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“An epic account of the decades-long battle to control what has emerged as the world’s most critical resource—microchip technology—with the United States and China increasingly in conflict. You may be surprised to learn that microchips are the new oil—the scarce resource on which the modern world depends. Today, military, economic, and geopolitical power are built on a foundation of computer chips. Virtually everything—from missiles to microwaves, smartphones to the stock market—runs on chips. Until recently, America designed and built the fastest chips and maintained its lead as the #1 superpower. Now, America’s edge is slipping, undermined by competitors in Taiwan, Korea, Europe, and, above all, China. Today, as Chip War reveals, China, which spends more money each year importing chips than it spends importing oil, is pouring billions into a chip-building initiative to catch up to the US. At stake is America’s military superiority and economic prosperity. Economic historian Chris Miller explains how the semiconductor came to play a critical role in modern life and how the U.S. become dominant in chip design and manufacturing and applied this technology to military systems. America’s victory in the Cold War and its global military dominance stems from its ability to harness computing power more effectively than any other power. But here, too, China is catching up, with its chip-building ambitions and military modernization going hand in hand. America has let key components of the chip-building process slip out of its grasp, contributing not only to a worldwide chip shortage but also a new Cold War with a superpower adversary that is desperate to bridge the gap. Illuminating, timely, and fascinating, Chip War shows that, to make sense of the current state of politics, economics, and technology, we must first understand the vital role played by chips”—Amazon.

Highlights

Introduction (Page 0)

People’s Liberation Army announced a retaliatory series of live-fire exercises around Taiwan, practicing what one Beijing-controlled newspaper called a “reunification-by-force operation.” (Page 0)

U.S. Commerce Department regulation called the Entity List, which limits the transfer of American technology abroad. (Page 0)

U.S. government was dramatically tightening the rules governing computer chips, which had become ubiquitous in both military systems and consumer goods. (Page 0)

The target was Huawei, China’s tech giant, which sells smartphones, telecom equipment, cloud computing services, and other advanced technologies. (Page 0)

The U.S. feared that Huawei’s products were now priced so attractively, partly owing to Chinese government subsidies, that they’d shortly form the backbone of next-generation telecom networks. (Page 0)

The United States still has a stranglehold on the silicon chips that gave Silicon Valley its name, though its position has weakened dangerously. China now spends more money each year importing chips than it spends on oil. (Page 0)

Beijing, however, is more worried about a blockade measured in bytes rather than barrels. China is devoting its best minds and billions of dollars to developing its own semiconductor technology in a bid to free itself from America’s chip choke. (Page 0)

If Beijing succeeds, it will remake the global economy and reset the balance of military power. World War II was decided by steel and aluminum, and followed shortly thereafter by the Cold War, which was defined by atomic weapons. The rivalry between the United States and China may well be determined by computing power. (Page 0)

At the core of computing is the need for many millions of 1s and 0s. The entire digital universe consists of these two numbers. Every button on your iPhone, every email, photograph, and YouTube video—all of these are coded, ultimately, in vast strings of 1s and 0s. But these numbers don’t actually exist. They’re expressions of electrical currents, which are either on (1) or off (0). A chip is a grid of millions or billions of transistors, tiny electrical switches that flip on and off to process these digits, to remember them, and to convert real world sensations like images, sound, and radio waves into millions and millions of 1s and 0s. (Page 0)

Today, Apple’s most advanced processors—which are arguably the world’s most advanced semiconductors—can only be produced by a single company in a single building, the most expensive factory in human history, which on the morning of August 18, 2020, was only a couple dozen miles off the USS Mustin’s starboard bow. (Page 0)

It was only sixty years ago that the number of transistors on a cutting-edge chip wasn’t 11.8 billion, but 4. (Page 0)

In 1970, the second company Moore founded, Intel, unveiled a memory chip that could remember 1,024 pieces of information (“ bits”). It cost around $ 20, roughly two cents per bit. Today, $ 20 can buy a thumb drive that can remember well over a billion bits. (Page 0)

“Big tech” wouldn’t exist if the cost of processing and remembering 1s and 0s hadn’t fallen by a billionfold in the past half century. (Page 0)

The making of Moore’s Law is as much a story of manufacturing experts, supply chain specialists, and marketing managers as it is about physicists or electrical engineers. (Page 0)

Today’s semiconductor supply chain requires components from many cities and countries, but almost every chip made still has a Silicon Valley connection or is produced with tools designed and built in California. America’s vast reserve of scientific expertise, nurtured by government research funding and strengthened by the ability to poach the best scientists from other countries, has provided the core knowledge driving technological advances forward. The country’s network of venture capital firms and its stock markets have provided the startup capital new firms need to grow—and have ruthlessly forced out failing companies. Meanwhile, the world’s largest consumer market in the U.S. has driven the growth that’s funded decades of R& D on new types of chips. (Page 0)

Asian governments, in Taiwan, South Korea, and Japan, have elbowed their way into the chip industry by subsidizing firms, funding training programs, keeping their exchange rates undervalued, and imposing tariffs on imported chips. (Page 0)

Most of the world’s GDP is produced with devices that rely on semiconductors. For a product that didn’t exist seventy-five years ago, this is an extraordinary ascent. (Page 0)

Unlike oil, which can be bought from many countries, our production of computing power depends fundamentally on a series of choke points: tools, chemicals, and software that often are produced by a handful of companies—and sometimes only by one. No other facet of the economy is so dependent on so few firms. Chips from Taiwan provide 37 percent of the world’s new computing power each year. Two Korean companies produce 44 percent of the world’s memory chips. The Dutch company ASML builds 100 percent of the world’s extreme ultraviolet lithography machines, without which cutting-edge chips are simply impossible to make. OPEC’s 40 percent share of world oil production looks unimpressive by comparison. (Page 0)

The global network of companies that annually produces a trillion chips at nanometer scale is a triumph of efficiency. It’s also a staggering vulnerability. The disruptions of the pandemic provide just a glimpse of what a single well-placed earthquake could do to the global economy. Taiwan sits atop a fault line that as recently as 1999 produced an earthquake measuring 7.3 on the Richter scale. Thankfully, this only knocked chip production offline for a couple of days. But it’s only a matter of time before a stronger quake strikes Taiwan. A devastating quake could also hit Japan, an earthquake-prone country that produces 17 percent of the world’s chips, or Silicon Valley, which today produces few chips but builds crucial chipmaking machinery in facilities sitting atop the San Andreas Fault. (Page 0)

concentration of advanced chip manufacturing in Taiwan, South Korea, and elsewhere in East Asia isn’t an accident. A series of deliberate decisions by government officials and corporate executives created the far-flung supply chains we rely on today. Asia’s vast pool of cheap labor attracted chipmakers looking for low-cost factory workers. The region’s governments and corporations used offshored chip assembly facilities to learn about, and eventually domesticate, more advanced technologies. Washington’s foreign policy strategists embraced complex semiconductor supply chains as a tool to bind Asia to an American-led world. Capitalism’s inexorable demand for economic efficiency drove a constant push for cost cuts and corporate consolidation. The steady tempo of technological innovation that underwrote Moore’s Law required ever more complex materials, machinery, and processes that could only be supplied or funded via global markets. (Page 0)

PART I COLD WAR CHIPS (Page 1)

CHAPTER 1 From Steel to Silicon (Page 3)

Akio Morita, (Page 3)

Morris Chang’s (Page 3)

Andy Grove (Page 4)

Endless tank columns; waves of airplanes; thousands of tons of bombs dropped from the skies; convoys of ships delivering trucks, combat vehicles, petroleum products, locomotives, rail cars, artillery, ammunition, coal, and steel—World War II was a conflict of industrial attrition. The United States wanted it that way: an industrial war was a struggle America would win. In Washington, the economists at the War Production Board measured success in terms of copper and iron, rubber and oil, aluminum and tin as America converted manufacturing might into military power. The United States built more tanks than all the Axis powers combined, more ships, more planes, and twice the Axis production of artillery and machine guns. (Page 4)

World War II’s outcome was determined by industrial output, but it was clear already that new technologies were transforming military power. The great powers had manufactured planes and tanks by the thousands, but they’d also built research labs that developed new devices like rockets and radars. The two atomic bombs that destroyed Hiroshima and Nagasaki brought forth much speculation that a nascent Atomic Age might replace an era defined by coal and steel. (Page 5)

Of course, the idea of using devices to compute wasn’t new. People have flipped their fingers up and down since Homo sapiens first learned to count. The ancient Babylonians invented the abacus to manipulate large numbers, and for centuries people multiplied and divided by moving wooden beads back and forth across these wooden grids. During the late 1800s and early 1900s, the growth of big bureaucracies in government and business required armies of human “computers,” office workers armed with pen, paper, and occasionally simple mechanical calculators—gearboxes that could add, subtract, multiply, divide, and calculate basic square roots. (Page 5)

America’s Works Progress Administration, looking to employ jobless office workers, set up the Mathematical Tables Project. (Page 6)

person looking to use the results of the Mathematical Tables Project had to flip through the pages of one of the twenty-eight volumes to find the result of a specific logarithm or exponent. (Page 6)

war accelerated the hunt for computing power. Several countries’ air forces developed mechanical bombsights to help aviators hit their targets. Bomber crews entered the wind speed and altitude by turning knobs, which moved metal levers that adjusted glass mirrors. These knobs and levers “computed” altitudes and angles more exactly than any pilot could, focusing the sight as the plane homed in on its target. However, the limitations were obvious. Such bombsights only considered a few inputs and provided a single output: when to drop the bomb. In perfect test conditions, America’s bombsights were more accurate than pilots’ guesswork. When deployed in the skies above Germany, though, only 20 percent of American bombs fell within one thousand feet of their target. The war was decided by the quantity of bombs dropped and artillery shells fired, not by the knobs on the mechanical computers that tried and usually failed to guide them. (Page 6)

More accuracy required more calculations. Engineers eventually began replacing mechanical gears in early computers with electrical charges. Early electric computers used the vacuum tube, a lightbulb-like metal filament enclosed in glass. The electric current running through the tube could be switched on and off, performing a function not unlike an abacus bead moving back and forth across a wooden rod. A tube turned on was coded as a 1 while a vacuum tube turned off was a 0. These two digits could produce any number using a system of binary counting—and therefore could theoretically execute many types of computation. (Page 7)

state-of-the-art computer called ENIAC, built for the U.S. Army at the University of Pennsylvania in 1945 to calculate artillery trajectories, had eighteen thousand vacuum tubes. On average, one tube malfunctioned every two days, bringing the entire machine to a halt and sending technicians scrambling to find and replace the broken part. ENIAC could multiply hundreds of numbers per second, faster than any mathematician. Yet it took up an entire room because each of its eighteen thousand tubes was the size of a fist. Clearly, vacuum tube technology was too cumbersome, too slow, and too unreliable. So long as computers were moth-ridden monstrosities, they’d only be useful for niche applications like code breaking, unless scientists could find a smaller, faster, cheaper switch. (Page 7)

CHAPTER 2 The Switch (Page 9)

William Shockley had long assumed that if a better “switch” was to be found, it would be with the help of a type of material called semiconductors. (Page 9)

Semiconductors, Shockley’s area of specialization, are a unique class of materials. Most materials either let electric current flow freely (like copper wires) or block current (like glass). Semiconductors are different. On their own, semiconductor materials like silicon and germanium are like glass, conducting hardly any electricity at all. But when certain materials are added and an electric field is applied, current can begin to flow. Adding phosphorous or antimony to semiconducting materials like silicon or germanium, for example, lets a negative current flow. (Page 9)

Until the late 1940s, despite all the physics brainpower accumulated at Bell Labs, no one could explain why slabs of semiconductor materials acted in such puzzling ways. (Page 10)

Where Shockley was proud and obnoxious, his colleagues Walter Brattain, a brilliant experimental physicist from a cattle ranch in rural Washington, and John Bardeen, a Princeton-trained scientist who’d later become the only person to win two Nobel Prizes in physics, were modest and mild-mannered. (Page 10)

By January 1948, he’d conceptualized a new type of transistor, made up of three chunks of semiconductor material. The outer two chunks would have a surplus of electrons; the piece sandwiched between them would have a deficit. If a tiny current was applied to the middle layer in the sandwich, it set a much larger current flowing across the entire device. (Page 11)

He could turn the larger current on and off by manipulating the small current applied to the middle of this transistor sandwich. On, off. On, off. Shockley had designed a switch. (Page 11)

The New York Times buried the story on page 46. Time magazine did better, reporting the invention under the headline “Little Brain Cell.” (Page 12)

CHAPTER 3 Noyce, Kilby, and the Integrated Circuit (Page 13)

Brattain and Bardeen had little interest in business or mass production. They were researchers at heart, and after winning the Nobel, they continued their careers teaching and experimenting. Shockley’s ambitions, by contrast, only grew. He wanted not only to be famous but also to be rich. (Page 13)

In 1955, he established Shockley Semiconductor in the San Francisco suburb of Mountain View, California, just down the street from Palo Alto, where his aging mother still lived. (Page 13)

Shockley assumed that there’d be a market for transistors, at least for replacing vacuum tubes in existing electronics. (Page 13)

Shockley would soon win the Nobel Prize for his theorizing about semiconductors, but the question of how to make transistors practical and useful was an engineering dilemma, not a matter of theoretical physics. (Page 14)

Jack Kilby, an engineer at Texas Instruments, spent the summer of 1958 in his Texas lab fixated on finding a way to simplify the complexity created by all the wires that systems with transistors required. (Page 14)

Multiple transistors could be built into a single slab of silicon or germanium. Kilby called his invention an “integrated circuit,” but it became known colloquially as a “chip,” because each integrated circuit was made from a piece of silicon “chipped” off a circular silicon wafer. (Page 15)

eight engineers left Shockley Semiconductor and decided to found their own company, Fairchild Semiconductor, with seed funding from an East Coast millionaire. (Page 15)

The eight defectors from Shockley’s lab are widely credited with founding Silicon Valley. (Page 15)

Eugene Kleiner, would go on to found Kleiner Perkins, (Page 15)

Gordon Moore, who went on to run Fairchild’s R& D process, would later coin the concept of Moore’s Law (Page 15)

Most important was Bob Noyce, the leader of the “traitorous eight,” (Page 15)

Jean Hoerni, (Page 16)

He devised a method of fabricating all the parts of a transistor by depositing a layer of protective silicon dioxide on top of a slab of silicon, then etching holes where needed and depositing additional materials. This method of depositing protective layers avoided exposing materials to air and impurities that could cause defects. It was a major advance in reliability. (Page 16)

Noyce realized Hoerni’s “planar method” could be used to produce multiple transistors on the same piece of silicon. Where Kilby, unbeknownst to Noyce, had produced a mesa transistor on a germanium base and then connected it with wires, Noyce used Hoerni’s planar process to build multiple transistors on the same chip. (Page 16)

Noyce’s version had no freestanding wires at all. The transistors were built into a single block of material. Soon, the “integrated circuits” that Kilby and Noyce had developed would become known as “semiconductors” or, more simply, “chips.” (Page 16)

CHAPTER 4 Liftoff (Page 19)

Across America, the Soviet space program caused a crisis of confidence. Control of the cosmos would have serious military ramifications. (Page 19)

Bob Noyce suddenly had a market for his integrated circuits: rockets. (Page 19)

By November 1962, Charles Stark Draper, the famed engineer who ran the MIT lab, had decided to bet on Fairchild chips for the Apollo program, calculating that a computer using Noyce’s integrated circuits would be one-third smaller and lighter than a computer based on discrete transistors. (Page 20)

MIT considered the Apollo guidance computer one of its proudest accomplishments, but Bob Noyce knew that it was his chips that made the Apollo computer tick. (Page 20)

NASA’s trust in integrated circuits to guide astronauts to the moon was an important stamp of approval. Fairchild’s Micrologic chips were no longer an untested technology; they were used in the most unforgiving and rugged environment: outer space. (Page 21)

Winning the Minuteman II contract transformed TI’s chip business. TI’s integrated circuit sales had previously been measured in the dozens, but the firm was soon selling them by the thousands amid fear of an American “missile gap” with the Soviet Union. Within a year, TI’s shipments to the Air Force accounted for 60 percent of all dollars spent buying chips to date. By the end of 1964, Texas Instruments had supplied one hundred thousand integrated circuits to the Minuteman program. By 1965, 20 percent of all integrated circuits sold that year went to the Minuteman program. Pat Haggerty’s bet on selling chips to the military was paying off. The only question was whether TI could learn how to mass-produce them. (Page 22)

CHAPTER 5 Mortars and Mass Production (Page 23)

Lathrop called the process photolithography—printing with light. He produced transistors much smaller than had previously been possible, measuring only a tenth of an inch in diameter, with features as small as 0.0005 inches in height. Photolithography made it possible to imagine mass-producing tiny transistors. Lathrop applied for a patent on the technique in 1957. With the Army band playing, the military gave him a medal for his work and a $ 25,000 cash bonus, which he used to buy his family a Nash Rambler station wagon. (Page 24)

Implementing Lathrop’s lithography process at Texas Instruments required new materials and new processes. Kodak’s photoresist chemicals were insufficiently pure for mass production, so TI bought its own centrifuges and reprocessed the chemicals that Kodak supplied. Lathrop took trains across the country in search of “masks” that could be used to project precise patterns of light onto photoresist-covered slabs of semiconductor material to carve circuits. He eventually concluded that no existing mask company had sufficient precision, so TI decided to make masks itself, too. The slabs of silicon that Kilby’s integrated circuits required had to be ultra-pure, beyond what any company sold. TI therefore also began producing its own silicon wafers. (Page 24)

Morris Chang arrived at TI in 1958, the same year as Jay Lathrop, and was put in charge of a production line of transistors. (Page 25)

The Nobel Prize for inventing the transistor went to Shockley, Bardeen, and Brattain. Jack Kilby later won a Nobel for creating the first integrated circuit; had Bob Noyce not died at the age of sixty-two, he’d have shared the prize with Kilby. (Page 27)

These inventions were crucial, but science alone wasn’t enough to build the chip industry. The spread of semiconductors was enabled as much by clever manufacturing techniques as academic physics. Universities like MIT and Stanford played a crucial role in developing knowledge about semiconductors, but the chip industry only took off because graduates of these institutions spent years tweaking production processes to make mass manufacturing possible. It was engineering and intuition, as much as scientific theorizing, that turned a Bell Labs patent into a world-changing industry. (Page 28)

Armed with these capabilities, Fairchild and TI entered the mid-1960s with a new challenge: turning chips into a mass market product. (Page 28)

CHAPTER 6 “I… WANT… TO… GET… RICH” (Page 29)

By the mid-1960s, the U.S. military was deploying chips in weaponry of all types, from satellites to sonar, torpedoes to telemetry systems. (Page 29)

Noyce had experienced government-directed R& D while fresh out of graduate school when he worked for Philco, an East Coast radio manufacturer with a big defense unit. “The direction of the research was being determined by people less competent,” Noyce recalled, complaining about the time he wasted writing progress reports for the military. Now that he was running Fairchild, a company seeded by a trust-fund heir, he had flexibility to treat the military as a customer rather than a boss. He chose to target much of Fairchild’s R& D not at the military, but at mass market products. (Page 29)

He predicted that every year for at least the next decade, Fairchild would double the number of components that could fit on a silicon chip. If so, by 1975, integrated circuits would have sixty-five thousand tiny transistors carved into them, creating not only more computing power but also lower prices per transistor. As costs fell, the number of users would grow. This forecast of exponential growth in computing power soon came to be known as Moore’s Law. It was the greatest technological prediction of the century. (Page 31)

By 1968, the computer industry was buying as many chips as the military. Fairchild chips served 80 percent of this computer market. Bob Noyce’s price cuts had paid off, opening a new market for civilian computers that would drive chip sales for decades to come. Moore later argued that Noyce’s price cuts were as big an innovation as the technology inside Fairchild’s integrated circuits. (Page 32)

Fairchild, however, was still owned by an East Coast multimillionaire who paid his employees well but refused to give them stock options, viewing the idea of giving away equity as a form of “creeping socialism.” Eventually, even Noyce, one of Fairchild’s cofounders, began wondering whether he had a future at the firm. Soon everyone began looking for the exit. The reason was obvious. Alongside new scientific discoveries and new manufacturing processes, this ability to make a financial killing was the fundamental force driving forward Moore’s Law. As one of Fairchild’s employees put it in the exit questionnaire he filled out when leaving the company: “I… WANT… TO… GET… RICH.” (Page 32)

PART II THE CIRCUITRY OF THE AMERICAN WORLD (Page 33)

CHAPTER 7 Soviet Silicon Valley (Page 35)

America’s decision to let Soviet scientists like Trutko study semiconductors at Stanford was surprising, given U.S. fears that the Soviet Union was catching up in science and technology. Yet every country’s electronics industry was increasingly oriented toward Silicon Valley, which so totally set the standard and pace of innovation that the rest of the world had no choice but to follow—even America’s adversaries. The Soviets didn’t pay Shockley royalties, but they understood the value of semiconductors, translating Shockley’s textbook into Russian just two years after it was published. As early as 1956, America’s spies had been ordered to acquire Soviet semiconductor devices to test their quality and track their improvements. A CIA report in 1959 found that America was only two to four years ahead of the Soviets in quality and quantity of transistors produced. At least several of the early Soviet exchange students were KGB agents—suspected at the time, but not confirmed until decades later—forging an intimate connection between student exchanges and Soviet defense industrial goals. (Page 35)

Beginning in the late 1950s, the USSR established new semiconductor facilities across the country and assigned its smartest scientists to build this new industry. (Page 36)

Yuri Osokin (Page 36)

Joel Barr (Page 37)

Alfred Sarant, (Page 37)

In the 1930s, Barr and Sarant were integrated into an espionage ring led by Julius Rosenberg, the infamous Cold War spy. During the 1940s, Barr and Sarant worked on classified radars and other military systems at Western Electric and Sperry Gyroscope, two leading American technology firms. Unlike others in the Rosenberg ring, Barr and Sarant didn’t possess nuclear weapons secrets, but they had gained intimate knowledge about the electronics in new weapons systems. In the late 1940s, as the FBI began unraveling the KGB’s spy networks in the U.S., Rosenberg was tried and sentenced to death by electrocution alongside his wife, Ethel. Before the FBI could catch them, Sarant and Barr fled the country, eventually reaching the Soviet Union. (Page 37)

CHAPTER 8 “Copy It” (Page 41)

Boris Malin returned from a year studying in Pennsylvania with a small device in his luggage—a Texas Instruments SN-51, one of the first integrated circuits sold in the United States. (Page 41)

Shokin called Malin and a group of other engineers into his office, placed the chip under his microscope, and peered through the lens. “Copy it,” he ordered them, “one-for-one, without any deviations. I’ll give you three months.” (Page 41)

Soviet scientists reacted angrily to the suggestion they were simply copying foreign advances. Their scientific understanding was as advanced as that of America’s chemists and physicists. Soviet exchange students in the U.S. reported learning little from lectures by William Shockley that they couldn’t have studied in Moscow. (Page 41)

USSR had some of the world’s leading theoretical physicists. (Page 41)

Shokin’s “copy it” strategy was fundamentally flawed, however. Copying worked in building nuclear weapons, because the U.S. and the USSR built only tens of thousands of nukes over the entire Cold War. In the U.S., however, TI and Fairchild were already learning how to mass-produce chips. The key to scaling production was reliability, a challenge that American chipmakers like Morris Chang and Andy Grove fixated on during the 1960s. Unlike their Soviet counterparts, they could draw on the expertise of other companies making advanced optics, chemicals, purified materials, and other production machinery. If no American companies could help, Fairchild and TI could turn to Germany, France, or Britain, each of which had advanced industries of their own. (Page 42)

The USSR excelled in quantity but not in quality or purity, both of which were crucial to high-volume chipmaking. (Page 42)

Every step of the process of making chips involved specialized knowledge that was rarely shared outside of a specific company. This type of know-how was often not even written down. Soviet spies were among the best in the business, but the semiconductor production process required more details and knowledge than even the most capable agent could steal. (Page 43)

the cutting edge was constantly changing, per the rate set out in Moore’s Law. Even if the Soviets managed to copy a design, acquire the materials and machinery, and replicate the production process, this took time. (Page 43)

no other sector in which stealing last year’s design was such a hopeless strategy. (Page 43)

CHAPTER 9 The Transistor Salesman (Page 45)

When Japanese prime minister Hayato Ikeda met French president Charles de Gaulle amid the splendor of the Elysée Palace in November 1962, he brought a small gift for his host: a Sony transistor radio. De Gaulle was formalistic and ceremonious, a tradition-minded military man who saw himself as the incarnation of French grandeur. Ikeda, by contrast, thought his country’s voters were straightforwardly materialistic, and promised to double their incomes within a decade. Japan was nothing but an “economic power,” de Gaulle declared, huffing to an aide after the meeting that Ikeda behaved like a “transistor salesman.” But it wouldn’t be long before all the world was looking enviously at Japan, because the country’s success selling semiconductors would make it far wealthier and more powerful than de Gaulle ever imagined. (Page 45)

When World War II ended, some Americans had envisioned stripping Japan of its high-tech industries as punishment for starting a brutal war. Yet within a couple years of Japan’s surrender, defense officials in Washington adopted an official policy that “a strong Japan is a better risk than a weak Japan.” Apart from a short-lived effort to shut down Japan’s research into nuclear physics, the U.S. government supported Japan’s rebirth as a technological and scientific power. The challenge was to help Japan rebuild its economy while binding it to an American-led system. Making Japan a transistor salesman was core to America’s Cold War strategy. (Page 45)

Sony, (Page 47)

Sony had the benefit of cheaper wages in Japan, but its business model was ultimately about innovation, product design, and marketing. Morita’s “license it” strategy couldn’t have been more different from the “copy it” tactics of Soviet Minister Shokin. (Page 48)

If only TI had found a way to market its own branded devices earlier, Haggerty later lamented, TI “would have been the Sony of consumer electronics.” (Page 49)

The semiconductor symbiosis that emerged between America and Japan involved a complex balancing act. Each country relied on the other for supplies and for customers. By 1964, Japan had overtaken the U.S. in production of discrete transistors, while American firms produced the most advanced chips. U.S. firms built the best computers, while electronics manufacturers like Sony and Sharp produced consumer goods that drove semiconductor consumption. Japan’s exports of electronics—a mix of semiconductors and products that relied on them—boomed from $ 600 million in 1965 to $ 60 billion around two decades later. (Page 49)

letting Japan build an electronics industry was part of U.S. Cold War strategy, so, during the 1960s, Washington never put much pressure on Tokyo over the issue. (Page 49)

“Japan is a keystone in America’s Pacific policy… If she cannot enter into healthy commercial intercourse with the Western hemisphere and Europe, she will seek economic sustenance elsewhere,” like Communist China or the Soviet Union. U.S. strategy required letting Japan acquire advanced technology and build cutting-edge businesses. “A people with their history won’t be content to make transistor radios,” President Richard Nixon later observed. They had to be allowed, even encouraged, to develop more advanced technology. (Page 49)

Japan won a new seat on the world stage thanks to intrepid electronics entrepreneurs like Morita. Transistor salesman was a position of far more influence than Charles de Gaulle could ever have imagined. (Page 50)

CHAPTER 10 “Transistor Girls” (Page 51)

It was mostly men who designed the earliest semiconductors, and mostly women who assembled them. Moore’s Law predicted the cost of computing power was about to plummet. But making Moore’s vision a reality wasn’t only a question of shrinking the size of each transistor on a chip. It also required a larger and cheaper supply of workers to assemble them. (Page 51)

Charlie Sporck (Page 51)

Many companies wouldn’t have described a strategy of labor relations that culminated in management getting burned in effigy as “competent.” But in Silicon Valley, unions were weak, and Sporck was committed to keeping it that way. He and his colleagues at Fairchild were “dead set” against unions, he declared. (Page 52)

Unlike East Coast electronics firms whose workforces tended to be male-dominated, most of the new chip startups south of San Francisco staffed their assembly lines with women. Women had worked in assembly line jobs in the Santa Clara Valley for decades, first in the fruit canneries that drove the valley’s economy in the 1920s and 1930s, then in the aerospace industry during World War II. Congress’s decision to ease immigration rules in 1965 added many foreign-born women to the valley’s labor pool. (Page 53)

Chip firms hired women because they could be paid lower wages and were less likely than men to demand better working conditions. Production managers also believed women’s smaller hands made them better at assembling and testing finished semiconductors. (Page 53)

Production quality was excellent, because low labor costs meant Fairchild could hire trained engineers to run assembly lines, which would have been prohibitively expensive in California. (Page 54)

Fairchild was the first semiconductor firm to offshore assembly in Asia, but Texas Instruments, Motorola, and others quickly followed. (Page 54)

Within a decade, almost all U.S. chipmakers had foreign assembly facilities. Sporck began looking beyond Hong Kong. The city’s 25-cent hourly wages were only a tenth of American wages but were among the highest in Asia. In the mid-1960s, Taiwanese workers made 19 cents an hour, Malaysians 15 cents, Singaporeans 11 cents, and South Koreans only a dime. (Page 54)

Foreign policy strategists in Washington saw ethnic Chinese workers in cities like Hong Kong, Singapore, and Penang as ripe for Mao Zedong’s Communist subversion. Sporck saw them as a capitalist’s dream. “We had union problems in Silicon Valley,” Sporck noted. “We never had any union problems in the Orient.” (Page 55)

CHAPTER 11 Precision Strike (Page 57)

The early bombing campaigns in Vietnam, like Operation Rolling Thunder, which stretched from 1965 to 1968, dropped over eight hundred thousand tons of bombs, more than was dropped in the Pacific Theater during all of World War II. This firepower had only a marginal impact on North Vietnam’s military, however, because most of the bombs missed their targets. (Page 57)

The Air Force realized it needed to fight smarter. The military had experimented with a variety of techniques for guiding its missiles and bombs, from using remote control to infrared seekers. (Page 57)

The problem with many guided munitions, the military concluded, was the vacuum tubes. The Sparrow III anti-aircraft missiles that U.S. fighters used in the skies over Vietnam relied on vacuum tubes that were hand-soldered. The humid climate of Southeast Asia, the force of takeoff and landings, and the rough-and-tumble of fighter combat caused regular failures. The Sparrow missile’s radar system broke on average once every five to ten hours of use. A postwar study found that only 9.2 percent of Sparrows fired in Vietnam hit their target, while 66 percent malfunctioned, and the rest simply missed. (Page 58)

The intercontinental ballistic missiles that TI had built chips for presented a relatively straightforward guidance challenge. (Page 58)

It was vastly easier to hit Moscow from Montana than it was to hit a truck with a bomb dropped by an F-4 flying at a couple thousand feet. (Page 59)

Davis opened his desk drawer and pulled out a photo of the Thanh Hoa Bridge, a 540-foot-long metallic structure stretching across North Vietnam’s Song Ma river, ringed with air defenses. Word and Davis counted eight hundred pockmarks around the bridge, each caused by an American bomb or rocket that missed its target. Dozens, maybe hundreds more bombs had fallen in the river and left no mark. The bridge was still standing. Could Texas Instruments do anything to help? Davis asked. (Page 59)

He added a small set of wings that could direct the bomb’s flight as it fell from the sky. Finally, he installed a simple laser-guidance system that would control the wings. A small silicon wafer was divided into four quadrants and placed behind a lens. The laser reflecting off the target would shine through the lens onto the silicon. If the bomb veered off course, one quadrant would receive more of the laser’s energy than the others, and circuitry would move the wings to reorient the bomb’s trajectory so that the laser was shining straight through the lens. (Page 60)

Colonel Davis gave Texas Instruments nine months and $ 99,000 to deliver this laser-guided bomb, which, thanks to its simple design, quickly passed the Air Force’s tests. On May 13, 1972, U.S. aircraft dropped twenty-four of the bombs on the Thanh Hoa Bridge, which until that day had been still standing amid hundreds of craters, like a monument to the inaccuracy of mid-century bombing tactics. (Page 60)

simple laser sensor and a couple of transistors had turned a weapon with a zero-for-638 hit ratio into a tool of precision destruction. (Page 60)

The arrival of TI’s Paveway laser-guided bombs coincided with America’s defeat in the war. (Page 60)

When military leaders like General William Westmoreland predicted “combat areas that are under real-or near real-time surveillance” and “automated fire control,” many people heard echoes of the hubris that had dragged America into Vietnam in the first place. Outside a small number of military theorists and electrical engineers, therefore, hardly anyone realized Vietnam had been a successful testing ground for weapons that married microelectronics and explosives in ways that would revolutionize warfare and transform American military power. (Page 60)

CHAPTER 12 Supply Chain Statecraft (Page 63)

In Washington, U.S. strategists feared the coming collapse of American-backed South Vietnam would send shock waves across Asia. Foreign policy strategists perceived ethnic Chinese communities all over the region as ripe for Communist penetration, ready to fall to Communist influence like a cascade of dominoes. Malaysia’s ethnic Chinese minority formed the backbone of that country’s Communist Party, for example. Singapore’s restive working class was majority ethnic Chinese. Beijing was searching for allies—and probing for U.S. weakness. (Page 64)

No one was more worried about the impending Communist victory in Vietnam than the government in Taiwan, which still claimed to rule all of China. The 1960s had been a good decade for Taiwan’s economy but disastrous for its foreign policy. The island’s dictator, Chiang Kai-shek, still dreamed of reconquering the mainland, but the military balance had shifted decisively against him. In 1964, Beijing tested its first atomic weapon. A thermonuclear weapon test shortly followed. Facing a nuclear China, Taiwan needed American security guarantees more than ever. (Page 64)

The more semiconductor plants on the island, and the more economic ties with the United States, the safer Taiwan would be. (Page 65)

Taiwan wasn’t alone in thinking that semiconductor supply chains could provide economic growth and bolster political stability. In 1973, Singapore’s leader Lee Kuan Yew told U.S. president Richard Nixon he was counting on exports to “sop up unemployment” in Singapore. (Page 65)

By the end of the 1970s, American semiconductor firms employed tens of thousands of workers internationally, mostly in Korea, Taiwan, and Southeast Asia. (Page 65)

Semiconductors recast the economies and politics of America’s friends in the region. Cities that had been breeding grounds for political radicalism were transformed by diligent assembly line workers, happy to trade unemployment or subsistence farming for better paying jobs in factories. (Page 66)

From South Korea to Taiwan, Singapore to the Philippines a map of semiconductor assembly facilities looked much like a map of American military bases across Asia. Yet even after the U.S. finally admitted defeat in Vietnam and drew down its military presence in the region, these trans-Pacific supply chains endured. By the end of the 1970s, rather than dominoes falling to Communism, America’s allies in Asia were even more deeply integrated with the U.S. (Page 66)

CHAPTER 13 Intel’s Revolutionaries (Page 67)

“Founders Leave Fairchild; Form Own Electronics Firm.” (Page 67)

At Fairchild, Noyce and Moore were unhappy about their lack of stock options and sick of meddling from the company’s head office in New York. Their dream wasn’t to tear down the established order, but to remake it. (Page 67)

founded Intel, which stood for Integrated Electronics. (Page 67)

In their vision, transistors would become the cheapest product ever produced, but the world would consume trillions and trillions of them. (Page 67)

Two years after its founding, Intel launched its first product, a chip called a dynamic random access memory, or DRAM. (Page 68)

Before the 1970s, computers generally “remembered” data using not silicon chips but a device called a magnetic core, a matrix of tiny metal rings strung together by a grid of wires. (Page 68)

As demand for computer memory exploded, magnetic cores couldn’t keep up. (Page 68)

In the 1960s, engineers like IBM’s Robert Dennard began envisioning integrated circuits that could “remember” more efficiently than little metal rings. (Page 68)

Handheld calculators were the iPhones of the 1970s, a product that used the most advanced computing technologies to drive down price and put a powerful piece of plastic in everyone’s pocket. (Page 69)

no one was building memory chips more powerful than Intel’s. (Page 70)

Intel wasn’t the first company to think about producing a generalized logic chip. A defense contractor had produced a chip much like Intel’s for the computer on the F-14 fighter jet. However, that chip’s existence was kept secret until the 1990s. Intel, however, launched a chip called the 4004 and described it as the world’s first microprocessor—“ a micro-programmable computer on a chip,” as the company’s advertising campaign put it. It could be used in many different types of devices and set off a revolution in computing. (Page 70)

“In the next ten years,” Mead predicted in 1972, “every facet of our society will be automated to some degree.” (Page 71)

“In the past 200 years we have improved our ability to manufacture goods and move people by a factor of 100,” Mead calculated. “But in the last 20 years there has been an increase of 1,000,000 to 10,000,000 in the rate at which we process and retrieve information.” (Page 71)

CHAPTER 14 The Pentagon’s Offset Strategy (Page 73)

William Perry (Page 73)

For a Silicon Valley entrepreneur like Perry, serving as undersecretary of defense for research and engineering was, he said, the “best job in the world.” (Page 73)

set off on his own, founding his own firm to design surveillance devices for the military. To get the processing power he needed, Perry bought chips from his singing partner, Intel’s CEO. (Page 74)

In sunny Silicon Valley it felt like “everything was new and anything was possible,” Perry would later remember. Viewed from the Pentagon upon his arrival in 1977, the world looked far darker. The U.S. had just lost the Vietnam War. Worse, the Soviet Union had almost completely eroded America’s military advantage, warned Pentagon analysts like Andrew Marshall. (Page 74)

Washington had been shocked by Sputnik and the Cuban Missile Crisis, it wasn’t until the early 1970s that the Soviets had built a big enough stockpile of intercontinental ballistic missiles to guarantee that enough of their atomic weapons could survive a U.S. nuclear strike to retaliate with a devastating atomic barrage of their own. (Page 74)

More worrisome, the Soviet army had far more tanks and planes, which were already deployed on potential battlegrounds in Europe. The U.S.—facing pressure at home to cut military spending—simply couldn’t keep up. (Page 75)

Strategists like Marshall knew the only answer to the Soviet quantitative advantage was to produce better quality weapons. (Page 75)

“A good strategy would be to develop that lead and to shift concepts of warfare in ways that capitalize on it,” he wrote. (Page 75)

Many of the weapons systems used in the Vietnam War still relied on vacuum tubes, but chips in the newest handheld calculators offered vastly more computing power than an old Sparrow III missile. Put those chips in missiles, Perry wagered, and America’s military would jump ahead of the Soviets. (Page 75)

Guided missiles would not only “offset” the USSR’s quantitative advantage, he reasoned. They’d force the Soviets to undertake a ruinously expensive anti-missile effort in response. Perry calculated Moscow would need five to ten years and $ 30 to $ 50 billion to defend against the three thousand American cruise missiles that the Pentagon planned to field—and even then, the Soviets could only destroy half the incoming missiles if they were all fired at the USSR. (Page 75)

Working with Jimmy Carter’s secretary of defense, Harold Brown, Perry and Marshall pushed the Pentagon to invest heavily in new technologies: a new generation of guided missiles that used integrated circuits, not vacuum tubes; a constellation of satellites that could beam location coordinates to any point on earth; and—most important—a new program to jump-start the next generation of chips, to ensure that the U.S. kept its technological edge. (Page 75)

Sensors and communications also began to leap forward with the application of miniaturized computing power. Detecting enemy submarines, for example, was largely a problem of developing accurate sensors and running the information they gathered through ever-more-complicated algorithms. With enough processing power, the military’s acoustic experts wagered, it should be possible to distinguish a whale from a submarine from many miles away. (Page 76)

to see what would happen if all these new sensors, guided weapons, and communications devices were integrated. Called “Assault Breaker,” (Page 76)

Perry grumbled that his congressional critics were “Luddites,” who simply didn’t understand how rapidly chips were changing. (Page 77)

Only consumer markets had the volume to fund the vast R& D programs that Moore’s Law required. (Page 78)

In the early 1960s, it had been possible to claim the Pentagon had created Silicon Valley. In the decade since, the tables had turned. The U.S. military lost the war in Vietnam, but the chip industry won the peace that followed, binding the rest of Asia, from Singapore to Taiwan to Japan, more closely to the U.S. via rapidly expanding investment links and supply chains. The entire world was more tightly connected to America’s innovation infrastructure, and even adversaries like the USSR spent their time copying U.S. chips and chipmaking tools. Meanwhile, the chip industry had catalyzed an array of new weapons systems that were remaking how the U.S. military would fight future wars. American power was being recast. Now the entire nation depended on Silicon Valley’s success. (Page 78)

PART III LEADERSHIP LOST? (Page 79)

CHAPTER 15 “That Competition Is Tough” (Page 81)

The 1980s were a hellish decade for the entire U.S. semiconductor sector. (Page 81)

Silicon Valley thought it sat atop the world’s tech industry, but after two decades of rapid growth it now faced an existential crisis: cutthroat competition from Japan. (Page 81)

The worst U.S. firm produced chips with 0.26 percent failure rates—over ten times as bad as the Japanese results. American DRAM chips worked the same, cost the same, but malfunctioned far more often. So why should anyone buy them? (Page 82)

Chips weren’t the only U.S. industry facing pressure from high-quality, ultra-efficient Japanese competitors. In the immediate postwar years, “Made in Japan” had been a synonym for “cheap.” But entrepreneurs like Sony’s Akio Morita had cast off this reputation for low price, replacing it with products that were as high quality as those of any American competitor. (Page 82)

Sony’s research director, the famed physicist Makoto Kikuchi, told an American journalist that Japan had fewer geniuses than America, a country with “outstanding elites.” But America also had “a long tail” of people “with less than normal intelligence,” Kikuchi argued, explaining why Japan was better at mass manufacturing. (Page 83)

Sony sold 385 million units worldwide, making the Walkman one of the most popular consumer devices in history. (Page 83)

The aim of turning Japan into a country of democratic capitalists had worked. Now some Americans were asking whether it had worked too well. The strategy of empowering Japanese businesses seemed to be undermining America’s economic and technological edge. (Page 83)

CHAPTER 16 “At War with Japan” (Page 85)

Jerry Sanders, CEO of Advanced Micro Devices. (Page 85)

After founding his own chip firm, AMD, in 1969, he spent much of the next three decades in a legal brawl with Intel over intellectual property disputes. “I can’t walk away from a fight,” he admitted to a journalist. (Page 85)

If Hitachi, Fujitsu, Toshiba, and NEC succeeded, Sporck thought, they’d move the whole industry across the Pacific. “I worked specifically on TVs at GE,” Sporck warned. “You can drive by that facility now, it’s still empty… We knew the dangers and we damn right well weren’t gonna let that happen to us.” Everything was at stake—jobs, fortunes, legacies, pride. “We’re at war with Japan,” Sporck insisted. “Not with guns and ammunition, but an economic war with technology, productivity, and quality.” (Page 86)

Sporck saw Silicon Valley’s internal battles as fair fights, but thought Japan’s DRAM firms benefitted from intellectual property theft, protected markets, government subsidies, and cheap capital. (Page 86)

Sporck had a point about the spies. After a 5 a.m. rendezvous in the lobby of a Hartford, Connecticut, hotel on a cold November morning in 1981, Hitachi employee Jun Naruse handed over an envelope of cash and received in exchange a badge from a “consultant” at a company called Glenmar that promised to help Hitachi obtain industrial secrets. With the badge, Naruse gained entrance to a secret facility run by aircraft maker Pratt & Whitney and photographed the company’s newest computer. (Page 86)

Toshiba, the Japanese industrial conglomerate that by the mid-1980s was a world-leading DRAM producer, spent years fighting claims—true, it turned out—that the company sold the Soviets machinery that helped them build quieter submarines. (Page 86)

The number of documented cases of illegal Japanese industrial espionage was low. But was this a sign that stealing secrets played only a small role in Japan’s success, or evidence that Japanese firms were skilled at spycraft? (Page 87)

Noyce and Moore had left Shockley Semiconductor to found Fairchild, then left Fairchild to found Intel, where they hired dozens of Fairchild employees, including Andy Grove. Fairchild considered suing before deciding that it was unlikely to win a lawsuit against the geniuses who had built the chip industry. (Page 87)

Until 1974, Japan imposed quotas limiting the number of chips U.S. firms could sell there. Even after these quotas were lifted, Japanese companies still bought few chips from Silicon Valley, even though Japan consumed a quarter of the world’s semiconductors, which companies like Sony plugged into TVs and VCRs that were sold worldwide. (Page 87)

Japan’s government subsidized its chipmakers, too. Unlike in the U.S., where antitrust law discouraged chip firms from collaborating, the Japanese government pushed companies to work together, launching a research consortium called the VLSI Program in 1976 with the government funding around half the budget. (Page 88)

Jerry Sanders saw Silicon Valley’s biggest disadvantage as its high cost of capital. The Japanese “pay 6 percent, maybe 7 percent, for capital. I pay 18 percent on a good day,” he (Page 88)

In the 1980s, U.S. interest rates reached 21.5 percent as the Federal Reserve sought to fight inflation. (Page 88)

Japan’s skimpy social safety net provided a further incentive for saving. Meanwhile, tight restrictions on stock markets and other investments left people with little choice but to stuff savings in bank accounts. As a result, banks were flush with deposits, extending loans at low rates because they had so much cash on hand. Japanese companies had more debt than American peers but nevertheless paid lower rates to borrow. (Page 88)

In the early 1980s, Japanese firms invested 60 percent more than their U.S. rivals in production equipment, even though everyone in the industry faced the same cutthroat competition, with hardly anyone making much profit. Japanese chipmakers kept investing and producing, grabbing more and more market share. (Page 89)

Because of this, five years after the 64K DRAM chip was introduced, Intel—the company that had pioneered DRAM chips a decade earlier—was left with only 1.7 percent of the global DRAM market, while Japanese competitors’ market share soared. (Page 89)

Japan’s firms doubled down on DRAM production as Silicon Valley was pushed out. In 1984, Hitachi spent 80 billion yen on capital expenditure for its semiconductor business, compared to 1.5 billion a decade earlier. At Toshiba, spending grew from 3 billion to 75 billion; at NEC, from 3.5 billion to 110 billion. In 1985, Japanese firms spent 46 percent of the world’s capital expenditure on semiconductors, compared to America’s 35 percent. By 1990, the figures were even more lopsided, with Japanese firms accounting for half the world’s investment in chipmaking facilities and equipment. Japan’s CEOs kept building new facilities so long as their banks were happy to foot the bill. (Page 89)

American consumers of chips, like HP, had hard evidence that Japanese chips were simply better quality. So Japan’s market share in DRAM chips grew every year during the 1980s, at the expense of American rivals. Japan’s semiconductor surge seemed unstoppable, (Page 89)

CHAPTER 17 “Shipping Junk” (Page 91)

1981, GCA Corporation was being celebrated as one of America’s “hottest high-technology corporations,” growing rapidly by selling equipment that made possible Moore’s Law. (Page 91)

Now lithography was big business, and at the start of the 1980s, GCA was at the top. (Page 91)

Several years later, in 1978, GCA introduced its first stepper. Sales orders began rolling in. Before the stepper, GCA had never made more than $ 50 million a year in revenue on its military contracts, but now it had a monopoly on an extraordinarily valuable machine. Revenue soon hit $ 300 million and the company’s stock price surged. (Page 93)

After Greenberg stopped buying Nikon lenses, the Japanese company decided to make its own stepper. It acquired a machine from GCA and reverse engineered it. Soon Nikon had more market share than GCA. (Page 94)

CHAPTER 18 The Crude Oil of the 1980s (Page 97)

Noyce, Sanders, and Sporck had all started their careers at Fairchild: Noyce the technological visionary; Sanders the marketing showman; Sporck the manufacturing boss barking at his employees to build faster, cheaper, better. A decade later they’d become competitors as CEOs of three of America’s biggest chipmakers. But as Japan’s market share grew, they decided it was time to band together again. At stake was the future of America’s semiconductor industry. Huddled over a table in a private dining room at Ming’s, they devised a new strategy to save it. After a decade of ignoring the government, they were turning to Washington for help. (Page 97)

Throughout the 1980s, America’s computer industry expanded rapidly, as PCs were made small enough and cheap enough for an individual home or office. Every business was coming to rely on them. Computers couldn’t work without integrated circuits. Nor, by the 1980s, could planes, automobiles, camcorders, microwaves, or the Sony Walkman. Every American now had semiconductors in their houses and cars; many used dozens of chips daily. Like oil, they were impossible to live without. Didn’t this make them “strategic”? Shouldn’t America be worried Japan was becoming “the Saudi Arabia of semiconductors”? (Page 97)

In the 1970s, Silicon Valley firms had forgotten about the government as they replaced defense contracts with civilian computer and calculator markets. In the 1980s, they crawled sheepishly back to Washington. After their dinner at Ming’s, Sanders, Noyce, and Sporck joined other CEOs to create the Semiconductor Industry Association to lobby Washington to support the industry. (Page 98)

The U.S. spent five to ten times more on defense relative to the size of its economy. Japan focused on growing its economy, while America shouldered the burden of defending it. (Page 100)

Once derided as a country of transistor salesmen, Japan was now the world’s second-largest economy. (Page 100)

CHAPTER 19 Death Spiral (Page 103)

The question of support for semiconductors was decided by lobbying in Washington. One issue on which Silicon Valley and free market economists agreed was taxes. Bob Noyce testified to Congress in favor of cutting the capital gains tax from 49 percent to 28 percent and advocated loosening financial regulation to let pension funds invest in venture capital firms. After these changes, a flood of money rushed into the venture capital firms on Palo Alto’s Sand Hill Road. Next, Congress tightened intellectual property protections via the Semiconductor Chip Protection Act, after Silicon Valley executives like Intel’s Andy Grove testified to Congress that legal copying by Japanese firms was undermining America’s market position. (Page 104)

In 1986, with the threat of tariffs looming, Washington and Tokyo cut a deal. Japan’s government agreed to put quotas on its exports of DRAM chips, limiting the number that were sold to the U.S. By decreasing supply, the agreement drove up the price of DRAM chips everywhere outside of Japan, to the detriment of American computer producers, which were among the biggest buyers of Japan’s chips. Higher prices actually benefitted Japan’s producers, which continued to dominate the DRAM market. Most American producers were already in the process of exiting the memory chip market. So despite the trade deal, only a few U.S. firms continued to produce DRAM chips. (Page 105)

GCA appealed one final time to the government for help, with top national security officials considering whether U.S. foreign policy required saving GCA. They concluded nothing could be done. The company shut its doors and sold off its equipment, joining a long list of firms vanquished by Japanese competition. (Page 108)

CHAPTER 20 The Japan That Can Say No (Page 109)

Sony’s Akio Morita (Page 109)

When he first licensed transistor technology in the 1950s, the U.S. was the world’s tech leader. Since then, America had faced crisis after crisis. The disastrous war in Vietnam, racial tension, urban unrest, the humiliation of Watergate, a decade of stagflation, a gaping trade deficit, and now industrial malaise. After each new shock, America’s allure dimmed. (Page 109)

The Moritas enjoyed entertaining, but their dinner parties served a professional purpose, too. As commercial tension between the U.S. and Japan increased, Morita served as informal ambassador, explaining Japan to American powerbrokers. (Page 110)

Their country’s system wasn’t working—but Japan’s was. By the 1980s, Morita perceived deep problems in America’s economy and society. America had long seen itself as Japan’s teacher, but Morita thought America had lessons to learn as it struggled with a growing trade deficit and the crisis in its high-tech industries. (Page 110)

It was time to tell his American friends: Japan’s system simply worked better. (Page 110)

His essays in The Japan That Can Say No called for Japan to declare independence from an overbearing America that had bossed Japan around for too long. (Page 111)

In the U.S., The Japan That Can Say No sparked fury. It was translated and circulated in unofficial form by the CIA. One irate congressman entered the entire book—still published in English only unofficially—into the Congressional Record to publicize it. Bookstores reported that customers in Washington were “going absolutely bananas” trying to find bootleg copies. (Page 113)

“High Tech Is Foreign Policy,” Brown titled the article. If America’s high-tech position was deteriorating, its foreign policy position was at risk, too. (Page 113)

Would Japan, a first-class technological power, be satisfied with second-class military status? If Japan’s success in DRAM chips was any guide, it was set to overtake the United States in almost every industry that mattered. Why wouldn’t it seek military dominance, too? If so, what would the U.S. do? (Page 114)

America’s supply chain statecraft had worked brilliantly in fending off Communists, but by the 1980s, the primary beneficiary looked to have been Japan. Its trade and foreign investment had grown massively. Tokyo’s role in Asia’s economics and politics was expanding inexorably. If Japan could so swiftly establish dominance over the chip industry, what would stop it from dethroning America’s geopolitical preeminence, too? (Page 114)

PART IV AMERICA RESURGENT (Page 115)

CHAPTER 21 The Potato Chip King (Page 117)

Jack Simplot (Page 117)

As America’s chip industry struggled to adjust to Japan’s challenge, cowboy entrepreneurs like him played a fundamental role in reversing what Bob Noyce had called a “death spiral” and executing a surprise turnaround. (Page 117)

The U.S. overtook Japan’s DRAM behemoths not by replicating them but by innovating around them. Rather than cutting itself off from trade, Silicon Valley offshored even more production to Taiwan and South Korea to regain its competitive advantage. (Page 117)

America’s unrivaled power during the 1990s and 2000s stemmed from its resurgent dominance in computer chips, the core technology of the era. (Page 117)

Micron, the DRAM firm that Simplot backed, at first seemed guaranteed to fail. (Page 118)

A potato farmer like him saw clearly that Japanese competition had turned DRAM chips into a commodity market. He’d been through enough harvests to know that the best time to buy a commodity business was when prices were depressed and everyone else was in liquidation. Simplot decided to back Micron with $ 1 million. He’d later pour in millions more. (Page 119)

Micron decided to challenge the Japanese DRAM makers at their own game, but to do so by aggressively cutting costs. (Page 120)

Micron could put more chips on each of the circular silicon wafers that it processed. This made manufacturing far more efficient. “It was by far the worst product on the market,” Ward joked, “but by far the least expensive to produce.” (Page 121)

More than any of its Japanese or American competitors, the engineering expertise of Micron’s employees was directed toward cost cuts. (Page 121)

Since the earliest days of the business, Joe Parkinson had made sure employees realized that their survival depended on efficiency, going so far as to dim hallway lights at night to save on power bills when DRAM prices fell. Employees thought he was “maniacally” focused on costs—and it showed. (Page 121)

Most other American DRAM producers were forced out of the market in the late 1980s. TI kept manufacturing DRAM chips but struggled to make any money, and eventually sold its operations to Micron. Simplot’s first $ 1 million investment eventually ballooned into a billion-dollar stake. (Page 122)

After a decade of pain, the U.S. chip industry finally scored a win—and it was only possible thanks to the market wisdom of America’s greatest potato farmer. (Page 122)

CHAPTER 22 Disrupting Intel (Page 123)

Andy Grove (Page 123)

Clayton Christensen. (Page 123)

Intel had pioneered memory chips, and admitting defeat would be humiliating. (Page 124)

Intel would never make enough money in memory to justify new investments. It was a leader, though, in the small microprocessor market, where Japanese firms still lagged. (Page 124)

IBM contracted with a young programmer named Bill Gates to write software for the computer’s operating system. (Page 124)

Finally, Intel decided to leave memories, surrendering the DRAM market to the Japanese and focusing on microprocessors for PCs. (Page 125)

Intel’s new manufacturing method was called “copy exactly.” Once Intel determined that a specific set of production processes worked best, they were replicated in all other Intel facilities. Before then, engineers had prided themselves on fine-tuning Intel’s processes. Now they were asked not to think, but to replicate. “It was a huge cultural issue,” one remembered, as a freewheeling Silicon Valley style was replaced with assembly line rigor. “I was perceived as a dictator,” Barrett admitted. But “copy exactly” worked: (Page 126)

Compaq Computer muscled in on IBM’s PC market, (Page 126)

By the mid-1980s, Compaq and other firms building “clones” of IBM’s PC sold more units than IBM itself. Prices fell precipitously as computers were installed in every office and many homes. (Page 126)

CHAPTER 23 “My Enemy’s Enemy”: The Rise of Korea (Page 129)

Lee Byung-Chul (Page 129)

He would turn Samsung into a semiconductor superpower thanks to two influential allies: America’s chip industry and the South Korean state. (Page 129)

U.S. government had helped fund the creation in 1966 of the Korea Institute of Science and Technology, and a growing number of Koreans were graduating from top U.S. universities or being trained in Korea by U.S.-educated professors. (Page 130)

Intel therefore cheered the rise of Korean DRAM producers. It was one of several Silicon Valley firms to sign a joint venture with Samsung in the 1980s, selling chips Samsung manufactured under Intel’s own brand and wagering that helping Korea’s chip industry would reduce Japan’s threat to Silicon Valley. Moreover, Korea’s costs and wages were substantially lower than Japan’s, so Korean firms like Samsung had a shot at winning market share even if their manufacturing processes weren’t as perfectly tuned as the ultra-efficient Japanese. (Page 132)

Most of Silicon Valley was happy to work with Korean companies, undercutting Japanese competitors and helping make South Korea one of the world’s leading centers of memory chipmaking. The logic was simple, as Jerry Sanders explained: “my enemy’s enemy is my friend.” (Page 133)

CHAPTER 24 “This Is the Future” (Page 135)

The companies like Intel and Micron that survived did so less thanks to their engineering skills—though these were important—than their ability to capitalize on technical aptitude to make money in a hypercompetitive, unforgiving industry. (Page 135)

Despite its reputation for funding futuristic weapons systems, when it came to semiconductors DARPA focused as much on building educational infrastructure so that America had an ample supply of chip designers. DARPA also helped universities acquire advanced computers and convened workshops with industry officials and academics to discuss research problems over fine wine. Helping companies and professors keep Moore’s Law alive, DARPA reasoned, was crucial to America’s military edge. (Page 137)

Today, every chip company uses tools from each of three chip design software companies that were founded and built by alumni of these DARPA-and SRC-funded programs. (Page 138)

In 1971, Jacobs flew to St. Petersburg, Florida, to attend a conference of academics working on communications theory. Many of the professors had glumly concluded that their scholarly subfield—encoding data into radio waves—had reached its practical limits. The radio spectrum could only hold a limited number of signals before they became impossible to sort and interpret. Viterbi’s algorithms provided a theoretical way to pack more data into the same radio spectrum, but no one had the computing power to apply these algorithms at scale. The process of sending data through the air seemed to have hit a wall. “Coding is dead,” one professor declared. (Page 139)

Jacobs completely disagreed. Standing up from the back row, he held aloft a small chip and declared: “This is the future.” Chips, Jacobs realized, were improving so rapidly that they’d soon be able to encode orders of magnitude more data in the same spectrum space. Because the number of transistors on a square inch of silicon was increasing exponentially, the amount of data that could be sent through a given slice of the radio spectrum was about to take off, too. (Page 139)

Jacobs, Viterbi, and several colleagues set up a wireless communications business called Qualcomm—quality communications—betting that ever-more-powerful microprocessors would let them stuff more signals into existing spectrum bandwidth. (Page 139)

By the end of the 1980s, a chip with a million transistors—unthinkable in the early 1970s, when Lynn Conway had arrived in Silicon Valley—had become a reality, when Intel announced its 486 microprocessor, a small piece of silicon packed with 1.2 million microscopic switches. (Page 140)

CHAPTER 25 The KGB’s Directorate T (Page 141)

Vladimir Vetrov was a KGB spy, but his life felt more like a Chekhov story than a James Bond film. (Page 141)

The mission: “acquire Western equipment and technology,” a CIA report warned, “and improve its ability to produce integrated circuits.” (Page 141)

The Soviet consulate in San Francisco reportedly had a team of sixty agents targeting the tech firms of Silicon Valley. (Page 142)

Spying continued to play a fundamental role in Soviet semiconductors, as a group of Rhode Island fishermen discovered after pulling a strange metallic buoy out of the waters of the North Atlantic in fall 1982. They hadn’t expected to pick up advanced chips in their haul. When the mysterious buoy was sent to a military lab, however, it was identified as a Soviet listening device that used perfect replicas of Texas Instruments Series 5400 semiconductors. (Page 142)

The CIA claimed that the USSR had acquired nearly every facet of the semiconductor manufacturing process, including nine hundred Western machines for preparing materials needed for semiconductor fabrication; eight hundred machines for lithography and etching; and three hundred machines each for doping, packaging, and testing chips. (Page 143)

In 1985, the CIA conducted a study of Soviet microprocessors and found that the USSR produced replicas of Intel and Motorola chips like clockwork. They were always half a decade behind. (Page 144)

CHAPTER 26 “Weapons of Mass Destruction” : The Impact of the Offset (Page 145)

One popular Soviet joke from the 1980s recounted a Kremlin official who declared proudly, “Comrade, we have built the world’s biggest microprocessor!” (Page 146)

By traditional metrics like numbers of tanks or troops, the Soviet Union had a clear advantage in the early 1980s. Ogarkov saw things differently: quality was overtaking quantity. He was fixated on the threat posed by America’s precision weapons. Combined with better surveillance and communication tools, the ability to strike targets accurately hundreds or even thousands of miles away was producing a “military-technical revolution,” Ogarkov argued to anyone who’d listen. (Page 146)

The most pessimistic Soviet estimates suggested that if the U.S. launched a nuclear first strike in the 1980s, it could have disabled or destroyed 98 percent of Soviet ICBMs. (Page 147)

By the early 1980s it was publicly admitted that the U.S. had plugged its submarine sensors into the Illiac IV, one of the most powerful supercomputers and the first using semiconductor memory chips, which were built by Fairchild. Illiac IV and other processing centers were connected via satellite to an array of sensors on ships, planes, and helicopters to track Soviet subs, which were highly vulnerable to American detection. (Page 147)

When Ogarkov ran the numbers, he concluded that America’s semiconductor-powered advantage in missile accuracy, antisubmarine warfare, surveillance, and command and control could enable a surprise strike to threaten the survivability of the Soviet nuclear arsenal. Nukes were supposed to be the ultimate insurance policy, but the Soviet military now felt “substantially inferior in strategic weapons,” as one general put it. (Page 148)

The USSR had only a handful of allies, most of whom weren’t much help. Soviet-dominated East Germany, which had a chip industry as advanced as Zelenograd, made a last-ditch effort in the mid-1980s to revitalize its semiconductor sector, drawing on a long tradition of precision manufacturing as well as world-leading optics produced by the Carl Zeiss company in the city of Jena. East German chip output grew rapidly in the late 1980s, but the industry was only able to produce memory chips less advanced than Japan’s, at ten times the price. (Page 149)

The Soviet Union’s effort to reinvigorate its chipmakers failed completely. Neither the Soviets nor their socialist allies could ever catch up, despite vast espionage campaigns and huge sums poured into research facilities like those in Zelenograd. And just as the Kremlin’s response to Bill Perry’s “offset” was beginning to sputter out, the world was given a terrifying glimpse of the future of war on the battlefields of the Persian Gulf. (Page 150)

CHAPTER 27 War Hero (Page 151)

Warfare looked like a video game. But watching from Texas, Weldon Word knew this futuristic technology actually dated to the Vietnam War. (Page 152)

U.S. airpower proved decisive in the Persian Gulf War, decimating Iraqi forces while minimizing U.S. casualties. Weldon Word received an award for inventing the Paveway, improving its electronics, and driving down its cost so that each one was never more expensive than a jalopy, just as he had originally promised. It took several decades for people outside the U.S. military to realize how the Paveway and other weapons like it were changing war. But pilots who used these bombs knew just how transformative they were. “There are about ten thousand Americans who didn’t get killed because of you guys,” an Air Force officer told Word at the Pentagon award ceremony. Advanced microelectronics and a set of wings strapped to a bomb had transformed the nature of military power. (Page 152)

The Persian Gulf War was the first major test of Perry’s “offset strategy,” which had been devised after the Vietnam War but never deployed in a sizeable battle. (Page 153)

The Iraqi military—armed with some of the best equipment the Soviet Union’s defense industry produced—was helpless in the face of the American assault. “High-tech works,” Perry proclaimed. (Page 154)

The reverberations from the explosions of Paveway bombs and Tomahawk missiles were felt as powerfully in Moscow as in Baghdad. The war was a “technological operation,” one Soviet military analyst declared. It was “a struggle over the airwaves,” another said. The result—Iraq’s easy defeat—was exactly what Ogarkov had predicted. Soviet Defense Minister Dmitri Yazov admitted the Gulf War made the Soviet Union nervous about its air defense capabilities. (Page 154)

CHAPTER 28 “The Cold War Is Over and You Have Won” (Page 155)

Then in 1990 crisis hit. Japan’s financial markets crashed. The economy slumped into a deep recession. (Page 155)

The case study in Japan’s malaise was the industry that had been held up as exemplary of Japan’s industrial prowess: semiconductors. (Page 155)

Japan’s seeming dominance had been built on an unsustainable foundation of government-backed overinvestment. (Page 156)

Ogarkov had identified the dynamic a decade earlier, though at the time he hoped the USSR might overcome it. Like the rest of the Soviet military leadership, he’d grown more pessimistic over time. As early as 1983, Ogarkov had gone so far as to tell American journalist Les Gelb—off the record—that “the Cold War is over and you have won.” The Soviet Union’s rockets were as powerful as ever. It had the world’s largest nuclear arsenal. But its semiconductor production couldn’t keep up, its computer industry fell behind, its communications and surveillance technologies lagged, and the military consequences were disastrous. “All modern military capability is based on economic innovation, technology, and economic strength,” Ogarkov explained to Gelb. “Military technology is based on computers. You are far, far ahead of us with computers… In your country, every little child has a computer from age 5.” (Page 158)

PART V INTEGRATED CIRCUITS, INTEGRATED WORLD? (Page 161)

CHAPTER 29 “We Want a Semiconductor Industry in Taiwan” (Page 163)

K. T. Li (Page 163)

Morris Chang (Page 163)

the 1990s, Taiwan’s importance began to grow, driven by the spectacular rise of the Taiwan Semiconductor 164Manufacturing Company, which Chang founded with strong backing from the Taiwanese government. (Page 163)

When Chang was hired by Taiwan’s government in 1985 to lead the country’s preeminent electronics research institute, Taiwan was one of Asia’s leaders in assembling semiconductor devices—taking chips made abroad, testing them, and attaching them to plastic or ceramic packages. (Page 164)

Under its new, post-Mao leadership, China began integrating into the global economy by attracting some of the basic manufacturing and assembly jobs that Taiwan had used to lift itself out of poverty. (Page 164)

With lower wages and several hundred million peasants eager to trade subsistence farming for factory jobs, China’s entry into electronics assembly threatened to put Taiwan out of business. It amounted to economic “warfare,” Taiwanese officials complained to visiting Texas Instruments executives. It was impossible to compete with China on price. Taiwan had to produce advanced technology itself. (Page 164)

Though most people speak of Chang “returning” to Taiwan, his strongest connection to the island was the Texas Instruments facilities that he helped establish, and by Taiwan’s claim to be the legitimate government of China, the country that Chang grew up in, but that he hadn’t visited since fleeing nearly four decades earlier. (Page 165)

He was arguably more Texan than Taiwanese. “Taiwan was a strange place to me,” he’d later recall. (Page 165)

Chang knew he’d need a lot of money, because his business plan was based on a radical idea. If it worked, it would upend the electronics industry, placing him—and Taiwan—in control of the world’s most advanced technology. (Page 166)

Chang had toyed with the idea of creating a semiconductor company that would manufacture chips designed by customers. At the time, (Page 166)

At the time, in 1976, there weren’t any “fabless” companies that designed chips but lacked their own fabs, though Chang predicted such companies would soon emerge. (Page 166)

to find the money for the business plan Chang drew up. The Taiwanese government provided 48 percent of the startup capital for TSMC, stipulating only that Chang find a foreign chip firm to provide advanced production technology. (Page 167)

crucial ingredient in TSMC’s early success was deep ties with the U.S. chip industry. Most of its customers were U.S. chip designers, and many top employees had worked in Silicon Valley. (Page 167)

The founding of TSMC gave all chip designers a reliable partner. Chang promised never to design chips, only to build them. TSMC didn’t compete with its customers; it succeeded if they did. (Page 168)

CHAPTER 30 “All People Must Make Semiconductors” (Page 171)

Ren Zhengfei (Page 171)

Huawei. (Page 171)

At the time, the most advanced, widely used chip that China produced domestically was a DRAM with roughly the same storage capacity as the first DRAM Intel had brought to market in the early 1970s, putting China over a decade behind the cutting edge. (Page 172)

Were it not for Communist rule, China might have played a much larger role in the semiconductor industry. When the integrated circuit was invented, China had many of the ingredients that helped Japan, Taiwan, and South Korea attract American semiconductor investment, like a vast, low-cost workforce and a well-educated scientific elite. However, after seizing power in 1949, the Communists looked at foreign connections with suspicion. For someone like Morris Chang, returning to China after finishing his studies at Stanford would have meant certain poverty and possible imprisonment or death. Many of the best graduates from China’s universities before the revolution ended up working in Taiwan or in California, building the electronics capabilities of the PRC’s primary rivals. (Page 172)

By 1960, China had established its first semiconductor research institute, in Beijing. Around the same time, the country began manufacturing simple transistor radios. In 1965, Chinese engineers forged their first integrated circuit, a half decade after Bob Noyce and Jack Kilby. (Page 172)

Mao’s radicalism made it impossible to attract foreign investment or conduct serious science. The year after China produced its first integrated circuit, Mao plunged the country into the Cultural Revolution, arguing that expertise was a source of privilege that undermined socialist equality. Mao’s partisans waged war on the country’s educational system. Thousands of scientists and experts were sent to work as farmers in destitute villages. Many others were simply killed. Chairman Mao’s “Brilliant Directive issued on July 21, 1968” insisted that “it is essential to shorten the length of schooling, revolutionize education, put proletarian politics in command… Students should be selected from among workers and peasants with practical experience, and they should return to production after a few years study.” (Page 172)

Mao wasn’t simply skeptical of foreign chips; at times he worried that all electronic goods were intrinsically anti-socialist. (Page 173)

One tiny speck of Chinese territory escaped the horrors of the Cultural Revolution. Thanks to a quirk of colonialism, Hong Kong was still governed temporarily by the British. As most Chinese were meticulously memorizing the quotations of their crazed chairman, Hong Kong workers were diligently assembling silicon components at Fairchild’s plant overlooking Kowloon Bay. A couple hundred miles away in Taiwan, multiple U.S. chip firms had facilities employing thousands of workers in jobs that were low-paying by California’s standards but far better than peasant farming. Just as Mao was sending China’s small set of skilled workers to the countryside for socialist reeducation, the chip industry in Taiwan, South Korea, and across Southeast Asia was pulling peasants from the countryside and giving them good jobs at manufacturing plants. (Page 174)

With the Cultural Revolution winding down, China’s leaders were trying to set aside their revolutionary fervor and befriend the Americans. (Page 175)

study in 1979 found that China had hardly any commercially viable semiconductor production and only fifteen hundred computers in the entire country. (Page 175)

Deng Xiaoping, who promised a policy of “Four Modernizations” to transform China. (Page 176)

This “Made in China” obsession was hardwired into the Communist Party’s worldview, (Page 176)

The government’s insistence that chips were strategically important caused China’s officials to try to control chipmaking, embroiling the sector in bureaucracy. (Page 176)

CHAPTER 31 “Sharing God’s Love with the Chinese” (Page 177)

The geography of chip fabrication shifted drastically over the 1990s and 2000s. U.S. fabs made 37 percent of the world’s chips in 1990, but this number fell to 19 percent by 2000 and 13 percent by 2010. Japan’s market share in chip fabrication collapsed, too. South Korea, Singapore, and Taiwan each poured funds into their chip industries and rapidly increased output. (Page 177)

Rest

It’s harder to say whether one side has an advantage when it comes to devising clever algorithms. Measured by the number of AI experts, China appears to have capabilities that are comparable to America’s. Researchers at MacroPolo, a China-focused think tank, found that 29 percent of the world’s leading researchers in artificial intelligence are from China, as opposed to 20 percent from the U.S. and 18 percent from Europe. However, a staggering share of these experts end up working in the U.S., which employs 59 percent of the world’s top AI researchers. The combination of new visa and travel restrictions plus China’s effort to retain more researchers at home may neutralize America’s historical skill at stripping geopolitical rivals of their smartest minds. (Page 285)

In the third part of Buchanan’s “triad,” computing power, the United States still has a substantial lead, though it has eroded significantly in recent years. China is still staggeringly dependent on foreign semiconductor technology—in particular, U.S.-designed, Taiwan-fabricated processors—to undertake complex computation. It isn’t only Chinese smartphones and PCs that rely on foreign chips. So, too, do most Chinese data centers—which explains why the country has tried so hard to acquire technology from companies like IBM and AMD. One Chinese study has estimated that as many as 95 percent of GPUs in Chinese servers running artificial intelligence workloads are designed by Nvidia, for example. Chips from Intel, Xilinx, AMD, and others are crucially important in Chinese data centers. Even under the most optimistic projections, it will be half a decade before China can design competitive chips and the software ecosystem around them, and far longer before it can manufacture these chips domestically. (Page 286)

many Chinese military systems, however, acquiring U.S.-designed, Taiwan-fabricated chips hasn’t been difficult. A recent review of 343 publicly available AI-related People’s Liberation Army procurement contracts, by researchers at Georgetown University, found that less than 20 percent of the contracts involved companies that are subject to U.S. export controls. In other words, the Chinese military has had little difficulty simply buying cutting-edge U.S. chips off-the-shelf and plugging them into military systems. The Georgetown researchers found that Chinese military suppliers even advertise on their websites their use of American chips. The Chinese government’s controversial policy of “Civil Military Fusion,” an effort to apply advanced civilian technology to military systems, looks like it’s working. Absent a major change in U.S. export restrictions, the People’s Liberation Army will acquire much of the computing power it needs by simply buying it from Silicon Valley. (Page 286)

The battle for the electromagnetic spectrum will be an invisible struggle conducted by semiconductors. Radar, jamming, and communications are all managed by complex radio frequency chips and digital-analog converters, which modulate signals to take advantage of open spectrum space, send signals in a specific direction, and try to confuse adversaries’ sensors. Simultaneously, powerful digital chips will run complex algorithms inside a radar or jammer that assess the 289signals received and decide what signals to send out in a matter of milliseconds. At stake is a military’s ability to see and to communicate. Autonomous drones won’t be worth much if the devices can’t determine where they are or where they’re heading. (Page 288)

Making semiconductors is so expensive that even the Pentagon can’t afford to do it in-house. The National Security Agency used to have a chip fab at its headquarters in Maryland’s Fort Meade. In the 2000s, however, the government decided it was too expensive to keep upgrading per the cadence dictated by Moore’s Law. Today even designing a leading-edge chip—which can cost several hundred million dollars—is too expensive for all but the most important projects. (Page 288)

Russia’s ongoing difficulties with fabricating and acquiring chips explains why the country’s drones shot down over Ukraine are full of foreign microelectronics. It also explains why Russia’s military continues to rely extensively on non-precision-guided munitions. A recent analysis of Russia’s war in Syria found that up to 95 percent of munitions dropped were unguided. The fact that Russia faced shortages of guided cruise missiles within several weeks of attacking Ukraine is also partly due to the sorry state of its semiconductor industry. Meanwhile, Ukraine has received huge stockpiles of guided munitions from the West, such as Javelin anti-tank missiles that rely on over 200 semiconductors each as they home in on enemy tanks. (Page 342)

AI Summary

Summary of Notes

Part I: Early Developments in Semiconductor Technology

• World War II and the Industrial War: WWII’s industrial output, especially in the U.S., was crucial. Key figures like Akio Morita, Morris Chang, and Andy Grove were influenced by the war’s devastation.
• Early Computing: The war spurred the need for computational power, leading to the development of early computers using vacuum tubes.
• Invention of the Transistor: In 1947, William Shockley, John Bardeen, and Walter Brattain at Bell Labs invented the transistor, revolutionizing electronics.
• Development of Integrated Circuits (ICs): Jack Kilby and Robert Noyce independently developed ICs in the late 1950s, with Kilby using germanium and Noyce using silicon.
• Cold War and Space Race: The launch of Sputnik in 1957 led the U.S. to invest heavily in technology, including ICs for military and space applications.
• Mass Production and Commercialization: Photolithography enabled mass production of ICs, expanding their use beyond military applications.
• Rise of Silicon Valley: The “traitorous eight” left Shockley Semiconductor to form Fairchild Semiconductor, laying the foundation for Silicon Valley.

Part II: Global Expansion and Competition

• Soviet Silicon Valley: The USSR attempted to develop its semiconductor industry through espionage and the establishment of Zelenograd.
• Japan’s Integration: Post-WWII, the U.S. supported Japan’s technological development, leading to Sony’s success with transistor technology.
• Labor Dynamics: The semiconductor industry relied heavily on female labor for assembly work, leading to globalization of production.
• Military Applications: The Vietnam War spurred innovations like the Paveway laser-guided bomb.
• Taiwan’s Role: Taiwan became crucial in the semiconductor industry, with significant U.S. support to counter Communist influence.
• Intel’s Founding: Bob Noyce and Gordon Moore left Fairchild to start Intel, focusing on memory chips and later microprocessors.

Part III: U.S.-Japan Semiconductor Rivalry

• Japanese Competition: In the 1980s, Japanese firms produced higher quality chips, leading to a crisis in Silicon Valley.
• Government and Industry Response: The U.S. formed the Semiconductor Industry Association (SIA) and Sematech to support the domestic industry.
• Strategic Importance: The U.S. recognized the strategic importance of semiconductors for national security.

Part IV: Resurgence of the American Semiconductor Industry

• Micron Technology: Jack Simplot’s investment helped Micron survive in the DRAM market.
• Intel’s Transformation: Under Andy Grove, Intel shifted focus from DRAM to microprocessors.
• Rise of South Korea: Samsung emerged as a significant player with support from the South Korean government.
• Military Advancements: The Persian Gulf War highlighted the importance of precision-guided munitions powered by advanced microelectronics.

Part V: Taiwan and China’s Semiconductor Ambitions

• TSMC’s Formation: Morris Chang founded TSMC in Taiwan, introducing the foundry model.
• China’s Lag: China lagged in semiconductor production due to Mao’s policies but began integrating into the global economy post-Mao.
• SMIC’s Establishment: Richard Chang founded SMIC in Shanghai, aiming to replicate TSMC’s success.
• EUV Lithography: Intel and ASML developed EUV lithography to continue Moore’s Law.
• Intel’s Strategic Decisions: Intel missed opportunities in the mobile market, leading to ARM’s rise.

Part VI: The Fabless Revolution and Global Supply Chains

• Offshoring Innovation: Manufacturing moved offshore, particularly to East Asia.
• Fabless Companies: Companies like Nvidia and Qualcomm design chips but outsource manufacturing.
• Apple Silicon: Apple became a significant player in chip design, outsourcing manufacturing to TSMC.
• Intel’s Decline: Intel faced delays and competition from TSMC and Samsung.

Part VII: China’s Strategic Efforts

• Made in China 2025: Aimed to reduce dependency on imported semiconductors.
• Technology Transfer: China pursued technology transfers from Western companies.
• Huawei’s Rise: Supported by government subsidies, Huawei became pivotal in China’s technological push.
• Military Implications: China’s advancements in semiconductors and AI threaten U.S. military technological edge.

Part VIII: U.S.-China Semiconductor Competition

• China’s Investments: China invested heavily in its semiconductor industry.
• U.S. Actions: The U.S. imposed export controls and sanctions to curb China’s access to critical technologies.
• Taiwan’s Role: Taiwan’s TSMC is crucial to global supply chains and U.S. national security.
• Supply Chain Vulnerabilities: The COVID-19 pandemic exposed vulnerabilities in the global semiconductor supply chain.

Complete Timeline

• 1945: End of World War II.
• 1947: Invention of the transistor by Shockley, Bardeen, and Brattain.
• 1955: William Shockley establishes Shockley Semiconductor.
• 1958: Kilby and Noyce develop the integrated circuit.
• 1959: Fairchild Semiconductor markets “Micrologic” chips; Anatoly Trutko studies at Stanford.
• 1961: Fairchild’s ICs used in NASA’s Apollo program.
• 1962: Khrushchev approves Zelenograd; Fairchild’s ICs chosen for Apollo guidance computer.
• 1963: Fairchild opens offshore facility in Hong Kong.
• 1964: Fairchild’s ICs power Apollo guidance computer; Texas Instruments supplies ICs for Minuteman II missile.
• 1965: Gordon Moore formulates Moore’s Law.
• 1968: Noyce and Moore leave Fairchild to start Intel; Bob Noyce and Gordon Moore found Intel.
• 1969: Intel launches DRAM chip.
• 1972: Intel introduces 4004 microprocessor; Texas Instruments develops Paveway bomb.
• 1977: William Perry becomes undersecretary of defense.
• 1980: Richard Anderson highlights Japanese chip quality; Jack Simplot invests in Micron.
• 1981: FBI sting reveals Hitachi espionage.
• 1986: Formation of SIA.
• 1987: Creation of Sematech.
• 1989: Publication of The Japan That Can Say No.
• 1990: Death of Robert Noyce.
• 1991: Persian Gulf War demonstrates precision-guided munitions.
• 1993: U.S. retakes first place in semiconductor shipments.
• Late 1990s: South Korea overtakes Japan in DRAM production.
• 2000: Richard Chang founds SMIC.
• 2001: ASML buys Silicon Valley Group.
• 2004: SMIC lists on NYSE.
• 2006: Apple announces use of Intel chips in Macs.
• 2007: Apple launches iPhone.
• 2008-2009: Financial crisis impacts semiconductor industry.
• 2009: GlobalFoundries established.
• 2010: Apple launches A4 chip.
• 2012: Intel, Samsung, and TSMC invest in ASML.
• 2013: Morris Chang retakes control of TSMC.
• 2015: GlobalFoundries cancels EUV program.
• 2018: Intel faces delays in 10nm and 7nm processes.
• 2020: TSMC and Samsung lead in EUV lithography.
• 2014: Xi Jinping emphasizes cybersecurity.
• 2015: IBM offers semiconductor technology to China.
• 2016: AMD licenses x86 technology to China; China announces Made in China 2025.
• 2017: Xi Jinping speaks at Davos.
• 2018: Arm spins out China division.
• 2019: Qualcomm-Huaxintong joint venture closes; Huawei becomes TSMC’s second-largest customer.
• 2021: DARPA launches Electronics Resurgence Initiative.
• 2015: Intel CEO expresses concerns about China’s subsidies.
• Late 2016: Commerce Secretary addresses U.S. leadership in semiconductors.
• 2017: Trump administration takes aggressive stance against China.
• 2018: U.S. reimposes restrictions on ZTE.
• 2019: U.S. tightens restrictions on Huawei.
• 2020: COVID-19 pandemic exacerbates semiconductor shortages.
• 2021: Biden administration emphasizes semiconductor manufacturing.
• 2021-2022: U.S. and allies impose additional restrictions on Chinese tech firms.

Summary of Part I

Main Points

• World War II and the Industrial War:

  • WWII was characterized by industrial output, with the U.S. leveraging its manufacturing might to produce vast quantities of war materiel.
  • Key figures like Akio Morita, Morris Chang, and Andy Grove experienced the war’s devastation firsthand, shaping their future contributions to technology.

• Early Computing and the Need for Innovation:

  • The war accelerated the demand for computational power, leading to the development of mechanical and early electrical computers.
  • Vacuum tubes were initially used but were cumbersome and unreliable, necessitating a more efficient solution.

• Invention of the Transistor:

  • William Shockley, along with his colleagues John Bardeen and Walter Brattain at Bell Labs, invented the transistor in 1947, revolutionizing electronics by replacing vacuum tubes.
  • The transistor’s ability to amplify and switch electronic signals laid the groundwork for modern computing.

• Development of Integrated Circuits:

  • Jack Kilby at Texas Instruments and Robert Noyce at Fairchild Semiconductor independently developed the integrated circuit (IC) in the late 1950s.
  • Kilby’s IC used a germanium base, while Noyce’s planar process used silicon, making mass production feasible.

• Cold War and the Space Race:

  • The launch of Sputnik by the Soviet Union in 1957 spurred the U.S. to invest heavily in technology, including ICs for military and space applications.
  • NASA and the U.S. Air Force became early adopters of ICs for the Apollo program and Minuteman missile guidance systems, respectively.

• Mass Production and Commercialization:

  • Photolithography, developed by Jay Lathrop, enabled the mass production of tiny transistors, crucial for the widespread use of ICs.
  • Companies like Fairchild Semiconductor and Texas Instruments scaled up production, reducing costs and expanding the market for ICs beyond military applications.

• Rise of Silicon Valley:

  • The “traitorous eight” engineers left Shockley Semiconductor to form Fairchild Semiconductor, laying the foundation for Silicon Valley.
  • Fairchild’s success inspired further innovation and the establishment of new companies, driving the growth of the semiconductor industry.

Timeline of Events

• 1945: End of World War II; significant industrial output shapes the outcome.
• 1947: Invention of the transistor by Shockley, Bardeen, and Brattain at Bell Labs.
• 1955: William Shockley establishes Shockley Semiconductor in Mountain View, California.
• 1958: Jack Kilby at Texas Instruments and Robert Noyce at Fairchild Semiconductor develop the integrated circuit.
• 1959: Fairchild Semiconductor markets its “Micrologic” chips.
• 1961: Fairchild’s integrated circuits are used in NASA’s Apollo program.
• 1962: Fairchild’s ICs are chosen for the Apollo guidance computer.
• 1963: U.S. chip companies begin opening production facilities in Asian nations.
• 1964: Fairchild’s ICs power the Apollo guidance computer; Texas Instruments supplies ICs for the Minuteman II missile.
• 1965: Gordon Moore formulates Moore’s Law, predicting exponential growth in computing power.
• 1968: Gordon Moore and Robert Noyce leave Fairchild to start Intel.

Part 1 of Chip War by Chris Miller provides a detailed account of the early days of the semiconductor industry, highlighting the key inventions and developments that laid the foundation for modern computing and the rise of Silicon Valley.

Summary of Part II

Main Points

Chapter 7: Soviet Silicon Valley

• Soviet Efforts in Semiconductors: The USSR recognized the importance of semiconductors and began efforts to develop their own industry, including sending engineers to study in the U.S.
• Espionage and Innovation: Soviet spies like Joel Barr and Alfred Sarant played crucial roles in advancing Soviet semiconductor technology by stealing American secrets.
• Zelenograd: The Soviet Union established Zelenograd, a city dedicated to semiconductor research and production, inspired by Silicon Valley.

Chapter 8: “Copy It”

• Copying American Technology: Soviet engineers were ordered to replicate American semiconductor devices, such as the Texas Instruments SN-51.
• Challenges of Replication: Despite having theoretical knowledge, the USSR struggled with the practical aspects of mass production and quality control.
• Technological Lag: The Soviet strategy of copying rather than innovating led to a persistent technological lag behind the U.S.

Chapter 9: The Transistor Salesman

• Japan’s Integration into the U.S. Semiconductor Industry: Post-WWII, the U.S. supported Japan’s technological development to strengthen it as a Cold War ally.
• Sony’s Success: Sony, under Akio Morita, successfully licensed and innovated on transistor technology, leading to the production of popular consumer electronics like transistor radios.
• Economic Symbiosis: Japan and the U.S. developed a symbiotic relationship in the semiconductor industry, with Japan focusing on consumer electronics and the U.S. on advanced chip production.

Chapter 10: “Transistor Girls”

• Labor Dynamics: The semiconductor industry relied heavily on female labor, particularly for assembly line work, due to lower wages and perceived dexterity.
• Globalization of Production: Companies like Fairchild Semiconductor began offshoring assembly to Asia, taking advantage of lower labor costs and establishing the foundations of modern global supply chains.

Chapter 11: Precision Strike

• Military Applications: The Vietnam War highlighted the need for precision-guided munitions, leading to innovations like the Paveway laser-guided bomb developed by Texas Instruments.
• Technological Advancements: The integration of semiconductors into military technology significantly improved the accuracy and effectiveness of weapons systems.

Chapter 12: Supply Chain Statecraft

• Taiwan’s Role: Taiwan emerged as a crucial player in the semiconductor industry, with Texas Instruments establishing a significant presence there.
• Strategic Importance: The U.S. strategically supported semiconductor production in Taiwan and other Asian countries to counter Communist influence and ensure economic stability.

Chapter 13: Intel’s Revolutionaries

• Founding of Intel: Bob Noyce and Gordon Moore left Fairchild Semiconductor to found Intel, focusing initially on memory chips and later on microprocessors.
• Technological Breakthroughs: Intel’s development of the DRAM and the 4004 microprocessor revolutionized computing, enabling mass production and widespread use of semiconductors.

Chapter 14: The Pentagon’s Offset Strategy

• Military-Industrial Complex: The Pentagon, under leaders like William Perry, heavily invested in semiconductor technology to maintain a technological edge over the Soviet Union.
• Precision Warfare: Advances in microelectronics enabled the development of precision-guided munitions and sophisticated military systems, reshaping modern warfare.

Timeline of Events

• 1959: Anatoly Trutko, a Soviet engineer, studies at Stanford University.
• 1962: Yuri Osokin creates the first Soviet integrated circuit.
• 1962: Khrushchev visits the Special Design Bureau in Leningrad and approves the creation of Zelenograd.
• 1963: Fairchild Semiconductor opens its first offshore assembly facility in Hong Kong.
• 1968: Bob Noyce and Gordon Moore leave Fairchild to found Intel.
• 1969: Intel launches its first product, the DRAM chip.
• 1972: Intel introduces the 4004 microprocessor.
• 1972: Texas Instruments develops the Paveway laser-guided bomb.
• 1977: William Perry becomes undersecretary of defense for research and engineering, pushing for advanced semiconductor-based military technology.
• 1980: Texas Instruments’ Taiwan facility ships its billionth semiconductor device.

This summary and timeline provide a comprehensive overview of the key developments and events in Part 2 of Chip War by Chris Miller.

Summary of Part III

Main Points

• Japanese Competition in the 1980s: The U.S. semiconductor industry faced severe competition from Japanese firms, which produced higher quality and more reliable chips. This competition led to a crisis in Silicon Valley, with many American companies struggling to keep up.

• Quality and Efficiency: Japanese companies like Toshiba, NEC, and Sony were producing chips with significantly lower failure rates compared to their American counterparts. This quality advantage was a key factor in their success.

• Economic and Technological Strategies: Japanese firms benefitted from government subsidies, protected markets, and cheap capital. This support allowed them to invest heavily in production equipment and R&D, outpacing American firms.

• Intellectual Property and Espionage: There were numerous instances of industrial espionage and intellectual property theft involving Japanese companies. These activities further strained U.S.-Japan relations.

• Government and Industry Response: In response to the Japanese threat, American semiconductor companies banded together to form the Semiconductor Industry Association (SIA) and lobbied the U.S. government for support. This led to initiatives like the Semiconductor Chip Protection Act and the creation of Sematech, a consortium aimed at improving U.S. semiconductor manufacturing.

• Strategic Importance of Semiconductors: The U.S. government recognized the strategic importance of semiconductors for national security, particularly for military applications. This recognition drove efforts to support and protect the domestic semiconductor industry.

• Cultural and Economic Differences: The book highlights the differences in business practices and economic strategies between the U.S. and Japan. Japanese firms focused on long-term planning and efficiency, while American firms were more concerned with short-term profits and innovation.

Timeline of Events

• 1980: Richard Anderson of Hewlett-Packard highlights the superior quality of Japanese chips at an industry conference.
• Early 1980s: Japanese firms like Sony introduce innovative products such as the Walkman, showcasing their technological prowess.
• 1981: GCA Corporation, a leading U.S. photolithography equipment maker, begins to struggle due to mismanagement and competition from Japan.
• 1981: FBI sting operation reveals industrial espionage by Hitachi employees.
• Mid-1980s: Japanese firms dominate the DRAM market, pushing American companies like Intel out.
• 1986: Formation of the Semiconductor Industry Association (SIA) by U.S. semiconductor companies to lobby for government support.
• 1987: Creation of Sematech, a consortium funded by the U.S. government and industry to improve semiconductor manufacturing.
• 1989: Publication of The Japan That Can Say No by Akio Morita and Shintaro Ishihara, highlighting Japan’s technological dominance and criticizing American business practices.
• 1990: Death of Robert Noyce, a key figure in the semiconductor industry and leader of Sematech.
• 1993: Closure of GCA Corporation, marking a significant defeat for the U.S. semiconductor equipment industry.

This summary captures the key themes and events from Part III of Chip War by Chris Miller, highlighting the intense competition between the U.S. and Japan in the semiconductor industry during the 1980s and early 1990s.

Summary of Part IV

Main Points

• Jack Simplot and Micron Technology:

  • Jack Simplot, an Idaho potato magnate, played a crucial role in reviving the American semiconductor industry by investing in Micron Technology.
  • Despite his lack of formal education, Simplot’s business acumen and strategic investments helped Micron survive and eventually thrive in the competitive DRAM market dominated by Japanese firms.
  • Micron’s success was driven by aggressive cost-cutting, innovative manufacturing processes, and strategic lobbying for tariffs against Japanese competitors.

• Intel’s Transformation:

  • Under Andy Grove’s leadership, Intel pivoted from DRAM production to focus on microprocessors, recognizing that they could not compete with Japanese firms in the memory chip market.
  • Grove’s management style was characterized by intense paranoia and a focus on efficiency, which led to significant restructuring and the adoption of rigorous manufacturing standards.
  • Intel’s shift to microprocessors paid off, especially with the rise of personal computers, securing Intel’s dominance in the PC chip market.

• The Rise of South Korea:

  • Samsung, under the leadership of Lee Byung-Chul, emerged as a significant player in the semiconductor industry with support from the South Korean government and partnerships with American firms.
  • South Korea’s lower production costs and strategic investments allowed it to compete effectively against Japanese firms.
  • The U.S. semiconductor industry supported South Korean firms to counterbalance Japanese dominance, leading to a shift in the global chip market.

• Technological and Military Advancements:

  • The resurgence of the American chip industry was not just about business but also had significant military implications.
  • DARPA and other government agencies played a crucial role in funding research and development, leading to advancements in chip design and new applications for semiconductors.
  • The Persian Gulf War showcased the effectiveness of precision-guided munitions powered by advanced microelectronics, highlighting the strategic importance of semiconductor technology.

Timeline of Events

• 1978: Joe and Ward Parkinson founded Micron Technology in Boise, Idaho, initially struggling against Japanese competition in the DRAM market.
• 1980: Jack Simplot invested $1 million in Micron, providing crucial financial support.
• Early 1980s: Intel, under Andy Grove, decided to exit the DRAM market and focus on microprocessors, a move that would later secure its dominance in the PC era.
• 1983: Lee Byung-Chul of Samsung decided to enter the semiconductor market, with significant support from the South Korean government.
• Mid-1980s: Micron implemented aggressive cost-cutting measures and innovative manufacturing processes, allowing it to compete effectively against Japanese firms.
• 1985-1988: The value of the Japanese yen doubled against the dollar, making American exports cheaper and benefiting U.S. semiconductor firms.
• 1991: The Persian Gulf War demonstrated the effectiveness of precision-guided munitions, underscoring the strategic importance of advanced semiconductor technology.
• 1993: The U.S. retook first place in semiconductor shipments, signaling the resurgence of the American chip industry.
• Late 1990s: South Korean firms, led by Samsung, overtook Japan as the world’s largest producers of DRAM.

Conclusion

Part IV of Chip War details the remarkable turnaround of the American semiconductor industry in the face of Japanese dominance, highlighting the critical roles played by unconventional entrepreneurs like Jack Simplot, strategic pivots by companies like Intel, and the rise of new players like South Korea’s Samsung. This resurgence was not only a business triumph but also had profound implications for military technology and global geopolitical dynamics.

Summary of Part V

Main Points

Chapter 29: “We Want a Semiconductor Industry in Taiwan”

• Morris Chang’s Role: In 1985, Taiwan’s Minister K.T. Li recruited Morris Chang to lead Taiwan’s semiconductor industry.
• TSMC’s Formation: Chang founded Taiwan Semiconductor Manufacturing Company (TSMC) with strong government backing, introducing the foundry model where TSMC would manufacture chips designed by other companies.
• Economic Strategy: Taiwan aimed to move up the semiconductor value chain from assembly to advanced chip production to compete with countries like South Korea and China.

Chapter 30: “All People Must Make Semiconductors”

• China’s Semiconductor Lag: China was technologically behind due to Mao’s policies, including the Cultural Revolution, which disrupted scientific progress.
• Economic Reforms: Post-Mao, China began integrating into the global economy, focusing on electronics assembly but lagging in semiconductor production.

Chapter 31: “Sharing God’s Love with the Chinese”

• SMIC’s Establishment: Richard Chang founded Semiconductor Manufacturing International Corporation (SMIC) in 2000 in Shanghai, aiming to replicate TSMC’s success with significant government support.
• Challenges and Progress: Despite vast subsidies and foreign expertise, SMIC struggled to match TSMC’s technological advancements but made significant strides in the foundry business.

Chapter 32: “Lithography Wars”

• EUV Lithography Development: Intel invested heavily in extreme ultraviolet (EUV) lithography to continue Moore’s Law, partnering with ASML, a Dutch company, as the primary developer of EUV tools.
• Global Supply Chain: The development of EUV technology highlighted the increasing globalization and monopolization within the semiconductor manufacturing equipment industry.

Chapter 33: “The Innovator’s Dilemma”

• Intel’s Strategic Decisions: Intel’s focus on high-margin PC and server chips led it to miss opportunities in the mobile market, including turning down Apple’s request to develop chips for the iPhone.
• ARM’s Rise: ARM’s architecture, optimized for mobile devices, gained prominence as Intel’s x86 architecture dominated PCs and servers but failed to penetrate the mobile market.

Chapter 34: “Running Faster?”

• Offshoring Concerns: Andy Grove expressed concerns about the offshoring of advanced manufacturing jobs and the potential long-term impact on U.S. technological leadership.
• U.S. Semiconductor Ecosystem: Despite offshoring, the U.S. maintained leadership in semiconductor design and manufacturing equipment, though reliance on foreign fabs increased.

Timeline of Events

• 1968: Morris Chang visits Taiwan.
• 1980: Taiwan founds UMC, its first chipmaker.
• 1985: K.T. Li recruits Morris Chang to lead Taiwan’s semiconductor industry.
• 1987: Morris Chang founds TSMC.
• 1990s: TSMC grows rapidly, becoming a key player in the global semiconductor industry.
• 2000: Richard Chang founds SMIC in Shanghai.
• 2001: ASML buys Silicon Valley Group, consolidating the lithography market.
• 2004: SMIC lists its shares on the New York Stock Exchange.
• 2006: Apple announces it will use Intel chips in Mac computers.
• 2010: Andy Grove expresses concerns about offshoring and its impact on U.S. technological leadership.

This summary captures the key developments and strategic decisions that shaped the semiconductor industry in Taiwan and China, the evolution of lithography technology, and the broader implications of globalization on the semiconductor supply chain.

Citations:
[1] https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/7742445/69a76238-1255-478c-b847-42231a611e8f/Chip-War-Chris-Miller-2022-pages-233-287.pdf
[2] https://search.library.yale.edu/catalog/b1873894>)

Summary of Part VI

Main Points

• Offshoring Innovation: The semiconductor industry has increasingly moved manufacturing offshore, particularly to East Asia, while maintaining design capabilities in the U.S.
• “Real Men Have Fabs”: Jerry Sanders, founder of AMD, emphasized the importance of owning fabs despite the rising trend of outsourcing manufacturing to foundries like TSMC.
• The Fabless Revolution: The rise of fabless companies, which design chips but outsource manufacturing, has transformed the industry. Notable examples include Nvidia and Qualcomm.
• Morris Chang’s Grand Alliance: TSMC’s founder, Morris Chang, created a collaborative ecosystem involving various companies to maintain technological leadership.
• Apple Silicon: Apple has become a significant player in chip design, outsourcing manufacturing to TSMC, which produces the processors for iPhones and other devices.
• EUV Lithography: The development of extreme ultraviolet (EUV) lithography by ASML has been crucial for continuing Moore’s Law, enabling the production of smaller and more powerful chips.
• No Plan B: The semiconductor industry’s reliance on EUV lithography means there is no alternative for continuing advancements in chip manufacturing.
• Intel’s Decline: Intel has struggled to maintain its leadership in chip manufacturing, facing delays and competition from TSMC and Samsung.

Timeline of Events

• 1980s: Rise of fabless companies begins with the founding of Chips and Technologies.
• 1993: Nvidia is founded and later becomes a leader in graphics processing units (GPUs).
• 2005: Morris Chang steps down as CEO of TSMC but remains chairman.
• 2007: Apple launches the iPhone, initially using chips designed by other companies.
• 2008-2009: Financial crisis impacts the semiconductor industry; TSMC invests heavily to maintain leadership.
• 2009: GlobalFoundries is established as an independent company after being spun off from AMD.
• 2010: Apple launches its first in-house designed chip, the A4.
• 2012: Intel, Samsung, and TSMC invest in ASML to support EUV lithography development.
• 2013: Morris Chang retakes control of TSMC to drive investment in new technologies.
• 2015: GlobalFoundries cancels its EUV program and decides not to pursue 7nm process technology.
• 2018: Intel faces significant delays in its 10nm and 7nm manufacturing processes.
• 2020: TSMC and Samsung become the only companies capable of manufacturing cutting-edge processors using EUV lithography.

This summary captures the key points and timeline of events from Part VI of Chip War by Chris Miller, highlighting the major shifts and developments in the semiconductor industry.

Summary of Part VII

Main Points

• China’s Digital Security Concerns: Xi Jinping emphasized the importance of cybersecurity and informatization for national security and modernization. Despite China’s advanced internet control, Xi was concerned about the reliance on foreign semiconductors, which he saw as a significant vulnerability.

• Made in China 2025: This plan aimed to reduce China’s dependency on imported semiconductors from 85% in 2015 to 30% by 2025. The strategy included massive government subsidies, technology transfer, and fostering domestic semiconductor production.

• Technology Transfer and Partnerships: Chinese firms and the government have aggressively pursued technology transfers from Western companies through partnerships, investments, and sometimes coercion. Notable examples include deals with IBM, Qualcomm, and AMD.

• Tsinghua Unigroup’s Investments: Led by Zhao Weiguo, Tsinghua Unigroup made significant investments in both domestic and international semiconductor firms, aiming to bolster China’s capabilities in chip design and manufacturing.

• Huawei’s Rise: Huawei’s growth into a global telecom giant was supported by substantial government subsidies and strategic investments in R&D. The company has been pivotal in China’s push towards technological self-sufficiency, particularly in 5G technology.

• Military Implications: The future of warfare is increasingly reliant on computing power and AI, areas where China is making significant investments. The U.S. military’s technological edge is threatened by China’s advancements in semiconductors and AI.

Timeline of Events

• 2014: Xi Jinping declares the importance of cybersecurity and informatization. China launches the “Big Fund” to support semiconductor development.

• 2015: IBM CEO Ginni Rometty offers semiconductor technology to China. Qualcomm enters a joint venture with Huaxintong to develop server chips.

• 2016: AMD licenses x86 chip technology to Chinese firms. China announces the Made in China 2025 plan.

• 2017: Xi Jinping speaks at Davos, emphasizing China’s commitment to globalization. Tsinghua Unigroup attempts to acquire U.S. and Taiwanese semiconductor firms.

• 2018: Arm spins out its China division, selling a majority stake to Chinese investors.

• 2019: Qualcomm-Huaxintong joint venture closes. Huawei becomes TSMC’s second-largest customer.

• 2021: DARPA launches the Electronics Resurgence Initiative to maintain U.S. technological superiority in semiconductors.

Implications

• For the U.S.: China’s aggressive push for semiconductor self-sufficiency poses a strategic threat to U.S. technological and military dominance. The U.S. must innovate and invest in its semiconductor industry to maintain its edge.

• For Taiwan: Taiwan’s semiconductor industry, particularly TSMC, is crucial to global supply chains and U.S. national security. Any disruption in Taiwan could have significant global repercussions.

• For Global Trade: China’s drive for self-sufficiency in semiconductors could reshape global trade flows, impacting economies dependent on semiconductor exports.

Conclusion

Part VII of Chip War details China’s strategic efforts to overcome its dependency on foreign semiconductors through government policies, technology transfers, and significant investments in domestic capabilities. The implications of these efforts are profound, affecting global trade, U.S. national security, and the future of technological innovation.

Summary of Part VIII

Part VIII of Chip War by Chris Miller, titled “The Chip Choke,” delves into the escalating competition between the United States and China over semiconductor technology. This section highlights the strategic importance of semiconductors, the geopolitical maneuvers surrounding their production, and the specific challenges faced by the U.S. and China in this high-stakes arena.

Key Points

• China’s Semiconductor Ambitions: China has been aggressively investing in its semiconductor industry, with substantial government subsidies aimed at reducing reliance on foreign technology and achieving technological independence.
• U.S. Concerns and Actions: The U.S. government has become increasingly concerned about China’s advancements and has taken steps to curb China’s access to critical semiconductor technologies through export controls and sanctions.
• Geopolitical Implications: The semiconductor industry is not just an economic battleground but also a critical component of national security. The U.S. and its allies are wary of China’s growing influence and potential control over global semiconductor supply chains.
• Taiwan’s Role: Taiwan, home to TSMC (Taiwan Semiconductor Manufacturing Company), plays a pivotal role in the global semiconductor supply chain. The island’s strategic importance has made it a focal point of U.S.-China tensions.
• Supply Chain Vulnerabilities: The COVID-19 pandemic exposed vulnerabilities in the global semiconductor supply chain, leading to significant shortages and highlighting the need for more resilient and diversified production capabilities.

Timeline of Events

• 2015: Intel’s CEO Brian Krzanich expresses concerns about China’s semiconductor subsidies and their potential impact on the U.S. chip industry.
• Late 2016: Commerce Secretary Penny Pritzker addresses the importance of maintaining U.S. leadership in semiconductor technology and condemns China’s trade practices.
• 2017: The Trump administration begins to take a more aggressive stance against China’s technological advancements, with a focus on semiconductors.
• 2018: The U.S. government reimposes restrictions on ZTE, a major Chinese telecom company, for violating sanctions, highlighting the reliance of Chinese firms on U.S. semiconductor technology.
• 2019: The U.S. tightens restrictions on Huawei, another major Chinese tech firm, further escalating the tech conflict between the two nations.
• 2020: The COVID-19 pandemic exacerbates global semiconductor shortages, affecting various industries and prompting governments to reassess their supply chain strategies.
• 2021: The Biden administration continues to emphasize the importance of semiconductor manufacturing and research, urging U.S. companies to increase their investments in these areas.
• 2021-2022: The U.S. and its allies impose additional restrictions on Chinese tech firms, aiming to limit China’s access to advanced semiconductor technologies.

Conclusion

Part VIII of Chip War provides a detailed examination of the strategic and geopolitical dimensions of the semiconductor industry. It underscores the critical importance of semiconductors in modern technology and national security, while also highlighting the ongoing rivalry between the U.S. and China. The section concludes with a focus on the need for resilient and diversified supply chains to mitigate future risks.