[Book Club] Chip War
Chip War: The Fight for the World's Most Critical Technology
Chris Miller
Three-Sentence Summary
The staggering complexity of producing computing power shows that it (chip) isn’t simply a story of science or engineering. Technology only advances when it finds a market. The history of the semiconductor is also a story of sales, marketing, supply chain management, and cost reduction.
Who Is This Book For?
It is a great entry point for understanding chips, not potato chips. Too many news and finance reports discuss it. However, if you want to understand the essence of this product's importance, this book provides the correct perspective.
This book has been on my list for over a year. I started it only because my friend asked, “Is it worth investing in Chinese semiconductor manufacturing?” “Is there chip fabs breakthrough in China?” I searched the news, and every reporter seemed so confident or terrified (depending on the side they stand) about the progress. Meanwhile, their reports have almost zero details about the progress. Very suspicious. So, I have to use the last method: first principle thinking. Understanding the building blocks of chip manufacturing, the major challenges, and the history of technology development is necessary to chain the progress in a dynamic view to forecast the future. Absolute no guarantee my approach is flawless; however, the book lights up the road toward analysis of the whole picture.
Major Concepts
The following summary is primarily based on the forward of the Chinese edition. Yes, I have read both editions for different purposes. 万维钢 (Wang WeiGang) did a great job of summarizing the core concepts of the book by Miller. I will not put the effort into recreating the great work. Moreover, this book has triggered my interest incredibly; I announce that there will be a series of newsletters in the following months on these topics to cover science, engineering, supply chain, business, etc. The research has been started.
Now, let’s jump into the book Chip War.
There are primarily three misconceptions about chips, and they reflect its major complexities and why there is even “war” started around it.
#1. Any high technology can be achieved through "accumulation" methods
One commonly accepted but unexamined notion is that we can achieve anything others have accomplished with enough human and material resources. For example, since others can produce advanced chips, can we achieve the same as long as we have the attention of our leaders, government support, and unlimited funding? The answer is no. Many tasks in the world are indeed “stackable,” such as building a bridge or paving a road—things that can be accomplished with sheer numbers. However, some tasks are “non-stackable.” Non-stackable endeavors often require the creative insights of high-level talent, complex environments, and serendipitous opportunities that cannot be forced.
Many people like to compare the chip race to China’s development of nuclear weapons: both are high-tech challenges. If China could develop nuclear weapons in the past, why can’t it now produce advanced chips? The reason is that nuclear weapons are relatively “simple” technology and are stackable. When China developed nuclear weapons, the U.S. and the Soviet Union had already demonstrated successful examples. The basic principles were well understood, the research direction was clear, and the number of technical projects involved was limited. Additionally, developing nuclear weapons did not need to account for commercial profitability—just creating them was enough to establish nuclear deterrence.
To develop nuclear weapons, you only needed a few of the brightest talents, like Deng Jiaxian and Yu Min, who were indispensable. Below them, you could have hundreds of engineers and scientists capable of executing their ideas, and the rest could be replaceable workers and soldiers—the majority of whom were stackable.
However, to manufacture chips, every step—from chip design software to lithography machines to silicon materials—requires the innovative ideas of many brilliant individuals. There is no “brute force miracle” here. You need thousands upon thousands of “Deng Jiaxians” and “Yu Mins,” all of whom must be deeply rooted in their respective fields. The scientific principles behind chips are no secret; they are publicly available. However, achieving technical feasibility, especially commercial profitability, is exceedingly difficult. Producing a single chip at the cost of one billion yuan is meaningless; we must ensure mass production, high yield rates, rapid innovation, and affordability.
We don’t need a single large-scale project but an entire ecosystem to achieve this. Such a system can only be built through collaboration among leading technology companies. Miller emphasizes the structure of today’s chip technology landscape in his book. Take the EUV (extreme ultraviolet) lithography machine, capable of producing chips under 5 nanometers. The initial design principles came from the U.S., but the Dutch company ASML developed the final product after 30 years of research and development to achieve commercialization. However, ASML didn’t work alone; it relied on investment and collaboration from major companies and thousands of small high-tech suppliers. For example, the laser used in EUV lithography machines was developed by a German company and consists of 457,329 components—if even one component fails to meet specifications, the overall performance of the lithography machine will suffer significantly.
#2. The government should lead innovation
Some of us imagine the government as an omnipotent force as if the government could say, “Let there be light,” and there would be light. However, examining the history of chip development in the United States, Japan, and the Soviet Union reveals that the higher the government’s involvement, the less successful the outcomes. While the U.S. government played an essential role in supporting the growth of chip companies, the main actors in chip research and production were always businesses, not the government. At most, the government offered support “from above,” such as providing military orders or funding research at national laboratories and universities—but it never “picked winners” or directly nurtured specific companies. Innovation has always emerged from companies, evolving like biological processes through risk-taking, exploration, and natural selection.
Japan’s approach can be called the “Asian model.” The government pushes “from below,” providing loans and policies, sparing no expense to help companies grow big and strong. If you have a latecomer advantage, this method may yield rapid success in the early stages. However, it eventually backfires because the companies being propped up lack cost awareness and a spirit of risk-taking, which means they also lack true innovation capabilities.
The Soviet Union’s case requires no elaboration. The government directly controlled everything, and since its efforts were never tested by the market, the result was the most catastrophic failure. If the government leads innovation, it ceases to be innovation. Governments are not innovation departments. Innovation inherently involves risk, creativity, and freedom to explore in various directions. It means waste, disruption of the status quo, ruthless bankruptcies, and elimination—none of which align with government tendencies. Governments always prioritize stability, conservatism, and avoiding risks.
#3. A country or company is better off to be self-reliant
The essence of self-reliance does not depend on anyone. However, this pursuit has become outdated in the era of globalization. The reality is that even the United States cannot be entirely self-reliant regarding chip technology. The U.S. must rely on Dutch lithography machines, Japanese silicon wafers, and Taiwanese manufacturing. Ironically, the so-called “chip war,” where the U.S. tries to strangle China’s supply chains, is forcing China to pursue self-reliance. This is an example of “weaponizing interdependence.”
Interdependence is a condition for survival, and isolation is a form of suppression. Modernization has created a global “circle” where only those within it benefit from its resources, cooperation, and mutual reliance. Being independent outside the circle offers no prospects. The correct response to being “strangled” is not self-reliance but making oneself indispensable—so valuable that the rest of the world must rely on us. This would give us leverage to negotiate.