‘The Chip War’: US-China Escalation Won’t Stop – 07/25/2023 – World

Chris Miller, 37, made no secret of his fascination when he struck up a conversation in March with Morris Chang (or Zhang Zhongmou), who just turned 93, at the launch of “The Chip War” in Taipei.

The fascination was not diminished even when the founder of the giant TSMC, born in mainland China and educated in the United States, came out saying: “I completely agree with this book, but there could be some corrections.” It extended to the role of Li Guoding, a politician who provided state support for TSMC.

They talked for half an hour, before Chang finished with a compliment to the book for showing the ubiquity of chips today, but adding that “after Miller wrote it, the whole game changed again.” The work came out in the US on October 4, 2022 and, three days later, Joe Biden imposed export controls to China.

It was the open conflict that Miller had outlined. The book, a history of chips, came out in May in Brazil (Globo Livros, 480 pages.). The conversation with Sheet coincided with China’s response, eight months after the “October surprise”, imposing controls on the export of ores essential to produce chips. Miller says the escalation will not stop and risks a US-China military conflict by 2027.

Mr. Could you describe how his perspective on Chang changed while working on the book and recently in this public dialogue in Taipei?
Chang is one of the most underrated entrepreneurs of the last century. Every reader of your newspaper depends every day on the chips his company produces. He is the most important maker of our time. However, since the chips made by TSMC are buried deep in our cell phones, cars and computers, hardly anyone outside of Taiwan has heard of it.

Mr. started writing his book after realizing that China spent more on chips than on oil. Is it still like that?
China continues to spend more money importing chips than any other manufactured product. That’s because there are many crucial types of chips, for smartphones, artificial intelligence and more, that China simply cannot produce at home.

Is China closer to a leap that would bring it closer to Taiwan? Perhaps by 2025, as Beijing projects?
China continues to make progress in its chip industry, but the vanguard of the sector continues to advance, so it remains significantly behind. In certain segments, such as Nand memory chips, Chinese companies are close to the forefront. But in others, like chip-making tools, they are years behind. In short, China still has a long way to go before it can produce high-end chips on its own.

China has announced export controls on ores, escalating the chip wars. What stage of the conflict are we in now?
We should expect continued escalation. The United States is likely to implement heightened export controls on the transfer of AI chips to China. China will respond with further limits on exports of raw materials, as well as stepping up protectionism to block low-cost western chips from entering the Chinese market.

What would be the red lines that would trigger a widespread economic conflict?
The US has no interest in an economic conflict. Its leaders said they were primarily focused on controlling the most advanced technologies with military application. American companies still trade extensively with China. In fact, it is China that started the decoupling. Xi Jinping’s industrial strategy, Made in China 2025, aims to reduce Chinese imports of foreign manufactured goods. China is trying to build a self-sufficient industry, and has been doing so for years, before any US technological controls were imposed.

Is there a chance of a truce after Secretary Janet Yellen’s visit to China? She is against dissociation.
Expressions such as dissociation or risk elimination [de-risking] are too vague to tell us what political leaders believe. The US, Europe and Japan are basically united around a strategy of trying to continue most of their trade with China, limiting its access to cutting-edge technology and trying to diversify its dependence on China into spheres where it is the world’s only major producer. Beijing is, of course, unhappy with this strategy, which aims to limit its technological progress.

I would ignore what Chinese and American leaders say and focus on what they do. The Americans say they are against decoupling, but it is true that they are trying to decouple China from cutting-edge technology in chip manufacturing. The Chinese say they are against decoupling, but are trying to decouple themselves from dependence on imported technology by building a self-sufficient supply chain. Thus, each player seeks a different decoupling strategy that meets their own interests.

Will the shadow of a war over Taiwan grow bigger? Can you make a prognosis about that, maybe 2027, as an American military man suggested?
The CIA said it believed Xi told the Chinese military to be ready for war in 2027. That’s different from saying there will be a war in 2027, but there certainly could be. The main reason China has not invaded Taiwan since the Communists took power in 1949 is that the US military has defended Taiwan, including threatening to use nuclear power. But China’s military capabilities have grown dramatically in recent years, and the US is less capable of defending Taiwan today. Chinese leaders know this. This weakness creates the risk that they might attack.

About the US being less capable today, militarily, does that bring us closer to the threat of nuclear use?
China has been rapidly expanding its nuclear arsenal for this reason. The lesson Beijing learned from the Russia-Ukraine war is that nuclear threats work. Western aid to Ukraine has been limited by fears that Russia might escalate to nuclear use. China wants the ability to make comparable threats, so it is rapidly building its nuclear arsenal.

Mr. Do you see any chance of TSMC factories being blown up, as mentioned in a military publication and recently by American politicians?
In any war or blockade scenario, Taiwan’s chip industry would be shut down immediately. It requires huge amounts of electricity, much of it imported via shipments of liquefied natural gas that would otherwise be plugged. It also requires regular imports of chemicals and raw materials from Japan and other countries, which would be cut. So it wouldn’t matter if the factories were blown up, because they wouldn’t work anyway.

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X-ray | Chris Miller, 37

Professor at Tufts University, in Massachusetts, USA, he specializes in the history of Russia and, more recently, of China. Before “The Chip War-The Battle for the Technology that Moves the World”, he published three books on the Soviet-Russian economy. In 2016’s “The Struggle to Save the Soviet Economy”, he addresses why the Soviet Union failed, compared to China. As a researcher, he is also linked to the conservative American Enterprise Institute, in Washington.