What Does The Future Of Technology Have In Store? Chips, Microchips, and Advanced Microchips


By: Chira Tudoran and Niels Brink
Picture credits: Pixabay

The Covid-19 pandemic forced many businesses to transition to remote work and migrate their data to the cloud, and they became more vulnerable than ever to such attacks. Cybercriminals stole millions of dollars from businesses during the pandemic. Conversely, with the increased number of cyber attacks during the pandemic, it is easy to focus on them and to glance over the different types of technological attacks that can have similar impacts on our daily lives. The last decade has seen numerous developments and new research at an exponential rate in technology. Cyberspace, as well as the infrastructure behind it, have become essential to our way of life, and at the centre of it all is the microchip.

In our ever growing digitized world, almost no industry has been left untouched by the global shortage of microchips. It is, after all, a problem of supply and demand.  It is estimated that the world’s major chip manufacturers, largely focused in Taiwan, South Korea and Mainland China, are operating at 90% production capacity, effectively bottlenecking supply. Moreover, this fragile worldwide semiconductor supply chain is dealing with a limited supply of raw materials when demand skyrocketed during the pandemic. Thus the global supply chain is caught in a “perfect storm” of the suppliers working at a bottleneck level with a limited supply of raw material and a series of “black swan” events, such as factory fires, energy shortages, and COVID-19-related shutdowns

How did such a small piece of technology cast such a large shadow? How was such an essential technology developed? How has it been regulated? What are the manufacturing capabilities and politics behind microchips?

How did microchips come to be? It seems that microchips were destined to be invented. Two separate inventors, unaware of each other’s activities, created almost identical integrated circuits at nearly the same time. Jack Kilby, an engineer with a background in ceramic-based silk screen circuit boards and transistor-based hearing aids, started working for Texas Instruments in 1958. A year earlier, research engineer Robert Noyce had co-founded the Fairchild Semiconductor Corporation. From 1958 to 1959, both electrical engineers were working on an answer to the same dilemma: how to make more of less. They didn’t know that their invention would reduce the cost of electronic functions by a factor of a million to one. A giant leap for humanity indeed. 

But what are these chips exactly? In an interview with ABC News, Morris Cohen, a professor of Manufacturing and Logistics in the Operations, Information and Decisions Department at the University of Pennsylvania, explained that “semiconductors, or chips as we call them, are sort of the building blocks of any computer system”. Moreover, “There’s been incredible advancements over the years in the capabilities of these chips, in reduction of their size and power requirements,” Cohen stated. “And so we see them now embedded everywhere, in your cellphone and your computer, in your home appliances, and in your automobile.” Cohen explained that “these devices are used to monitor performance, to control function, to capture data, to send instructions and so on,” Cohen added. “They’ve become sort of an essential part of almost every product that we use.”

How do microchips work though? A microchip is a set of electronic circuits on a small flat piece of silicon. On the chip, transistors act as miniature electrical switches that can turn a current on or off. The pattern of tiny switches is created on the silicon wafer by adding and removing materials to form a multilayered lattice work of interconnected shapes. A testament to human ingenuity, chip improvements are behind the incredible increase in computing power and memory function that has allowed technology to advance to where it is today. Due to chip development, from 1956 to 2015, computing power increased one trillion-fold. To give an example, the computer that navigated the Apollo missions to the moon was about twice as powerful as a Nintendo console. But how did this happen?

Here is where Moore’s Law comes into play. This is the observation that the number of transistors on integrated circuits doubles approximately every two years. This aspect of technological progress is vital as the capabilities of many digital electronic devices are strongly linked to Moore’s Law. Below is the famous graph Moore published in 1965. Moore had only seven observations from 1959 until 1965, but he predicted a continuing growth, saying: “There is no reason to believe it will not remain nearly constant for at least 10 years”. Moore’s graph is accompanied by the graph from Our World Data, which shows observations from 1970 until 2020. 

Moore’s Law has been temporarily slowed down. Although the design of chips continues due to companies not wanting to lose their edge,  overall production has slowed down. As mentioned before, the supply-demand balance in the semiconductor industry was already fragile before the pandemic, which then only exacerbated the crisis by causing a surge in demand for products that require semiconductors, while simultaneously disrupting the supply. There is however, an issue which has not been mentioned yet: politics.

Two years ago, the FBI identified Chinese theft of technology as the biggest law enforcement threat to the US, and subsequently started 1,000 investigations into Chinese technology theft across its 56 regional offices. William Evanina, director of the National Counterintelligence and Security Center, estimated that the theft of American trade secrets by China could be “anywhere from $300bn to $600bn” a year. This head start could provide China with a significant technological advantage compared with the US in the next decade. 

And China has shown that it is capable of, and willing to use American chip technology. Last year, it simulated the heat and drag on hypersonic vehicles (missiles) speeding through the atmosphere at their test facility located at the China Aerodynamics Research and Development Center (CARDC). The supercomputer used for these test runs on chips designed by Phytium Technology. Although it purports to be a Chinese commercial company, it uses American software and produces its chips in Taiwan, which heavily relies on American technology for chip production. “Phytium acts like an independent commercial company,” said Eric Lee, a research associate at the Project 2049 Institute, a Northern Virginia think tank focused on strategic Indo Pacific issues. “Its executives wear civilian clothes, but they are mostly former military officers from NUDT.” Moreover, Tai Ming Cheung, director of the University of California at San Diego’s Institute on Global Conflict and Cooperation, said how CARDC is “a beating heart of Chinese hypersonic research and development.

Due to Phytium’s partnership with CARDC and the usage of civilian technologies for military purposes, the Biden administration placed Phytium and six other Chinese firms and labs involved in high-performance computing on an export blacklist. The tricky part is that even though these chip deals were not illegal, the same computer chips that could be used for a commercial or civilian data center could also be used for powering a military supercomputer

Here lies the issue with technological development: it is difficult to prevent technology theft when all the chips and microchips are manufactured in the same geopolitical sphere. As this Washington Post article explains, the Phytium case also highlights the dilemma for Taiwan, a self-governed liberal democracy, perched between the United States and China. Taiwan’s government relies on Washington to defend itself from Beijing, but Taiwan’s companies rely on the Chinese market, which accounts for 35% of Taiwan’s trade. To defend itself in the superpower struggle between the US and China, Taiwan has become indispensable to both sides.

The Taiwan Semiconductor Manufacturing Company (TSMC) makes key components for everything from cellphones to F-35 fighter jets to NASA’s Perseverance Rover mission to Mars. In 2021, TSMC accounted for more than 90% of global output of these chips, according to industry estimates. Ou Si-fu, a fellow at the Institute for National Defense and Security Research, explained that TSMC is in the unusual position of manufacturing chips that end up being used for military purposes by both the United States and China.

In response to the Trump administration’s  concerns about the security of the semiconductor supply chain, TSMC announced two years ago that it would build a $12 billion factory in Arizona. However, the new Arizona chip-making plant has run into construction delays due to a mixture of labor shortages, COVID-19 surges, and complexities in obtaining construction licenses. 

The US is the birthplace of microchips, but for decades now it has been losing market share to Asia, which produced 79% of the world’s chips in 2020. Since 1990, the US share of global chip production has declined from 37% to 12% today and is projected to further decline to 9% in 2030 unless U.S. policymakers take action. At the same time, China is projected to grow its share of global chip manufacturing from today’s 12% to 28% by 2030.

Intel, which was founded in 1968 by, among others, a co-inventor of chip technology, is still the largest manufacturer that markets its own products. Even though Intel still designs and makes its own chips, it has fallen behind Samsung and TSMC in recent years and now relies on TSMC to make some of its chips. Despite all of these factors, today America’s strengths lie primarily in chip design, software, and production machinery: Virtually everyone who wants to design and manufacture chips depends on American software and machines built in the US

Hence if Washington wants to consolidate its position for the next decade, it can do so through two  main responses: by enlarging domestic production capabilities, and by keeping China at arm’s length. These goals would reaffirm the position of the US in technology development.

The Biden administration, just as its predecessor the Trump administration, is taking all the steps necessary to reorganize global supply chains to make the US less dependent on other countries for critical goods like chips. In the political sphere, this can be seen in how Biden continues to hold firm on Trump’s sanctions on Chinese chipmakers. Moreover, in January 2022, the House of Representatives passed the America COMPETES Act whose main goal is to make the US more competitive with other countries in chip manufacturing . It includes provisions from the CHIPS for America Act which would provide $52 billion to semiconductor chip manufacturers with the goal of bringing the production of chips back to the US as demand for the technology rises

In the economical sphere, Intel ended plans to outsource some of its manufacturing, and now wants to build two new $20 billion factories in Arizona instead. Samsung is building another manufacturing plant in the US, in South Carolina. And although there are delays, TSMC will have a factory in Arizona in the foreseeable future. 

Thus the US is not out of the race. Neither is China for that matter, since it has passed multiple exemptions and given low-interest loans to chip manufacturers. China has funded the construction of more than 70 fabs through a range of support measures including grants, equity investment, reduced utility rates, favorable loans, tax breaks, and free or discounted land. The measures paid off, since as of January 2022, China’s share of global chip sales surpassed Taiwan’s and are closing in on Europe’s and Japan’s.

It remains to be seen how the race will proceed from this point. The recent developments show how the industry of microchips is at the crux of politics, economics, and military power. After all, no army in the 21st century could exist without microchips. To say that both the US and Chinese militaries would be paralysed without a steady supply of microchips is an understatement. Neither would the global economy function without microchips for that matter. However, the US is the global hegemon, and it needs to secure its supply-line for microchips. Otherwise the US risks losing to China in Thucydides’s trap, a clash of great powers with the microchip at its center.

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