The Reading Room

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

Chris Miller

Published: 2022, Simon & Schuster

Chris Miller’s book “Chip War” provides the entire chronology of the evolution of semiconductor (chip) industry and its role in electronics, computing & modern warfare. Chris is a Professor at the Fletcher School at Tufts University, and is a non-resident senior fellow at the American
Enterprise Institute, a think-tank in Washington, D.C. The book starts with the origin of transistors and delves into the history of key companies – Intel, ASML, TSMC and their respective founders. Alongside, Chris captures the role of chips in the development of latest ammunition and modern weaponry. As the initial part of semiconductor industry coincided with Cold War, it highlights the tensions between USA & USSR and the difference in approaches taken by both the nations in its progress. Later, the book tries to put into perspective the rising tensions between USA & China amid the ever-rising significance of Taiwan as the leading producer of semiconductors/chips.

Historical Context & Cold War
The book is full of the history of the origins of the semiconductor industry. Right from the days of Shockley Semiconductor to the founding of Fairchild Semiconductor by the group of traitorous eight, which became the bedrock of the industry. During the early days of the chip industry, the usage was largely in space and military advancements. As the Cold War intensified, the quest to gain prominence in defence also increased. This is where chips provided the computing edge to Western powers. Chips were used in guiding missiles to precise locations and launching rockets into space. However, this made these companies totally dependent upon NASA & the Pentagon for growth; defence accounted for over 70% of the entire sale of chips in 1965. Looking at the strategic importance of chips, the USSR also started promoting research in chips, but they made a blunder in deciding to copy the design & process, which affected its quality significantly. On the other hand, US companies were focused on moving to mass-scale production of chips and advancing to the next technology.

Adoption in Consumer Electronics

In 1965, Gordon Moore forecasted exponential growth in computing power, which is later known as Moore’s Law. The usage of chips in the private sector for computers started after Fairchild slashed prices by 90%, which led to a significant rise in computer sales: 17 times in the next 10 years. However, Fairchild saw senior people quitting over the lack of ESOPs, and in 1968, two of the original eight – Gordon Moore and Robert Noyce – left Fairchild to start Intel. Intel launched a product, DRAM (Dynamic Random Access Memory) – these chips still form the core part of any computer. Japanese firms like Sony used chips to make new products like the Walkman, one of the most iconic consumer products ever. In addition, Japanese firms like Toshiba, NEC, and Hitachi were significantly more efficient in chip production and quality than their US counterparts. As a result, US firms faced heavy competition from Japan.

Rise of Japan & Korea

The most common factor in the rise of these countries is the playbook: government support, subsidies, fiscal support via cheap loans, and protected markets. This is how Japanese firms gained a market share in the DRAM market at the expense of US firms. However, when US
companies bounced back, they outsourced production more and more to Taiwan and Korea to regain dominance. The strategy to gain scale remained the same.

Rise of Design Firms/Fabless Firms & TSMC

In 1985, the Taiwan government managed to convince Morris Chang to come back to Taiwan to set up the semiconductor industry. Although Taiwan was assembling chips, it wanted to move up the value chain. Morris had an old idea of separating chip design and chip manufacturing. He reasoned that the low cost of computing would open up more growth avenues. Finally, Taiwan Semiconductor Manufacturing Company (TSMC) was set up in 1987 with the Taiwan government contributing 48%, Phillips 27.5%, and the rest owned by wealthy Taiwanese.

Intel: Losing Dominance

Intel dominated the PC industry, as it was supplying the microprocessor for most computers except Apple’s Mac computers. In 2006, Intel and Apple announced that Intel would start supplying microprocessors to Apple as well, strengthening its stranglehold over the industry. However, when Apple approached Intel to make processors for its mobile phone, Intel turned it down due to profitability and its forecast that it would be a niche product. This business went to Arm, a chip design company in the UK, and it was manufactured by Samsung.

Current Context in US-China Relations

Today, TSMC produces 40% of chips globally and approximately 90% of advanced chips globally, becoming the lynchpin of the supply chain. In today’s digital age, the competition to control chip production and access to advanced technology is no longer just an economic concern but a matter of national security as well. This is because now, chips are the backbone of everything from smartphones to advanced military systems. Currently, the global supply chain is truly global – chips are designed in the US, made in Asia, using equipment which is made in Europe.

Interestingly, even a country like China, which prevents Western internet companies from operating freely and places censorship, realized that all the data collected by its own homegrown firms also relies on foreign hardware. The core tech which runs computing is designed by
US firms and the Chinese don’t control it. This was evident after Snowden’s leak of surveillance methods.

Conclusion

To summarise, this book is a must-read to understand the deep connection between technology, economics, and geopolitics in today’s world. It gives you a view on how today’s national security is defined by the nation that has full control over data, starting right from the hardware and designing. I thoroughly enjoyed reading the book and regret not reading it before!

Saurabh Chugh
February 2025