View from Washington: Chip War

There have been surprisingly few comprehensive histories of the semiconductor industry, so the arrival of Chip War: The Fight for the World’s Most Critical Technology by American academic Chris Miller is welcome. With the US and China at loggerheads over silicon, it is also timely.

But while Miller, a professor of international history at Tufts University, addresses that rivalry directly at the end of his excellent book, he originally came to the topic when he discovered how the importance of chips has long tended to be buried away within the things they enable.

“The book was going to be about the history of missiles in the Cold War. And the more I dug into missile technology, the more I realised that the interesting part was the guidance computers. And the more I learned about them, the more I realised that the invention of the integrated circuit was the key driver of the miniaturisation of guidance computers,” he says.

“As I was doing that research about five years ago, the Trump administration was taking its first moves against [Chinese telecoms hardware groups] ZTE and Huawei, and I started to understand that actually there was this link between what I was now reading about in the newspapers and what I was reading about in the historical sources.”

Miller’s book charts the history of the IC from its invention through to the present day, describing not just how silicon has evolved as a technology but also its ever-shifting economic and political landscape. It is a clear, thoroughly researched read that tells a story that anyone can understand and appreciate. Not just comprehensive, but accessible.

Perhaps most important right now is how he presents the rise of China in the context of how Japan, South Korea and Taiwan emerged as major semiconductor players and why the former USSR did not. As talks grows of a new Cold War, the comparisons Miller draws between the Soviet Union and China are particularly useful.

“The Soviets are interesting, because they had many of the crucial components you would think they needed to build a chip industry. They had brilliant physicists. They had lots of capital investment. In the 1960s and 1970s, they had a clear military reason to want to race forward,” he says.

“But what they didn’t have were a consumer market and global supply chains. Those proved disastrous oversights for them. So, I do think it is an interesting comparison with China. In some ways, I think China makes some similar errors, but in a lot of ways, China’s really quite different. It is tightly connected to the global supply chain and it is building a consumer middle class.”

Nevertheless, Miller notes how President Xi Jinping’s government is today becoming more interventionist, much as Moscow was in the last century.

“I think that understanding the Chinese sector’s development is tricky because you’ve got the state-led element coinciding alongside and interacting with a more private-led element,” he says.

“For example, if you look at SMIC, the biggest Chinese foundry, I would say that it started out basically as a private firm that was plugged into international supply chains in a really deep way. Whereas over the past decade – maybe since 2008 or so – it’s been much more reliant on the support of the Chinese state, and therefore pursuing goals that are less focused on commercialisation and more focused on meeting the more politically defined goals of the Chinese government.

“That said, different firms do end up in different parts of the Chinese system at different times. So it’s hard to categorise simply. But the role of the bureaucrats in setting directives is now certainly important in China and a problem for them there is that their track record as venture capitalists isn’t that great.”

Some of those failures, with companies being pushed in too many directions at once and growing beyond being manageable, are charted in Chip War. Here, Miller draws a comparison with how South Korea and Taiwan built their semiconductor industries.

“We know that both those governments played a central role in pushing private capital in certain directions. But what worked in South Korea and what worked in Taiwan is that they focused on one part of the supply chain, one where they thought they could get a real competitive advantage,” he says. “What China is trying to do is really tough. Because it is now trying to invest in multiple parts of the supply chain where it’s not obviously clear that it can get all those advantages.”

Miller completed his book before President Joe Biden’s administration announced a far more comprehensive and far-reaching clampdown on China’s access to the latest semiconductors and fab equipment late last year.

“I was surprised at how comprehensive they were. I think that’s the interesting part,” Miller says.

 “The US government had, over the last five years, been sort of chipping away, if you will, at China’s ability to reach the leading edge in terms of applications, and in terms of access to tools and software on the leading edge. But this was a much more comprehensive effort to really impose a hard stop on China’s ability to move forward, particularly its military – there’s been a lot of concern about how the PLA has been able to pull technology for its use from the commercial sector.

“It’s not going to be watertight, but it’s going to cause some serious problems for the Chinese.”

The US bans also broadly coincided with the passage of the federal CHiPS and Science Act providing $52.7bn (£43.8bn) in government support for semiconductor manufacturing and research (The EU published its equivalent earlier this month; the UK is playing catch-up). For some, this raises the risk that Washington may end up mimicking Beijing in “picking winners” with all the risks that entails. Those are there, but Miller takes a phlegmatic view by focusing on Taiwan’s role as the world’s largest chipmaker.

“We should be open about the fact that this is a national security strategy, not an innovation strategy or a commercialisation strategy or anything else. It’s also about having an insurance policy, basically vis-a-vis the Taiwan Strait,” he says.

“I think the bulk of the manufacturing subsidies are actually fairly clearly delineated so that the primary goal is to move capacity where we already know how to produce leading edge logic and memory, and just make sure more of that is in the US. The wisdom of that is not based on where the market is. It’s not based on anything technological. It’s a hedge to reduce the likelihood that the US and Taiwan and the supply chain are caught out in the case of military escalation.”

There is no news yet as to whether Miller will be updating Chip War for a second paperback edition. But given how comprehensive a view of the semiconductor business he has built, you do hope he gets the chance.

Chip War: The Fight for the World’s Most Critical Technology is published by Simon & Schuster in the UK and US, and is available from all leading booksellers in hardback, digital and audio formats.

To find out more, read E&T‘s interview with Chris Miller here