Global Security Relies on Container Ships Full of iPhones
Microchips, or integrated circuits, are perhaps the single greatest guarantor of global stability, due to a series of what can be seen as collossally stupid mistakes by the United States in the 1960s--allowing and to a certain extent fostering the creation of advanced semiconductor industries in East Asia, specifically Japan, Korea, and Taiwan.
America and other countries do produce and design microchips--China and Israel are notable among them. But the ground in high-demand, high value products has fallen largely to Taiwan and the Republic of Korea.
This mistake however, has prevented the new American century from coalescing and has instead created an Asian century in the making--and thus far prevented the full-mobilization global war that would have been necessary in 2008 to conquer China and Russia.
Today what guarantees the global architecture we know is not democracy, it is not the dollar, it is not a single or a group of interlocked commodity markets, it is a single good. Microchips.
Microchips
Microchips are manufactured for both consumers and industry at approximately the same grade--the chip in your laptop or cell phone is not interchangeable but could conceivably be made to work (with some differing degrees of effectiveness) with the chips in refrigerators, cars, televisions, and industrial equipment.
If we were to explain it to a person in the distant past-- we would make an analogy to the gear, or to the combustion engine.
Steve Jobs compared his computers to a bicycle for the mind. The chip then, is the drivetrain. They have purposes and intentions in and on everything the same as the AC motor.
The strangest miracle of the modern internal combustion engine is not its centrality to the world production system. It's its physical clustering.
Microchips are mostly by 2 or 3 companies on an island and half of a peninsula that 100 years ago was table scraps for Japan or whomever bothered to get ships there could conquer.
Then, you would have been laughed out of the room for saying Formosa and Korea would be the focal points of the first half of the 21st century, the sine qua non for the continuation of the world economy.
A more credulous man would be most baffled though, as to why exactly, and what the effects could possibly be, of the secrets of the present and future being controlled by only a few nations.
A moderately well informed layman's perspective.
Today, the leading edge of semiconductor research and manufacture occurs exclusively in Taiwan, with Korea behind by a bit, but offering competitive, if marginally inferior products.
Their products are made by taking very refined pieces of silicon and what are called 'rare earth metals', and etching using machine-operated lasers focused through massive lenses in specific patterns.
Electromagnetic lithography. These etches, close to invisible to the human eye, create pathways for electricity to flow, or stop, which is modulated through other chips.
These are transistors, placed on what are called integrated circuits. The chips' physical structures, when electricity is modulated through them, produce signals that can control other chips, or be transmitted and translated to human-readable information.
Information can be stored on magnetic disks or in other chips, which modulates the flow of electricity through the chips' physical structures.
Programs and stored information are transmitted through embedded radio antennae made and controlled through similar processes.
It's turtles all the way down, until principles that were in fact well understood (by scientists in their field) in the 1920s come into play.
Transistors, depending on the electricity in them, can be understood to have an on or off state. This on and off state can be translated in mathematical terms as a 1 or a 0. This enables specific arrangements of transistors to, with electrical modulation, perform arbitrary mathematical operations, or store information encoded to binary. In fact, with enough space, any information can be encoded as binary.
Any operation that can be performed by our brains can conceivably be performed, though perhaps not currently, by enough transistors arranged in a particular way, given enough electricity and time.
It's a goddamned miracle. Everything could use a brain, even if it's not good for much compared to our brains. Who had the bright idea to give it to the Taiwanese and the Koreans?
The short answer: it was up for the taking, if you could see the potential. And it wasn't always theirs.
The structure of this exceptional and barely-precedented market.
Electromagnetic lithography is tricky to even imagine, it is exceptionally hard to do, there are not enough people who can do it to fill up a moderately sized city.
The technology that organizes electromagnetic lithography tasks--it's all American owned. Protected by, ultimately, the US military and their far more formidable and well funded national guild of lawyers. Intellectual property is the first reason why the US has not colonized Taiwan and Korea and Japan to a greater extent.
The current arrangement, whereby all integrated circuit designers on Earth speak the same language--American--and American is the only language invented yet, puts America in a privileged position.
America profits, to a certain extent from the basic manufacture, controls the highest levels of value-addition in the general computing industry (software and design), and is in a formal military alliance/informal and highly decentralized political control arrangement with these countries.
America has had a historic advantage, being the birthplace of both personal computing, industrial computing, and semiconductor manufacture. 5G is the first time a radio frequency standard for internet data transmission was not lead by the US/EU companies.
WiFi is still derived ultimately from radio frequency standards used by the US Navy. The Internet itself is a DARPA project. Intel, IBM, AMD, ARM--all are Western companies that have manufactured or simply designed hardware in computing.
But, to most observers it is clear that there has been a structural shift starting in the 2010s, as hardware focused on mobility, chip design prioritized smaller chips and higher yields. The flow of capital, interest, and talent favored these East Asian companies.
TSMC's breakthrough has come from a mixture of factors--the leading edge of research and development (meaning flows of human talent) shifted toward the most profitable sector of the industry, low size, low cost ARM chips, made from less material (meaning more chips per silicon wafer) had an advantage and no market bias toward their own IP or product segment.
And of course, their American competitors shat the bed--and were locked in to existing product lines and production techniques, rather than exploring new ones.
Chipmakers, chip designers, and product designers, all work with lead times. Products take between 3-5 years to make it to market. This means that forward cooperation must be rock solid. Millions and millions are at stake.
In 2020, all forward cooperation based product development was thrown away by the Communist Party of China. The world entered a prolonged depression from which recovery is only possible if the US, Israel, China, Taiwan, and Korea all simultaneously agree to ignore any health consequences or bear whatever costs associated with the SARS-2 pandemic.
Why? Because from a pure hardware, guts perspective, it works like this:
The chips are designed in the US, the EU, or Israel, by US companies.
China (or companies owned by China) dig up and refine the rare earths, the raw materials.
Taiwan and Korea (and the US and Israel) make the parts and chips. China (and some of the rest of ASEAN) assemble them into finished products.
This is the basic cycle for consumer industry in the 2020s.
Chips must flow. All parties must cooperate.
Locked in
This triangle: China, The Other East Asians, the West is worth examining why none of them can 'go it alone.'
The Chinese
do not currently have the manufacturing resources, educational system, social trust, or software to design and manufacture its own, industry leading chips while in a state of hostilities with America or any of its wealthy neighbors. It does not as a society have the social qualities to attract potentially the single most valuable class of engineers to their country. But they are trying. They have autonomy, capital, and a large share of the world's fixed capital in manufacturing. They also have the physical resources to ensure they can cut the others off, if aggressions spiral. Their political need to recapture Taiwan is the single greatest structural threat to this triangle--at the moment they are the only one with a knife out, at the throat of one of the others.
The Other East Asians
are hemmed in. They do not have the political or military autonomy to break from the US, nor is there a strong reason to do this. The US, in addition to providing high levels of value-add for their manufactures, are economically intertwined. At the same time, China provides both raw materials and finished goods assembly, and a market that is much, much, much larger than the US' market. It is also closer, yet more aggressive towards them. China will, in the next 30 years, invade and conquer Taiwan, and kill all who resist, if they do not agree to a peaceable integration before this time. Cooperation across all of the East Asian countries with China has very different stakes. And the Taiwanese would, at this point in time, much rather die than put up with mainlanders. They currently have access to an essentially unlimited amount of money and a high-performing R&D sector, but only in lithography.
The US
has absolute leads in human and financial capital and intellectual property. Its structural advantages are large, but have been slipping away following the country's bankruptcy in the 1970s. As the current 'policeman' of the world, it is kept out of hock by high performing industries and a class alliance between the elites of other countries and the perceived value for a fiat currency as the major means of international trade. Its qualitative leads in military are questionable, but certainly formidable and capable of inflicting chaos on any point in the planet their decrepit and venal leadership chooses. It also currently has what may very well be the most corrupt and ineffectual leadership at any point in the past 150 years, and greater social divisions than seen since the 1970s, a truly violent and desperate time. If its leadership is replaced by a suitable monarchical figure, in the mold of Nixon, FDR, Lincoln, Jackson, or Washington, it may see a resurgence where its enormous advantages in natural resources, deep love of war, financial capital, and human capital all work together again.
Which is most important -- cash, resources, or value-add?
In this triangle, broadly speaking, each holds a non-replaceable or non-fungible resource the others cannot hope to gain.
China has resources.
They can cut the factories off tomorrow until they get their terms. This would also provoke a war of survival between the global economy and the CPC. To sidestep this, their native foundry and chip design industries are racing to become competitive with East Asia, and offer the world's only full vertical of resource to finished product, and aim to get there within 10 years. It is possible, their current chips are approximately 10 years away from catchup, but could easily accelerate via industrial espionage or repudiating IP law.
East Asia has value-add
Currently, they make the most and most-demanded products. This is a fragile position, under assault from both China and foreign and internal competition. These countries and state-like entities are, however, much more adept at diplomacy and integrated into Chinese society, and fully capable of playing both sides against each other. Local development of software is ap riority for both, but at the moment, they are alarmingly passive in all but controlling the high end of the manufacture stack.
The US has has cash--seignorage privileges, demand, and control of international trade at a financial and physical level.
Scrambling for resources in Africa, rebuilding its semiconductor industry, and control of IP licensing give it other structural advantages in value-add and reosurces. It is unclear if it can manage to regain full control, though own-goals by its rival China give it a large and persistent advantage.
Is it stable?
As a burning house.