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consumer electronics cars
medical devices planes smart appliances
their common component chips you don't
buy them directly but trust me
you need them so when the silicon chips
are down
what happens well we're finding out
the auto sector has been hit hard with
car companies around the world
pulling the brakes on production
although they're not the only ones
makers of gadgets and popular
electronics are feeling it too
the chip shortfall is also feeding into
existing
international relations issues and
demand
linked to future uses doesn't really
look like it's about to slow
okay so maybe that last bit is a bit
tangential
but you get the picture the chip
shortage could be why you're having a
hard time
finding a ps5 or a flex fan passat
about one trillion chips are made a year
that's about 128 for every person
on the planet suffice to say the world
runs on chips semiconductors so why are
we coming up short
the many factors contribute to the chip
shortage that we see today
the cobit 19 pandemic plays a
significant role
the pandemic changed consumer behaviors
we're buying
personal computers new phones
new tablets xboxes
so we can work from home and to cope
with the lockdowns
and companies upgrading their digital
infrastructure to enable remote working
and all these purchases are driving up
the demand for chips
at the beginning of pandemic we have
estimated an economic downturn
industries such as the automakers they
slash the chip purchases
and but the economy in east asia bounced
back sooner than
expected with more demands for cars
car makers keep limited inventory so
right now they are
buying buying buying as the corona virus
crisis
reshaped supply and demand chip
companies are scrambling
and if there's an industry that can't
simply quickly ramp up production
or ask its clients to do without its
products for a while
or shift its manufacturing elsewhere
rapidly it's the chip industry
supply chains have been spread across
countries as the cost of communication
has gone down
along with you know the cost of
transportation so this was largely seen
as a good thing to spread the production
of semiconductors out of their high-tech
components across countries
you know kind of based on some sort of
fundamental theories of economics and
that
by doing so you could reduce the cost of
production thereby
increasing efficiency but in the past
several years as
concerns over technology and you know
technological sovereignty have grown
um this has been coming to be viewed as
a
geopolitical risk rather than you know
economic benefit
hold that thought geopolitical
complexity
is going to figure in this so let's run
through the basics
one every country in the world needs
chips
two chips are complicated to produce and
three because the world economy runs on
chips
who makes them and who is able to buy
them goes a long way towards
defining who stagnates and who
progresses
one expert likens it to one other
commodity that's seen its own share of
geopolitical contentiousness
relates to the district they are as
they've been called the new oil in the
digital age
everything from your phone to your air
conditioning
and everything in between of course uses
chips and of course
as technology becomes more central chips
become more important
and most importantly the ability to
manufacture smaller and smaller chips
that can do more
is is absolutely critical talking about
smaller and smaller chips that can do
more
makes it a good time to introduce this
guy gordon moore
co-founder of american chip champion
intel in 1965 he said that the number of
transistors
the active component of chips that could
fit onto one chip
would double every two years or so
meaning computers can be expected to
double their efficiency in that
time as costs fall by half it's not
really a law
but it is kind of a guiding principle
increasing power but decreasing size
you've probably felt that happening
that's how we went from this
to this as next generation
super fast 5g connectivity becomes more
common
the internet of things continues to
expand and ai powered tech improves
the appetite for increasingly powerful
chips of various kinds
is going to grow accordingly and the
more powerful chips become
the more specialized their manufacturer
and the fewer
the producers that are able to do it
here are the so-called big three of
chips producers
intel from the us samsung from south
korea
and tsmc from taiwan they're considered
companies at the industry's leading edge
meaning they can make the world most
advanced chips
they're not the same kinds of companies
samsung and intel
are what you would call integrated
device manufacturers
meaning they can design manufacture and
sell the chips from start to finish
tsmc is what you would call a foundry
meaning they make chips for companies
without factories themselves or fabs as
they're known in
industry parlance those fabs by the way
become more expensive with each
generation of chip
the cost to build a facility with five
nanometer production lines
is at least 5.4 billion dollars
according to consulting firm mckinsey
one example of that five nanometer chip
is the a14 bionic
apple says it's the fastest available
chip on a smartphone
and it's found in the iphone 12. those
chips are made by tsmc
it might not be a household name to most
consumers the way apple is
but apple couldn't have done it all
without tsmc
for that matter neither could apple
competitors like chinese tech giant
huawei
now tsmc and its home country taiwan
is in a unique position this is all part
of the geopolitical complexity we were
talking about earlier
so here you have this hugely important
industry
located in taiwan and taiwan of course
is you know right in the center of this
of geopolitical struggle
the communist party now make no clams
about saying that taiwan is an
ineligible part of china that is only
waiting for reunification
they whether they have they don't have a
publicly stated timetable per se but
they make no qualms about it
they have not renounced violence to
reunify the country
as they see it and so in taiwan you
could certainly be
see as being a very real flashpoint
really whether or not china
successfully invaded taiwan it was like
almost guaranteed that the semiconductor
industry
and you know the global supply chains
would be disrupted by this
there's also some concerns that if
successful that
china would take over taiwan's
manufacturing industry
or the semiconductor industry and
because of taiwan's critical role in the
manufacture of these chips
that could be relatively problematic for
the companies that
use tsnc to taiwan so there's some
discussions that
if china did take over tsmc
that china could put members of the
chinese communist party on the board or
you know exert
other influence through other ways chips
being as important as they are they
figure prominently in the often
intertwined discussion of security and
technological advancement
just think of the u.s coming up with its
special kind of list
an entity list that places companies
and persons for the for behaviors
contrary to u.s national security
interests and foreign policy interests
so let's say human rights violation will
account for one
ip theft will be another one and
one notable company you may have heard
is the chinese
telecom giant huawei in the summer
of 2020 the u.s also places
lists of chinese and russian military
end users to the entity list
so china's smick the short for
semiconductor manufacturing
international corporation
also made it onto the list because of
its ties with the pla
by this point u.s mid-chips are
essentially off-limits
to china incidentally this also
contributed to the massive chip shortage
we were talking about earlier
when smick got blacklisted by the u.s
that meant it couldn't purchase
advanced manufacturing gear from the
united states
so the sanctions prompted some of mixed
chip buyers
to shift their orders to tsmc thereby
helping to create a bottleneck
china had also been stockpiling chips
from elsewhere in order to circumvent
u.s sanctions
now its ambitions to become the world
leader in tech are well established
and semiconductors are a key part of
that the restrictions are a threat to
that plan
but china has been building its own
strategy
so china has worked for several decades
to develop its semiconductor industry
it has poured money into this
but really the past several years this
drive has been accelerated
as china's vulnerabilities in
semiconductors has been made so clear by
u.s sanctions
we see this by companies like huawei
pouring money into
chinese startups and other semiconductor
companies across the
industrial value chain but it really
remains seen whether or not china
and you know the chinese companies will
be successful at doing this so they're
starting from uh
from certainly a a backward position
and then they've got a lot of ground to
make up and they also are now
entering a pace a phase where there
simply isn't the trust
that is there chip design relies on a
whole
slew of components and inputs from
global chains
of engineers and companies and that's a
chain of trust which china is simply
outside at the moment
so it's going to be very difficult to
simply say
in five years we're going to bleeding
design companies
you can look across a number of
industries in china whether it be you
know high-tech industries difficult
industries like airline commercial
airlines
china's been trying to do that for 30
years with very little success
for the size of its economy it may
demand great things it may put them in
the plan
there may be political imperatives but
it takes a lot of work to get there and
there is no
certainty they're going to get there
from where they are today
so once again in broad strokes the us
and china both want to be
the tech superpower the us has accused
china among other things
of intellectual property theft and of
human rights violations
and has blocked certain chinese
companies from accessing
u.s technology china is spending
billions in order to be able to
decrease its dependence on tech imports
thereby also reducing its vulnerability
to sanctions put in place in part to
punish aggression
and deter future belligerence like say
towards taiwan
and that's why chips are the new
economic security and geopolitical
flashpoint
the question is what should be done i
think much of the
well the ideas behind some of the us
policy were correct i think the
implementation was pure
and certainly the global coordination
was poor and i think that's
something that needs to be addressed and
again
how do we use these whether it is
sanctions or how we use this leverage
and a positive way to actually get
better outcomes
it is and then that's what's been
missing in much of the us policy
a successful policy needs balance
business interests and also national
security concerns and
an ideal approach will be floor lateral
with
like-minded countries instituting
similar policies
at the same time as it so often is
the answer is working together whatever
global challenge is coming up
be it the next pandemic climate change
food security
technology and therefore chips are going
to play an outsized role
it's in all countries interest to ensure
a dependable supply
investing in research and development
and manufacturing closer to home
having more and varied suppliers and
making the supply chain shorter
are key and while semiconductors are a
source of political sensitivity
they're also a reminder of an
interlinked interdependent global
economy
so when the chips are down it's a good
time for countries of the world to think
of how they can get it back up
in cooperation