When he speaks, the world must listen in complete silence and learn as much as possible. It is not just the industrial world it helped shape, but the world of politics and business that looks with fear at other, now red hot, geopolitical fronts that point to how the frictions between Washington and Beijing are the framework for seismic landslides of the international system. .

The economic and political system that favored the emergence of Taiwan Semiconductor Manufacturing Corporation (TSMC), when Maurice Chang He felt that processes of globalization and regional integration (especially in the advanced electronics manufacturing hub of East and South Asia), with the gradual specialization of the chip industry, would give the opportunity for economic development. Business model From TSMC (Third Party Foundry) an unparalleled competitive advantage.

The rise of the Taiwanese chip giant, founded in 1987 (at the height of the Cold War, but already in a regional context that saw Asian countries, such as Japan, Korea and Taiwan, emerge as future electronics leaders) was, in fact, crucial to the relaunch of the industry in a period characterized by With trade tensions between Washington and Tokyo and recessions due to economic cycles that have always characterized the electronics sector.

in MIT Talks On Tuesday, during his US tour, Zhang mentioned how the success of his innovation was possible thanks to some of the enabling conditions that exist in Taiwan: a unique ecosystem, able to provide a specialized and highly qualified workforce (technicians and engineers), and continuity of duties (little work). rotation), geographical concentration of manufacturing activities and the “learning curve theory” with incremental gains and reduced production costs. This is a cycle that the United States also witnessed in the early and proud decades of Silicon Valley between the 1950s and 1960s when research, design, and manufacturing activities went hand in hand. In fact, Zhang noted that in the not-too-distant future, countries such as Vietnam, Indonesia and India could become important production centers.

Hence, the need to confront the increasing costs of keeping up with technological frontiers is evident. To do this, TSMC aims to build the trust of its customers, since its business model has been to manufacture chips on behalf of companies in direct competition with each other (think Qualcomm and Nvidia) while sharing sensitive information. Second, TSMC invested on the technological frontier, in advanced nodes, taking advantage of the difficulties faced by competitors, such as Samsung and Intel, who were still designing and manufacturing chips in an integrated model (IDM). The scalability of manufacturing the most advanced chips would have been impossible had the industry not reinvented itself with the aim of regional specialization, and many of the companies that still occupy the sector today – such as Intel and Texas Instruments – would have disappeared in 2018. They face fierce competition if they do not embrace the trend. 1990s and 2000s. Meanwhile, today the United States will no longer have design leadership in EDA software and lithography machines. Choke point From the market that the US government is using to stifle Beijing’s technological progress – if only TSMC and other Taiwanese foundries had not bet on billions of dollars in investments to become the factories of the future.

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Today, as Zhang himself recently stated, that world has ended and it has become the world’s only priority Policy makers Which looks in the semiconductor industry is just one. “Without national security, we will lose everything, everything we value,” Zhang said. Given the geopolitics of chip production, Zhang believes that manufacturing is one area where the United States and China compete industrially and where there is clearly no gap Very noticeable. This gap is evident instead with respect to Taiwan, whose future remains uncertain compared to Beijing’s political intentions. “If we can, to the best of our ability, let us avoid a cold war.”

But it is clear that Sino-American relations cannot be established as was the case between the United States and the Soviet Union. Throughout the period of bipolar confrontation, diplomatic channels always remained open, dictated primarily by the need to avoid nuclear war while economic and technological flows were almost non-existent. The absence of strong interconnectedness in this sense made the binary comparison more understandable and, above all, encoded in “game theory” which until the end remained an ideal scheme for the search for equilibrium and, finally, coexistence, if not peacefully, at least. Towards there De-escalation.

There is nothing similar today at the moment. In fact, the means and ends of competition tend to merge: technological interdependence, from semiconductors to critical raw materials, makes achieving this balance more complex because one’s security is also, in part, the need to ensure that an adversary does not reach his goals. Autonomy or, worse, override. This is the paradox of codependency, because the more you try to limit your vulnerabilities, the more you encourage the other party to exploit them before it is too late. Obviously, the consequences are calculated Suppliers Universality is often omitted.

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On this side Zhang, during The meeting that took place At the Asian Society of New York on Thursday, he has clear ideas. “I think that Disengage It will eventually slow everyone down. That seems clear to me (By the United States, ed.) The goal is to slow China down, however [il rallentamento] It’s happening.” He commented that tensions between Washington and China are entering a dangerous path, something that “keeps me up at night.” Zhang also cited the controversial book written by the Harvard professor, Graham Allisonpublished in 2019 under the title destined for war Which deals with 18 historical cases in which a hegemonic power (the United States today) collided with a rising power (China), leading to the competition ultimately ending in military conflict twelve times.

The US chip ban with new restrictions on the export of US technology (EUV and DUV machines and advanced AI chips) will be able to achieve the expected results – preventing or halting China’s pursuit of semiconductors and applications Dual use – Or it may have unintended consequences, such as stimulating the national ecosystem or pushing for the military annexation of Taiwan. But it is difficult to imagine the latter scenario as a result of the blockade. According to former TSMC director Burn Li, who was interviewed by BloombergHowever, the new US restrictions will have no impact: SMIC, China’s leading domestic chipmaker, will be able to manufacture 5nm chips using DUV machines shipped by ASML in recent semesters.

The race for advanced foundries, for reasons of safety and technological prestige, is a trend that also has direct consequences for TSMC. If Zhang’s creature is able to emerge and consolidate its market dominance with 90% of sub-10nm chip production, it is also due to the appropriate geopolitical context. Now that national security has prevailed, TSMC is in an awkward position: its “neutrality” in trade terms was once key to its success, but it is now arguably a disgrace in the triangle between the US, China and Taiwan. No company can continue to thrive in an environment where its importance is too risky a bet to rely on.

That’s why many competitors, including Intel and Samsung, are willing to take advantage of the “politicization” of the industry to their advantage. Race to Resettlement Or for com. friendshoringWith public investments from the US and the EU, TSMC was forced to do what it would never have done in a normal context: invest in capabilities abroad (in Europe and Japan), export its technology, know how And investments so as not to leave much room for American, Korean and European companies. It is also true that demand for chips and risk aversion is expected to increase loss As in the epidemic period, increase Chip capacity In general it would have been physiological anyway.

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The demand for advanced logic chips for supercomputing and artificial intelligence is constantly increasing. In 2022, it already accounted for about 41% of TSMC’s sales, followed by smartphone sales (39%). TSMC’s position as a market leader foundryHence, it still puts the company in a favorable position to benefit from it bubble Artificial intelligence in the coming years. Moreover, it is also unlikely that the Taiwanese company’s aggregate customers – such as Nvidia, Apple and Qualcomm – will be able to decide to abandon the relationship and allocate their orders to Intel or Samsung specifically due to the consolidated ecosystem revolving around TSMC’s foundries as well as the fact that the Chang has a rate of return for advanced nodes that neither competitor has.

Finally, the difficulties faced by the foundry in Arizona (worth $12 billion, 40 in total considering the second foundry under construction), with a capacity of 5nm (3nm from 2026), due to the lack of corporate culture and qualified personnel are eloquent. The conditions for success outlined by Zhang are perhaps the main reason why TSMC has been reluctant, in the past, to try to replicate its national successes elsewhere. But there remains further evidence that those times are now a distant memory.

All that remains is to try to convince politicians to avoid dragging the chip industry – and TSMC in particular – into a spiral of tensions before the point of no return. In this direction, the Taipei government chose to send Chang, for the first time, as a special representative to the upcoming Asia-Pacific Economic Cooperation (APEC) summit, which will be held in San Francisco from November 11 to 17. Joe Biden and Xi Jinping will also attend the meeting and will meet again after more than a year.

If there is one man who can mediate between the two leaders, from the platform of his knowledge of the industry and technology on which the fate of US-PRC relations depends, it is him. The future of the world and its company are strongly intertwined.

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