The chips are down: With a desperate global shortage of semiconductor chips crippling production of everything from Teslas to personal electronics, and with the most important chip maker threatened by China’s growing ambitions of Taiwan, will the U.S. go to war for chips?
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19 replies on “The Chips Are Down: Will We Go to War with China to Keep iPhones and Teslas Coming?”
The Endless Frontier Act, S. 1260, passed the Senate on June 8, 2021. It addresses semi-conductor chips specifically and calls on more American manufacturing of same. https://www.congress.gov/congressional-record/2021/6/10/senate-section/article/s4049-1?q=%7B%22search%22%3A%5B%22semi-conductor+chips%22%5D%7D&s=1&r=11
So, now that you can’t play computer games, what are ‘ya gonna do when you run out of bacon??
From Legal Insurrection…
Beginning January 1, California will enforce the Farm Animal Confinement Proposition (Prop 12) which was approved by voters in 2018 and requires more space for breeding pigs, egg-laying chickens and veal calves.
Unless the courts intervene or the state temporarily allows non-compliant meat to be sold in the state, California will lose almost all of its pork supply, much of which comes from Iowa, and pork producers will face higher costs to regain a key market.
https://legalinsurrection.com/2021/08/inflation-is-about-to-cook-californias-bacon-as-new-rules-kick-in
Gentlemen, As someone who was intimately involved in chip manufacture in Silicon Valley…the thing that ran Chip Mfg. out of the country was Environmental REGULATIONS! Chip Mfg uses Nasty Chemicals that were Regulated out of the US because of their use !! SO, if the Government wants that industry back, you’ll have to face the Sierra Club head on FIRST! SCOTT, that is why there are no US Entrepreneurs today!
https://reason.com/2021/08/02/that-weird-california-computer-ban-isnt-what-it-appears-to-be-its-dumber/
Issue a permanent resident visa to any Taiwanese citizen who wants one, Put seats in FedEx and UPS jets and bring them HERE. Think what would happen if you put them in someplace like Detroit. Here ya go folks! The street are here, the power is here the water and sewers are in place. Oh! You want to set up a chip manufacturing operation? Well, I’m sure we can find some former car factory which would work for you just fine…. Formosa? China can have it. WE want “Taiwan”. Yes I DO want them as my next-door neighbor! I think they’d make dandy American citizens.
The biggest mistake of my life was not buying Texas Instrument stock in 1966 at $6 a share. It was suggested to me by an electronics technician as something to use my shipping-out pay from the Navy on, but being 22 years old and a bachelor, I decided to piss it away on liquor and women. At that point they were just getting into integrated circuits and had a military contract for missile guidance systems. Little did I know computer chips would be the future of today’s world. Hindsight is always 20/20, ain’t it?
Subsidizing any commercial endeavor in the U.S. is something you don’t want to start doing unless you’re willing to keep doing it. Government subsidies end up being a vital aspect of the financial equation for that industry. That industry then counts on the subsidies for profitability and it’s very, very hard to put a stop to that.
A great example is the dairy industry in the U.S. During and after the Great Depression dairy production was subsidized in states that did not have a traditional, historic, hereditary dairy industry. States like Georgia and California received subsidies that northern tier states that had established dairy production, like Wisconsin and Minnesota, did not get. The idea was to both broaden and increase dairy production so that a problem with the dairy industry in those traditional states would not affect the entire nation. The intent was to stabilize dairy food prices by providing a larger base for production.
(Dairy foods are a major industry. Milk is the most popular drink in the United States surpassing all other beverage consumption including beer. That apex position is sliding downward now but still holds true. It’s not just milk as a beverage either, it’s all the things like cheeses, chocolates, etc. that use milk as either a primary or secondary component.)
Fast forward to today, more than a half century later. In states like Georgia and California dairy is a booming, profitable industry.
Those states have a longer growing season than northern tier states so they can produce more food over a longer time for their cows. They can do that for the same or a lower cost as the reduced forage totals of colder states. More cow food for less money.
They also have lower infrastructure costs for things like barns and milking facilities because many of those farms have roofed but otherwise open air systems, which cannot be done in a northern state because they’ll freeze solid in the winter. Building something to withstand and operate at -20F or colder temperatures costs more than open air. Large operations in the warm states have huge open air cow sheds. The barns in cold states cannot compete because if they build the same way the cows will die.
Now those warm states are competing unfairly with northern tier states because of the advantage they get from government subsidies a half century or more old. Today dairy producers in those warm states rely on subsidies in calculating profitability and they won’t give them up. Those subsidies accomplished their purpose but once they had done that, they did not end.
Worse yet, as dairy production grew in those warmer states, the gross cost of those subsidies to the taxpayer followed the same growth curve. Subsidies intended to encourage small, family owned farms of 50 – 100 milking cows are now applied to giant, industrial dairy production facilities with over a thousand head of cattle. Some even have multiples of 1000 cows.
This has had the effect of squeezing out the smaller family farms and encouraging huge, industrial farms. Milk prices have stayed low(er) as a result but this has put a lot of traditional northern dairy operations out of business.
I’m not a “milk price crusader” or making a complaint about how small family farms were treated. This is a typical, real world example of the long term ramifications of subsidies. More often than not, subsidies meant to encourage a market end up being permanent no matter what the original proposal stated.
China has successfully picked a fight with All its neighbors from North Korea to India. Japan, plus all the south east Asian countries and Australia are pissed off at China now. If China hits Taiwan one 5th of the worlds population will hit back!
The real driver is the environmental impact of the chemicals involved in chip making. State and federal regulations make it almost impossible to build a new chip factory in the USA, or most western countries, because one leak of some of those chemicals can kill hundreds of people and square miles of farm and forest. The technology is safer than it was in the 1990’s but the green environmental fanatics will not believe it. One new plant in the north east took 10 years to get though the green tape to the point of starting its production.
Note: It was an EPA regulation that sent the steel industry to Japan back in the day too.
The transistor went to japan because US manufacturers thought a 90 % failure rate on production was unacceptable even at 3 cents a 1000. The US engineer that knew how to make them, test them, and toss out 9 in 10 went to Tokyo. The 100 transistors that worked paid for the 900 that were scrapped.
So true. Whether intended or not, the oft-heard comment, “It’s just too expensive to make that here,” seems to assume an immutable force of nature. Behind nearly every industry no longer functioning in the United States lurks the high cost of government and its horde of bureaucrats who justify the permanence of their jobs by forcing us to lose ours.
Taiwan is a tricky issue for a lot of reasons. Not the least of which is the fact that East Asia has been a political hotspot literally for centuries. I could write an entire thesis on that and East Asia isn’t even my area of expertise. So …
Stability in that region is imperative. Right now, with the globally recognized national boundaries (note, not claimed boundaries, China is trying to claim things that do not belong to it, North Korea claims it owns South Korea, etc.) where they are we see about the most stability that has existed in that region for a very long time.
That should be our argument in front of the United Nations. Right now, the way things are, no East Asian nation is suffering unduly except for political faults of their own doing. With global markets in raw materials and food supplies the incentive is for nations to cooperate in trade and to maintain a semblance of political good will.
If China wants to militarily re-absorb Taiwan by force, we should defend Taiwan. We should defend Taiwan because of our promises. We should defend Taiwan because it is a free enterprise bastion in East Asia. We should defend Taiwan because China would be an obvious aggressor destabilizing peace in the region. There are more reasons to defend Taiwan and all of them make good, sound political sense.
The problem is that “good, sound political sense” thing. We can’t even seem to achieve that here in the U.S. Lots of different viewpoints mean lots of opposing politics, that’s just life. This is nothing new, the same problem has existed in one form or another throughout human history. Using “good, sound political sense” for a reason to defend Taiwan has its own pitfalls.
What we need to do is defend Taiwan and say we’re going to do so because of Taiwan’s role in providing semiconductor technology to the world. The world needs semiconductors as much as it needs the energy to power them. It is an existential concern that every POS anti-American Leftist elitist in the United States can understand when threatened with the loss of those gadgets they refuse to give up.
Those far Left elitists are welcome say they oppose American involvement in military belligerency in defense of Taiwan. As long as they talk and do not take meaningful action it really makes no difference.
Declaring that Taiwan is an essential American and global interest because of semiconductors is also a good way to telegraph our intentions and it’s something that the world can understand too. No nation in the industrial world wants to see China take Taiwan and thereby control a significant portion of the semiconductor industry. We should be quietly working with our allies to get that point across firmly.
Semiconductors make the perfect casus belli, the most realistic and understandable reason to deny China’s military adventurism towards Taiwan. It’s a hill we can stand on. Admittedly it is a stop-gap measure because the situation with semiconductors is fluid but international policy is often a matter of expediency in the moment anyway.
With Russians you play chess, the object being to take the opposing king. With Chinese you play 围棋 (“Weiqi” or more commonly “Go“) where the object is to take territory. We need to deny China’s ambitions to take territory and semiconductors are a very useful piece on the board. We should use it.
Taiwan- we should not let that go- yet the US has ignored Taiwan to a fault. for the next two years the US Navy will be reduced in capacity and with the Biden Administration practices permeating the force there is a real possibility of China making a move. You lose Taiwan it is not “just Chips” it is the first chain of the losses in the south china sea.
South Korea will go, Vietnam will go , the Philippians will go (all without a shot) – eventually Japan and Australia will be the only bulwarks in the region.
we do not do our country good by looking toward Russia and ignoring China
I think part of this is because we’ve not stood up to China on several issues surrounding our allies that they’re feeling empowered to go against Taiwan now. There was the Scarborough Shoals incident during the Obama administration where we negotiated a deal, Philippines followed our deal and left, but China did not, and instead of enforcing the deal Obama just flaked out.
Between that and the Hong Kong security law, that was like the Rhineland takeover to Nazi Germany. A small victory that emboldened them to start pushing more aggressively elsewhere. Now we need to start pushing back before they get their Czechoslovakia, so that we prevent their Poland and France pushes. That means pushing back not only on an invasion of Taiwan, but of their takeovers of fishing areas in the seas nearby, their invasions against India, and so forth. We’ve seen how letting them take territory after territory goes. Lets not do that again.
(Also, New Zealand is also basically on China’s side already. If Taiwan goes, New Zealand and all of the islands that are linked to them will go over to China’s side in an instant. Taiwan really is kind of the last piece holding our part of Asia together. That’s why Japan has said that China taking over Taiwan would be considered an existential threat to Japan, and we should consider it much the same.)
Fabs from the last 20 years are still useful because there’s a ton of kinds of chips that are still useful and can still be made on the older fabs. Microcontrollers? 180nm and higher’s probably still fine for many of those. Car vision systems? Probably 14nm’s still fine for that. Car ECMs? 180nm and even higher is likely fine for that. Satellite control systems? You want even higher for those because the smaller lithographies are much more sensitive to cosmic rays. A quick survey of the fabs in operation show that there’s some stuff up to even 5000nm that is still in operation.
The chips that have the heaviest reliance on smaller lithographies are AMD, Apple, Intel, Samsung, Qualcomm, and Nvidia’s high performance chips. The majority of Phone, laptop, and desktop CPUs and GPUs are made by those companies.
The ones with the most exposure to the Taiwan risk is AMD, Apple, and Qualcomm. Samsung and Nvidia are now mostly in South Korea for their chips, Intel’s fabs are all over the world. South Korea is an interesting risk as well, it’s less likely that China will invade it, and more likely that they’ll just keep subverting their government and taking it over from the inside.
We really need to start making stuff here again.
We still make tons of stuff here, I don’t think manufacturing in the US has ever just completely tanked. It’s just that we’re not growing our manufacturing as fast as the rest of the world is, and the stuff we make isn’t always the finished product you buy at walmart or amazon. One good example is a little company called Microchip. They have 3 fabs in the US, and you probably own several of the chips made by them in random devices you own. Things like car keyfobs, and TV remote controls are places where they have had a huge market. But it’s not the finished product you hold in your hand, but components that go into it that. They get by just fine on 130-500nm, because their products don’t need a huge amount of horsepower to get the job done.
The labor intensive stuff has left for cheap countries, and what we have is a lot of capital intensive but automate-able that require less labor products. Cutting edge semiconductors tend to be both labor and capital intensive.
So we PARTIALLY make tons of stuff here.