From the Merge:
We recently sat down with Trusted Strategic Solutions (TSS) to learn more about computer chips and some of the major dependencies that have far-reaching implications for US national security. Today’s feature is what came out of our conversation. We learned a ton—and think you will too. Enjoy!
Credit: AI
For national security, it’s vital to understand how they work, the different types, and who is building them—and who’s not.
Some chips are designed with generalization in mind, while others are purpose-built and hard-wired for a specific function (known as ASICs, or application-specific integrated circuits). Occupying a unique space between these are Field-Programmable Gate Arrays (FPGAs), which are multi-purpose semiconductor devices that can be reprogrammed after manufacturing to perform multiple applications.
Creating a chip is a highly intricate process involving design, fabrication, testing, and assembly. It’s so complicated we’re not even going to try and explain it—we recommend this excellent primer to get you up to speed. Bonus: it’ll add a new word to your vocabulary—photolithography—and you’ll remember what it means!
Some companies design chips (SiFive, Siemens, NVIDIA, and now Apple), some companies exist as foundries to build those chip designs (TSMC, Polar Semiconductor, GlobalFoundries), and a few companies have the talent and resources to design and build chips (Intel, Microchip).
As the industry rapidly evolved, these commercial dynamics also dramatically changed the US chip industry.
While the chip was invented in the US—and the US once produced upwards of 40% of the world’s chips—that is no longer the case. Today, only 10% of chips are produced in the US, and none of them are advanced chips. Most US chip companies are now designers—not makers—because design is the low-cost, high-margin part of the industry.
For perspective, the most advanced chips require extreme ultraviolet lithography (EUV). The machine that does this costs $380m, is the size and weight of two airliners, and is so complex that only one company in the world makes it: ASML in the Netherlands.
Offshoring production led to an overwhelming concentration of global chip foundries in East Asia. Today, 60% of the world’s chips—and upwards of 90% of the most advanced chips—are produced in Taiwan, mainly by a single company: Taiwan Semiconductor Manufacturing Corporation (TSMC).
In this case, it’s a double-edged sword. This is a critical US dependency but also a dependency that Taiwan has grown to count on.
Opinions aside, the so-called Silicon Shield dynamic ensures the US must be involved—or at least invested—in defending Taiwan. Efforts to decouple this becomes beneficial to the US but equally detrimental to Taiwan.
Additionally, tensions and escalation in this region will have ripple effects on other tech-centric chip countries in the first island chain (South Korea and Japan).
China’s domestic chip production has infected almost every aspect of US military equipment. A recent report analyzing US defense weapon systems and supply chains found that 41% rely on Chinese chips.
Looking at specific weapons programs is even more disturbing: The US Navy’s newest aircraft carrier is powered by over 6,500 Chinese computer chips. An F/A-18 Super Hornet isn’t much better: they fly around with 5,000+ Chinese chips.
Here’s a sobering graphic from the report showing Chinese chip supplier relationships for 4 weapons programs:
Producing chips requires high-quality neon gas, and Ukraine’s neon supported half of the global chip industry—and supplied 90% of the neon for US chip production. Who kept tabs on that before February 24, 2022?
Knowing the size, scope, and timeliness of the national security concerns, many are doubtful that the CHIPS Act is enough.
There’s so much more to unpack about this topic. For more information from experts on the complexities of this issue, reach out to the team at Trusted Strategic Solutions.
We recently sat down with Trusted Strategic Solutions (TSS) to learn more about computer chips and some of the major dependencies that have far-reaching implications for US national security. Today’s feature is what came out of our conversation. We learned a ton—and think you will too. Enjoy!
Credit: AI
Microchip's Macro Problem
Semiconductor chips, aka ‘microchips’ or simply ‘chips,’ are the brains of modern society. These little buggers are essential building blocks for nearly all electronic devices—including military systems ranging from night vision goggles and submarines to fighter jets and nuclear weapons.For national security, it’s vital to understand how they work, the different types, and who is building them—and who’s not.
Chips 101
A microchip is a small piece of semiconductor material containing a collection of transistors that act as tiny electrical switches. These switches work together to perform complex tasks like processing data or amplifying signals.Some chips are designed with generalization in mind, while others are purpose-built and hard-wired for a specific function (known as ASICs, or application-specific integrated circuits). Occupying a unique space between these are Field-Programmable Gate Arrays (FPGAs), which are multi-purpose semiconductor devices that can be reprogrammed after manufacturing to perform multiple applications.
Creating a chip is a highly intricate process involving design, fabrication, testing, and assembly. It’s so complicated we’re not even going to try and explain it—we recommend this excellent primer to get you up to speed. Bonus: it’ll add a new word to your vocabulary—photolithography—and you’ll remember what it means!
Industry Dynamics
As chip designs got more advanced, they became more complex and more costly to produce. The process has become so arduous and costly that it’s shaped the industry: commercially driven, global, and modeled after specialization and efficiency to drive innovation.Some companies design chips (SiFive, Siemens, NVIDIA, and now Apple), some companies exist as foundries to build those chip designs (TSMC, Polar Semiconductor, GlobalFoundries), and a few companies have the talent and resources to design and build chips (Intel, Microchip).
As the industry rapidly evolved, these commercial dynamics also dramatically changed the US chip industry.
While the chip was invented in the US—and the US once produced upwards of 40% of the world’s chips—that is no longer the case. Today, only 10% of chips are produced in the US, and none of them are advanced chips. Most US chip companies are now designers—not makers—because design is the low-cost, high-margin part of the industry.
For perspective, the most advanced chips require extreme ultraviolet lithography (EUV). The machine that does this costs $380m, is the size and weight of two airliners, and is so complex that only one company in the world makes it: ASML in the Netherlands.
Offshoring production led to an overwhelming concentration of global chip foundries in East Asia. Today, 60% of the world’s chips—and upwards of 90% of the most advanced chips—are produced in Taiwan, mainly by a single company: Taiwan Semiconductor Manufacturing Corporation (TSMC).
Silicon Shield
Any overly concentrated resource is a concern, but it's a national security issue when it’s located in the heart of long-standing China-Taiwan relations.In this case, it’s a double-edged sword. This is a critical US dependency but also a dependency that Taiwan has grown to count on.
Opinions aside, the so-called Silicon Shield dynamic ensures the US must be involved—or at least invested—in defending Taiwan. Efforts to decouple this becomes beneficial to the US but equally detrimental to Taiwan.
Additionally, tensions and escalation in this region will have ripple effects on other tech-centric chip countries in the first island chain (South Korea and Japan).
Chinese Infestation
The threat of attack on Taiwan isn’t the only national security problem.China’s domestic chip production has infected almost every aspect of US military equipment. A recent report analyzing US defense weapon systems and supply chains found that 41% rely on Chinese chips.
Looking at specific weapons programs is even more disturbing: The US Navy’s newest aircraft carrier is powered by over 6,500 Chinese computer chips. An F/A-18 Super Hornet isn’t much better: they fly around with 5,000+ Chinese chips.
Here’s a sobering graphic from the report showing Chinese chip supplier relationships for 4 weapons programs:
It Get’s Worse?!
Other national security aspects are much more nuanced and hard to track. For example, when Russia invaded Ukraine, it disrupted the global output of chip production, but not for the reason you might think.Producing chips requires high-quality neon gas, and Ukraine’s neon supported half of the global chip industry—and supplied 90% of the neon for US chip production. Who kept tabs on that before February 24, 2022?
What Now
In 2022, Congress passed the CHIPS Act—an ambitious $52.7B plan to address these issues.Knowing the size, scope, and timeliness of the national security concerns, many are doubtful that the CHIPS Act is enough.
There’s so much more to unpack about this topic. For more information from experts on the complexities of this issue, reach out to the team at Trusted Strategic Solutions.
