People have murdered each other en masse over resources since the dawn of time.
It started with gold and spices and has slowly moved on to oil and… microchips?
Today you’ll find out why this trivial good is so important to every country on the planet,
and why it might spark World War 3.
In the future, those who control the microchip business will control the world.
People have known for years about the possibility of technology wars.
Maybe you haven’t been paying attention, but the precursor to these deadly wars is
already taking shape.
Every device you hold in your hand has invisible blood seeping through its internal organs.
That phone or laptop looking straight back at you has caused pain and anguish somewhere
down the line, and it will only get worse.
Let us explain.
Your phone is like a sausage.
That’s because, like a sausage, you most likely don’t know what’s in your phone,
and let’s face it, you don’t really want to know.
Where phones and sausages are concerned, ignorance is bliss.
Because phones are so complicated, they rely on a range of resources and technology, most
of which are also found in other tech critical to our day to day lives.
So before we tell you why microchips might cause World War 3, we should explain why other,
perhaps smaller wars will start or have already started over resources critical to modern
technology.
For a start, your devices need batteries, and those batteries are partly made out of
cobalt.
Cobalt comes into play when you pick up your phone, fire up your PC, or turn the ignition
key in your super green electric car.
And much of the world’s cobalt is in the country of The Republic of the Congo, where
right now, little kids are being worked half to death in what some people call modern-day
slavery.
These workers, many of whom are children, are paid as little as $2 a day to mine that
cobalt, working 12-hour shifts in dangerous, toxic conditions, sometimes with guns not
so far away from them.
Congolese cobalt goes into 75 percent of the world’s batteries, according to a man that
has researched this modern-day human rights disaster as much as anyone, Mr. Siddharth
Kara.
He once explained: “You cannot send an email, check social
media, drive an electric car or fly home for the holidays without using this cobalt.”
As we said, phones are like sausages, so don’t expect Apple or any other big tech firm to
talk too much about how much they need cobalt for just about every single one of their swanky
products.
After all this would be very bad PR.
There’s no escaping it.
Every firm that uses lithium batteries needs cobalt, with the largest of those companies
coming from the US and China.
You’re going to hear those two nations in the same sentence a lot more today.
So, before we even get to microchips, just know that these upcoming wars will be about
various other natural resources needed in electronic devices.
For a long time now, we’ve known about so-called “conflict minerals” coming from Africa,
sometimes called 3TG, because they include the metals tantalum, tin, tungsten, and gold.
The US expects its companies to do audits on their supply chains, but as things stand,
the demand for electronic goods outweighs ethical concerns, and anyway, the suppliers
in Africa can easily fob the companies off by making conditions look ethical.
The same goes for China’s cobalt business.
If you were to pull apart that sausage, besides the battery and other parts that contain minerals,
you’d also find the microchip.
This is a small bit of semiconductor material that contains an electronic circuit.
We won’t get into the nitty-gritty, but we will tell you that microchips are used
to control all those wonderful functions in your devices.
Microchips are a major organ; without them, devices and other electronic gadgets and tools
you use would not work.
They are the lifeblood of computer technology.
If batteries are the beating heart, microchips are the brains of the business.
Now you need to hear some good news.
Microchips are usually made out of silicon, hence the name Silicon Valley.
Do you know what’s good about silicon?
It’s made out of silica, which is found in sand, and unlike cobalt and other conflict
minerals, sand is pretty much everywhere.
Some of the biggest silica mines are found in the US, Australia, Russia, China, and Brazil.
We’re not going to run out of sand anytime soon.
So, you might think that a Cobalt War is more likely to happen than a Microchip War since
the stuff that goes into making microchips is plentiful and found all over the planet.
What we’ll say about that is that conflicts have been fought over many types of resources
throughout history, such as when the Europeans were scrapping over all kinds of spices back
in the day.
Modern conflicts might be fought over computer technology's heart and brains, and the materials
required for it.
Right now, the fight for Congo’s cobalt is heating up, especially between the US and
China.
According to the experts, China is winning.
It’s been playing the game it’s played all over the world of late, sinking tons of
money into nations and territories it will need in the future.
China likes to play the long-game.
Congo used to be more pally with the US, but that’s changed now.
This is not a great time for a switch of friends since everyone is talking about the green
revolution.
This means cobalt-rich batteries in electric vehicles will be absolutely everywhere.
One Tesla car battery can hold about 400 times more cobalt than the average phone.
In some ways, cobalt is the new oil, so of course, there are going to be conflicts over
it.
The New York Times explained in 2021: “China is so far winning that contest, with
both the Obama and Trump administrations having stood idly by as a company backed by the Chinese
government bought two of the country’s largest cobalt deposits over the past five years.”
As US influence in the region dwindles, the global superpower is finding it hard to get
cheaper batteries because right now, a lot of its cobalt is coming from two other nations
where the mineral is found: Australia and Canada.
That means more expensive labour and more expensive batteries at the end of the day.
Ironically, because China has been able to produce cheaper batteries, it’s helped move
people towards using electric vehicles, which is what many environmentalists are asking
for.
It seems the Congolese miners are suffering for what is arguably the greater good.
On the other hand, China has invested tons of money there, which has gone or is going
towards building railway lines, roads, public housing, hospitals, health centers, water
treatment facilities, sports stadiums, and even universities.
It’s no wonder China is winning the cobalt war so far.
But let’s see what happens as we get closer to 2030, which is the year the International
Energy Agency says the great cobalt shortage will happen.
In the meantime, chips are the things to fight over, even if they are made out of widely
available sand.
It’s not the sand creating the concern; it’s the ability to make chips and make
enough of them for all you consumers…and, importantly, the military.
In 2021, sales of chips globally added up to $555.9 billion, which was up 26.2% from
2020, and it’s expected that the chip industry is just going to get bigger and bigger as
each year passes.
1.15 trillion chips were shipped in total in 2021, but the demand still outstrips the
supply.
This means we have a chip problem.
As the demand for consumer electronics grows, we are entering what some people have called
a global chip crunch.
This is why chips are sometimes referred to as digital gold.
The US used to be the biggest manufacturer of this digital gold, but those days are long
gone.
Around 72 percent of the world’s chips are currently made in Asia, with the leading Asian
nations being Taiwan, South Korea, China, and Japan.
According to The Washington Post, in 2021, the US had about a 13 percent global market
share in terms of production capacity, and the EU and the rest of the world about 15
percent.
The world’s leading company in chip production is Taiwan Semiconductor Manufacturing Company
Limited, TSMC, which can produce really simple chips but also very high-end chips.
It’s important to know this since many of the newest things in tech, such as items containing
advanced artificial intelligence, require a certain kind of high-end chip.
Think about future wars, which will require weapons that need these chips.
The chip problem is a lot bigger than you not being able to get the best kind of home-grown
phone.
It’s also about military power.
The US has been left behind where these high-end chips are concerned, so if you read the news
today, you’ll see it is doing everything it can to catch up.
In 2022, it was reported that under Joe Biden, the US passed new legislation for microchip
production and research costing about $52 billion.
It might make Americans feel less worried when they see that TSMC has just sunk about
$12 billion into building a semiconductor fabrication plant in Arizona, which should
start producing digital gold in 2024.
Around the time this was reported, Biden said on Twitter, “America is going to lead the
way in microchip manufacturing.”
We might call that high hopes, but it’s what Americans might want to hear.
The US being friendly with Taiwan has got nothing to do with making the average Taiwanese
guy and gal have better lives, just as China throwing money at Congo isn’t about the
average Congolese fella’s general well-being.
This is about war and those economic interests we talked about earlier.
China might be winning the cobalt war, but you can be sure that the US is doing everything
to ensure China doesn’t win the chip war.
You might have heard about some new US legislation that is supposed to cripple China’s high-end
chip industry.
The new laws make it really hard for China to produce its own high end chips and get
them from other countries.
That’s because the US has banned its own companies from buying chips from China and
also put restrictions on other companies selling to China if US technology is involved somewhere
in the manufacturing process.
This has been done in the name of national security, which might sound overboard if you
haven’t thought about what’s coming down the line in the future.
One of the major reasons why the US got left behind is it couldn’t compete with Asian
nations when it came to the foundries where the chips are made.
Labor costs a lot of money in the US.
It doesn’t in Asia.
It’s thought that it's about 50 percent cheaper to produce chips in Taiwan than it
is in the US.
Let’s note here that labor in China also costs a lot less than it does in the US, and
let’s face it, because of general Chinese culture and status quo, it is easier to get
your people together behind a flag and then work themselves into a frenzy - all in the
name of their beloved nation.
In liberal democracies, people spend a lot of time talking about rights, labor rights,
and human rights.
When it comes to manufacturing, it’s really hard to beat China, which isn't so rights-based.
This is why many Chinese factories have safety nets near all of their windows.
The stress that comes with working in these conditions often leads to near unbearable
amounts of mental strain.
These factories were making devices for Apple, so there was a massive uproar when Americans
learned about the working conditions involved in making their beloved iPhones.
This is what we mean by the US being rights-based and why it just can’t compete with China
in terms of labor.
It’s why some US companies want to keep doing business with China, and others say
it’s time to bring the work back to the US.
But as we said, the US just kicked China where it hurts when it made sure that China would
really struggle to get the advanced chips it needs.
Sure, China already has its own chip production facilities, but like the US, it has relied
mostly on imports for the good stuff.
China’s largest chip manufacturing company, SMIC, is currently nowhere near being able
to produce high-end chips for high-end goods.
Again, you need to think about weapons here, these chips aren’t fueling just gadgets
and AI helping high school kids cheat on their essays.
No sooner was China wiping the egg off its face after the US’s trade war low blow than
it announced it was spending $143 billion on new chip manufacturing initiatives.
New plants and factories are opening as you watch this.
The Chinese government is now saying it will be technologically self-sufficient soon in
regard to chips and other computer tech.
However, experts outside of China say it will be more like 10 to 15 years before China doesn’t
need chips from other countries.
So, in the meantime, China needs help, and other countries in Asia are where it expects
to get that help.
In 2022 alone, it imported US$79.4 billion worth of chips just from TSMC, which was about
15 percent more than it did in 2021.
As you know, the US is doing everything it can do right now to stop this.
Taiwan is stuck in the middle of a China-US trade war, but let’s face it, that’s not
such a bad thing right now in terms of its economy.
Taiwan holds a lot of power in its hands.
As one US pundit put it, “Taiwan is in a prime position to benefit from the trade diversionary
effects of the U.S.-China trade war.”
Just remember, though, that throughout history, being stuck in the middle of power struggles
between rich nations has worked out badly for certain nations.
Ok, now you understand the general situation regarding the modern commodities that countries
would be willing to fight over.
You might be wondering, though, why everyone can’t just get along.
Why fight?
Why not just share the spoils of technology and make sure the citizenry of their nations
can relax and bask in their relatively massive GDPs?
We’re not sure if you’re familiar with the realist interpretation of international
relations.
Long story short all countries vie for more power, and that’s all they want.
It’s the natural order of things.
It’s not very romantic or idealistic.
Morality doesn’t come into play at all.
The balance of power has been on the US's side for a long time, at least after WW2,
but that’s been changing.
China has been growing and becoming more powerful, and the US doesn’t like this.
Still, it has sat and watched China grow, and for the last decade or so, it has witnessed
China making friends all over the world by investing in nations…
such as Congo.
The US has also helped to make China so rich by importing goods that have ensured you get
great deals on your gadgets and just about anything else you can buy in stores.
This is a simplification of things, but it’s true enough.
According to political realists, it’s a good thing when one nation is the sole superpower
because that power keeps everyone in line.
They call this unipolarity.
Every nation knows its place in a unipolar reality.
But now, with China becoming such a formidable upstart, we might soon have bipolarity.
This might mean war, which in its worst manifestation, is nuclear war.
Why are we telling you this?
The answer is that China needs chips to keep growing.
Chips mean power, chips mean bipolarity, and may mean China becomes the world’s superpower,
and like the US does now and has been doing for decades, perhaps China in the future will
police the world and pretty much do what it likes in line with its economic interests.
Just the thought of that happening is enough to make politicians in Washington weep like
a child.
No matter their political orientation, this is their biggest fear.
The major threat is not Russia.
It’s China.
The politicians doubt Russia will resort to using nukes, and it can’t threaten the US
economically.
In the greater scheme of things, Russia doesn’t worry the US, even as war rages in Ukraine.
After many billions have flooded into the US arms industry and made many people rich,
and after many die on the battlefields and in their homes, the Ukraine situation they
believe will sort itself out.
The China situation won’t.
China isn’t going away.
China is Enemy Number One.
Make no mistake about that.
So again, this is why the US is trying so hard right now to get a stronghold on the
global chip market.
It knows it might soon have to face off with China in a bipolar reality.
It will need the most advanced chips for general infrastructure but also for things such as
uber-modern aircraft and hyper-clever intelligence tools.
All kinds of military applications require these modern chips.
The most sophisticated weapons need the most sophisticated chips, as do high-end communications
systems, surveillance drones, and stuff like augmented reality glasses that give soldiers
improved battlefield situational awareness.
Even 3-D printing will play a part in making new weapons.
Right now, military pundits are saying 3-D printing will soon be a critical capability
in upcoming wars.
Both China and the US want to monopolize the chip market for this reason.
Whoever rules the chip industry rules the roost.
Forget about nukes.
Nukes mean mutually assured destruction, and no one wants that.
Power will boil down to not who has the most nukes but who has the best and most chips.
This means that if China somehow pulls ahead of the US in chip manufacturing, the US will
have no choice but to resort to plan B. It will attack China’s chip industry somehow,
and go up against any nation that is helping China.
It will mean war.
Proxy wars will be common.
Since the world in the future will be less an oil and gas world and more an electric
world, the fighting will also take place over Congolese cobalt, and that might mean proxy
wars and proxy conflicts.
It’s not like rich countries, especially the US, haven’t caused a million of those
things before, including in Africa.
Asia may also turn into a battleground, just as it was in the past.
Let’s remember that China has been steadily building up its number of allies by investing
heavily in nations in Asia and beyond.
The US has also ensured that it has an alliance network in Asia which means in case of conflict
these two spheres of influence will clash in a bloody war over resources.
We aren’t there yet, but trust us, at some point, if China or the US loses a lot of ground
regarding chips or even batteries, something is going to crack.
The levy that’s been holding back two great forces will break.
Right now, we are at the beginning of a technological Cold War.
What you are seeing right now in this nascent fight for chips and other computer components
are the first sparks that could ignite a new arms race.
When the war happens, forget about four-manned tanks trudging over muddy fields and battlelines
of men freezing to death in winter far from their homes.
The next war will be brought to you by unfeeling machines.
They will be manned in quiet rooms by soldiers who look more like computer geeks, who might
merely ensure machine-learning algorithms are killing the right number of people in
the right places in accordance with updated UN conventions on technological warfare.
That folks, is why chips are going to change your life in many ways, good and bad.
Now you need to watch “China's Plan to Take Over the World.”
Or, have a look at something we talked about in this show, “How US Just Paralyzed Chinese
Manufacturing Overnight.”