CHIP WAR

How the U.S. lost its lead in the crucial area of microchip manufacturing and how it might be reclaimed.

Without microchips, entire industries can grind to a halt. “Most of the world’s GDP is produced with devices that rely on semiconductors,” writes Miller, who teaches international history at Tufts. “For a product that didn’t exist seventy-five years ago, this is an extraordinary ascent.” While it was primarily American scientists and entrepreneurs who created the industry, American chip manufacturing has lagged behind in recent years. Production happens in surprisingly few places, with one of the most important being Taiwan, where the Taiwan Semiconductor Manufacturing Company provides 37% of the world’s logic chips and 11% of the world’s memory chips. Miller notes that in the early years of chip manufacture, when most of the painstaking work was done by hand, high labor costs in the U.S. pushed producers to look overseas, first to Japan. But then Japan became a major competitor. An answer was to undercut the Japanese firms by finding countries with even lower labor costs, such as South Korea and Taiwan. Eventually, those countries became competitors as well as partners. American tech firms were willing to send chip manufacture offshore so they could focus on their strengths of innovation and design. Apple, for example, is a major user of chips but makes absolutely none. As Miller shows, the problem with this globalization strategy is China, which has long sought to build its own chip industry, with mixed results. From Beijing’s perspective, Taiwan’s chip factories make the island an even more tempting target. Though the author doesn’t make any clear policy proposals, his implicit message to U.S. policymakers is to recognize the danger and act accordingly. America’s tech lead is shrinking, so the time has come to develop policies to ensure that the secret machinery of the digital era continues to operate smoothly.

An important wake-up call with solid historical context.