There is no excuse, so let me state it plainly: the United States does not have a competitive domestic computer chip industry and will not have one for the next decade. China occupies Taiwan and takes control of TSMC (Taiwan Semiconductor Manufacturing Company, the world’s first and most important dedicated chip manufacturer). And the United States continues to buy TSMC chips with CCP backdoors in them and pretends everything is fine.
This is the sad reality of Intel
Failure To provide an alternative to TSMC. The idea of bringing cutting-edge chip manufacturing back home is clearly a fairy tale now. But it’s not just Intel’s fault. The problems that got us here are all part of the massive offshoring of American manufacturing over the last 30 years, and they won’t be solved by just imposing a few tariffs and throwing billions of dollars at propping up Intel.
If we cave in and help China keep TSMC running, perhaps with face-saving rhetoric, we will be continuing the efforts of the last 30 years to optimize cheap products at the expense of national sovereignty. That is the path to continuity.
In the midst of this disaster, we need a complete overhaul of American industrial policy, and semiconductor manufacturing is a big part of that effort, but even if we could get together and start doing this, we would only be able to get through a long period of time during which the Chinese Communist Party has root access into our systems and can steal or destroy our stuff.
At least China doesn’t want to completely destroy the US, because they need a country big enough to buy their products in bulk. The US has to remain functional to support Beijing’s continued rise to global dominance, and of course the US supplies some of the key components to the cutting edge chip foundries TSMC needs to run. So keeping the US second or third in the world is a win for China and for us.
And we accept it because we have no other choice. We can’t just take Apple, Google, NVIDIA, etc. out behind the barn and shoot them. We’ll keep buying TSMC’s products and pretend everything’s fine. We’ll get through the digital revolution as a country, but we’ll take a step (or two, or three) back.
Yes, we should have thought about this when we had the choice. We shouldn’t have forgotten about the chips and handed the factories over to China! The whole industrial policy was obviously and incredibly stupid. But here we are, so we just have to live with it.
Now some would argue that TSMC’s massive, high-profile expansion fab in Arizona is what will get us out of this mess. Unfortunately, the Arizona fab has always been backward and negligible in terms of its impact on the US chip problem. How could it not be? Why on earth would TSMC do anything concrete to reduce our dependency? LOL.
Moreover, if TSMC is already covertly captured by the Chinese Communist Party (as some in Washington DC and Silicon Valley believe is likely), then China itself would be giving up its ultimate leverage over us by reducing its reliance on TSMC, and even if it isn’t, we certainly wouldn’t want to make it less likely that we’d come to Taiwan’s aid if China were to make a move on Taiwan.
No matter how you look at it, TSMC’s Arizona factory was the industrial policy equivalent of national security theater: It may have been a good idea if it had been executed, but it was not a realistic plan for breaking away from dependence on China for transistor supplies.
So this Intel debacle is so severe that there is no real light at the end of the tunnel other than the oncoming train. There are no quick fixes or ways to throw billions of dollars (borrowed money) at this problem that will bring about substantial change in the short term. It’s all an illusion.
We have to find the will to reindustrialize, and we have to do it in a world where China is basically ahead of us. We’re very fortunate that China has its own big problems. China is causing its own dominoes to fall from decades of bad decisions. It’s good to be bullish on America, but we have to be bullish on ourselves as underdogs.
We are going to have a long journey back from behind. Even if you can’t see it yet, you will see it eventually. It’s better to start now.
A bitter pill to swallow
I received a lot of responses to my recent post.
Intel/TSMC Threads “If China invades they will surely blow up a manufacturing facility,” “Why not blow up a manufacturing facility,” etc. The Taiwan Semiconductor Manufacturing Company is destroyed, which is the scenario I outlined in this article. article This has been said for several years now, and is a roundabout way of saying that I am not going to take NVIDIA, Apple, Google, etc. out and shoot them in the back of the barn. The direct and indirect impacts of the sudden loss of TSMC would be devastating, and in some cases fatal, to the entire US technology industry.
In our last article, we listed some important details to keep in mind about the semiconductor business going forward.
“The market for advanced microchips is made up of:
- Equipment and tools to build cutting-edge chip manufacturing plants are coming from the US and Europe.
- The two most advanced foundry manufacturers, with their own know-how to turn their equipment and tools into factories that produce more advanced chips than others, are Taiwan’s TSMC and South Korea’s Samsung. (Actually there are about two and a half most advanced foundry manufacturers, half of which is Intel. Intel has stumbled, but will recover soon and join the other two.)
- These state-of-the-art factories produce products for customers across the globe, including the United States and Europe.
- Porting a chip design from one company’s manufacturing process to another is a costly and tedious process. You can’t just send an email with an attachment to another address and have an identical chip come off a new production line in another factory a few days later. Customers are tied to a specific company’s manufacturing process, and if they suddenly lose access to that process, they won’t get any chips produced at all until they complete a lengthy and expensive retargeting process.”
If TSMC were to suddenly disappear, the same thing that happened to Intel’s stock price recently would happen to the rest of the Nasdaq: a massive, immediate crash. Imagine Apple not being able to release a new iPhone for years, and not knowing when it would be available.
I don’t see us doing this to the technology sector, except maybe if keeping TSMC under CCP control is an option after the invasion, and I think that will happen since TSMC is likely already effectively under CCP control.
There were many similar responses to the effect that the US won’t “lose” TSMC. It’s hard to imagine that the US can be convinced to suddenly prioritise great power competition with China over its own blatant commercial interests when it has been doing the exact opposite for decades (which is why we’re in this predicament!).
Imagine a country that moved all its manufacturing overseas to cut costs, and then all of a sudden, they decide to try to destroy most of the Nasdaq under the pretext of attacking China because they’re a rival, and China can’t be trusted. Sorry, but I just can’t see it.
If we cave in and help China keep TSMC running, perhaps with face-saving rhetoric, we will be continuing the efforts of the last 30 years to optimize cheap products at the expense of national sovereignty. That is the path to continuity.
