Well, of course, TSMC doesn't want chip supplies to be onshored. It's everyone other than TSMC and Taiwan willing to do so. West wants to have reliable access to chips without potential war with China.
In addition to geopolitics, wouldn't overproduction of chips be beneficial to consumers in the form of cheaper chips and greater variety?
Historically, excess wafer fab capacity is what bankrupts semiconductor companies. An underloaded fab very rapidly eats up profit. Over the last 10 years, the industry has become very cautious not to overbuild capacity. We have now arrived at the opposite end of the long term (~10 year) cycle and we have accumulated a serious underinvestment in capacity.
The wash out in the memory industry was generally the opposite.
DRAM was a boom and bust market and during bust/oversupply windows vendors that under invested in the next node technology got washed out when the next boom cycle happened. When the market is high volume, price per bit, and new nodes are every 2 or 3 years, you can't really compete it your are nearly 2x as expensive (30% linear improvement => 70% squared cost per bit).
Of course you need to survive the dry times, but you make maximum margin when you are on the next fab node and your competition isn't.
I think what you are saying makes more sense when applied to contract manufacturers than all semiconductor companies.
I feel like there was a lesson about just-in-time inventory for critical supply chains recently. Perhaps a product as complex, sophisticated and absolutely necessary for a modern society should have government guarantees.
What will the lesson be though? Once the dust settles, it may well be that the savings over the last few decades outweighs the losses due to the supply shortages. I guess it comes down to how good the risk analysis was and if they acknowledge that once-in-a-lifetime events happen many times in a lifetime.
Honestly, the risks of just-in-time have always been know. The problem is that holding excess inventory and/or reserve capacity costs real money, and somebody has to pay for it. Investors/managers drive out wasted costs or eventually they go out of business. (Absent government support.)
A futures market would give some income stream to anyone who held significant inventories. Wonder how soon we have something like a futures market for semiconductors
The lithography machines and factories are prohibitively expensive, it can take years of production to break even, if you over build you may just end up in the red. Additionally the fabs have a limited lifespan when they are cutting edge and able to produce premium chips.
It's not unprecedented -- during the cold war, the US Air Force spent $279M (~$3B in today's money) on building some of the largest presses in the world specifically to enhance the capabilities around building complex and strong aircraft parts:
In practical terms, the government is just too slow to actually help. They always shoot behind the target. The semiconductor market is cyclical. By the time the CHIPS Act, etc, actually get passed and implemented, the market will already be in oversupply and voters/politicians will complain about government handouts for these companies.
But Congress is part of the government. So it's hamstringing itself. It's the same line of thought when some large dinosaur of a company purchases a startup. "Welp, startup is going to suck in 2 years." It's not the startup's fault, but to the consumer it's still going to suck. It doesn't really matter why.
No. Congress is not "part of the government". Sure, they get government paychecks, but they're the legislature not the executive. They don't "do" anything, just direct that it be done. All but a few are millionaires who make more income from non-government sources than that paycheck. By virtue of their office, they're also well connected: able to get lucrative board memberships for their kids in Ukraine, or Arkansas. As part of the upper echelon of society they share the interest of the rest of their class in not only making the government appear ineffective, but also ineffective in fact. A competent government might be a threat to their power, after all: as would an unbought section of their own chambers. Hence the critical need for a disciplined two party duopoly that savagely suppresses all competition.
> All but a few are millionaires who make more income from non-government sources than that paycheck. By virtue of their office, they're also well connecte
Incorrect. Congress can muck up government for everyone while investing in stocks, and receive unlimited campaign cash to help keep their job mucking up government.
As individuals, Congress is doing fine by its members
Yes, it's correct. It's the government mucking up itself to benefit the individual's personal interests. That doesn't mean they're not part of the government or not mucking up the government.
It started with getting TSMC to build a fab in Arizona, but to be fair it's a small fab (25k wafers/month) and 5nm will not be leading-edge by the time it's operational. Presumably the point of that fab is traceability/domestic sourcing for the defense/intelligence community - I'd expect that to mostly be used for products to be sold to the USG, and that's how it's sized, just what they'll need for defense. But this new initiative looks like a sea change to me - both in US chipmaking and foreign policy.
I think the situation in Ukraine with neon supply (used in older processes, like the automotive chips that are already in shortage...) has finally struck the fear of god into US policymakers. It's increasingly clear that the supply chain is dangerously single-source in many many areas (EUV and high-end DUV litho machines, fine chemicals and high-end passives, ABF film, etc), and any problem in any area of the world can have huge implications, because the "build one part in every country" strategy means conflicts are going to disrupt something. You reduce the risk of a black-swan event taking out the whole industry at once, but you also increase the risk of at least some disruption happening, and at this point any disruption is catastrophic in itself.
But beyond that, China is taking advance of the world being distracted by russia to rattle the saber with TSMC again and that's ultimately just not a tenable situation. Not just on China's part either, Taiwan is working the situation too and that's a problem too.
Not only could china blow up the world's chip supply by starting a war with Taiwan, but TSMC has that leverage at any time too. A fab is a tuned swiss watch, even simply wiping all the computers used to run it (or getting cryptolockered like happened a year or two ago) or opening the fab up and allowing it to be contaminated would basically halt production for a period of at least months, and that's practically trivial to do. Actively destroying certain machines could put the fab out of action for years, and blowing up a couple EUV machines is easily within reach of nationalists/partisans at TSMC if it came to it. Even beyond physically having the fabs on US soil, that means that TSMC and Samsung (and thus their respective governments) have leverage over US policymakers in terms of US national foreign policy - and letting foreign corporations have leverage over US foreign policy simply is not an acceptable situation. It's been a boiling-the-frog situation getting here but China rattling the saber over Taiwan while Russia is invading Ukraine is beyond the redline and the situation can't be allowed to persist.
Even if the US gets enough TSMC-owned capacity to not be completely dependent on Taiwan itself - what if China invades Taiwan and the US decides to allow Taiwan to fall? TSMC could destroy (or seriously damage) their US fabs in retaliation and still blow up the US (and world) economy. And the only other cutting edge fabs in the world are Samsung and Intel... and Samsung is sitting under the barrels of tens of thousands of North Korean artillery pieces, and now they've got nukes and ICBMs too. They have older fabs in Texas but all their cutting-edge stuff is in South Korea. It's not a problem today, but these are strategic projects with a 20 year spin-up time (given all the associated industries that need to be replicated) and foreign policy issues can easily crop up within a timespan of a year or less. What happens if North Korea gets antsy and Samsung doesn't think the US is committed enough to the defense? Samsung could basically do the same thing as TSMC if they really wanted too, and now you've got two quasi-state enterprises with leverage over policymakers.
Global Foundries, too, is owned by an Abu Dhabi sovereign investment fund, they're not cutting edge, but they're yet another potential state-level player.
Fabs are strategic infrastructure and letting foreign nationals control delicate, easily-destroyed strategic infrastructure simply isn't acceptable anymore, period. And the US is explicitly and specifically choosing to disarm the Sword of Damocles that Taiwan has used to exert control over US foreign policy, going forward TSMC won't be able to use the fabs as leverage - which obviously has huge implications for Taiwan's foreign policy, this really calls into question the long-term commitment of the US to the defense of Taiwan. I don't think we're gonna abandon them tomorrow by any means, but in 10 years there is going to be a different balance of power. Both of those are huge foreign-policy sea changes.
But yeah, the idea of "the end of history" and that globalization means that nobody is ever going to get into any conflicts ever again because "gosh, we're all just so economically intertwined" is dead - it's obvious that conflicts will happen and the intertwining just means that we have tons of economic problems when it does. That's another sea change. It's not going to stop neoliberals from doing it anyway, corporations will still lobby for deregulation and offshoring and tax cuts because it makes them money and neoliberals will generally oblige, but this is a signal that policymakers are starting to be aware that they can't just handwave and "the free market will take care" of strategic industries with massive foundational implications to downstream products and the industry as a whole. Globalization doesn't mean strategic industries aren't strategic.
[0] TSMC and Samsung are both quasi-state enterprises. TSMC is explicitly intertwined with Taiwan's foreign policy, they were the ones to negotiate for vaccines for taiwan for example, and Taiwan recently used the threat of cutting off TSMC's water (during shortages) as leverage in negotiations/etc. Samsung is a chaebol, one of the megaconglomerates that essentially run Korea's government shadowrun-style (this is how they industrialized from basically nothing to cutting-edge in 40 years, intense and tight corporate-state coordination). And this isn't just US-style "corporations donate to everyone", Korea's presidents have been repeatedly convicted of corruption for benefiting Samsung, and other actions are almost certainly happening behind the scenes that don't see the light of day on newspapers or can't be proven with hard data. Both Samsung and TSMC are either instruments (TSMC) or puppeteers (Samsung) of their states' foreign policies and cannot just be viewed as big corporations, they are players on the international stage in themselves.
Premium fabs, premium chips, and shortages of everything, from modern ("premium") graphics, to shitty DIP AVRs (relatively old tech). New fabs can still produce old chips when needed, and we need all of the chips now, and a bunch of the "new tech" chips, will still be needed in 20+ years, so that fab line can still operate then.
The difference is being able to manufacture a chip that retails for multiple thousands of dollars in the case of server chips or in the case of chips that go into coffee machines or cars for cents or dollars each. Premium chips demand a premium price. When you send billions on your factory you don't want to be stuck making low profit chips.
Well yeah, but now ("current few years"), you'll be able to manufacture expensive, premium chips, and after a few years, new, "smaller" tech will be used for those, and you'll still be able to use your (now older) tech to produce older chips.
It takes >$10B and >2 years to build a fab which will be effectively obsolete ~2 years after it opens. If it doesn't open on schedule or is underloaded, the ROI goes negative almost immediately. (I somewhat oversimplified this of course but it's to make the point.)
Yes but there is a huge technology gap. example: Automakers need a lot more small low-power MCUs built on ~130/90nm process. A 14nm fab that started 2 years ago is never going to be producing those 130/90nm MCUs. Furthermore, the semi toolmakers that produce the tools needed to build 130/90nm chips stopped making those tools years ago. This is a rabbit-hole that just keeps going. The problem isn't going away soon or easily.
It seems like the cutting edge is built, and transitioned to the 80/20 already. It's that cost focused bulk components / entry level that lacks investment or even planning.
Maybe that's where some industry development and co-ordination from regulators could help establish a market that's healthy.
Not just automakers, and not just old fabs. Not everything needs the latest bleeding edge process. So, even then some of the old processes get updated to support larger wafers.
So, 10-15 year ROI easy, and I'm guessing that might stretch even further as the trend to ever smaller nodes slows. AKA I'm betting 2nm doesn't look nearly as aged in 2040 as 90nm looks today.
It wasn't razor edge in 2009, when TSMC was running a 40% utilization rate. Forecasting is hard, and when you have in recent experience a massive glut it makes companies conservative about demand forecasts and investments.
I'm not sure I agree with some of the responses. The issue is that the price to build or retrofit fabs goes up significantly with each generation. Only a few companies have been able to survive given the amount of financial risk involved.
Right, which is pretty much where we are now: very fat margins largely because fabs have been banging up against capacity for a while now because they could. (i.e. to avoid the risk of overcapacity... why take a chance if you don't have to?) In a more perfect world with healthy competition, one or more of them would see the lack of capacity and see opportunity to take the risk to build a new fab to take some of that business. The fact that it's basically governments saying 'you will do this' tells you everything you need to know about how much the players are really driven by competition.
It's a great time to be a semi manufacturer: TSMC has customers like Apple funding their expansion, Intel has the U.S. government funding theirs. Can you blame them? A decade of record profits isn't what it used to be...
> accumulated a serious underinvestment in capacity
says who? the world's rivers and oceans are polluted with micro-plastics and heavy metals from E*Waste, while thirty years of "wild west" profits and dog-eat-dog markets, COMDEX and single-use devices will take 1000 years to degrade in Nature.
Calls for "more" to be viewed with earned-suspicion IMO
While I do agree that e-waste is a real problem, it’s not like we can just sit with old tech and say “nah, that’s good enough.” We need both more and better fabs, and better waste handling / recycling.
Remember when someone famously said 640kb of memory ought to be enough for anybody?
Imagine if video games' audio/video just stopped improving past the SNES. Imagine if we decided that 56k dialup was good enough. Imagine if we stopped improving cell phone cameras past the iPhone 3G. These things seem pretty low quality now because we've incrementally built so many better things in the interim. The unleaded gasoline of today is going to be as absurd as the leaded gasoline of yesterday within many our lifetimes. But we can't make big leaps without the interim nudges forward - the N64, the DOCSIS cable modem, modern phone cameras, hybrid vehicles. To do those, we need better microchips.
We also need more of them. Just because the richest areas of the world have theirs doesn't mean the less-well-off areas need to be shut out because they didn't get in on time.
As someone whose daily drivers consist of decade-old flagship hardware, I don't need to. Outside software support, the main downside of my phone is battery. Maybe I should get a new one - it's from an era where these were still user-replaceable.
My similarly aged laptop? Same thing. I could upgrade the hardware; the small increase in compute power isn't worth the reduction in connectivity (ports) though.
Sure, some will have specific needs. But for the vast majority that doesn't need a 96 GB desktop or a 10K screen, flagship HW from 10 years ago is more than good enough. Just as for your examples where we need better chips: that was true 30 years ago. Nowadays, a smaller nanometer scale than the last 2 cycles probably matters far less than a better chip design for most use cases.
While we would have lost some things, we would have avoided problems also.
Such as the massive engineered screen addictions pandemic that afflicts most of the world today, especially the younger generation that never knew any other way.
Or the mountains, rivers and oceans of e-waste. Or decline of physical and mental health from lack of natural physical activity.
There are benefits of course, but it's wise to keep a balanced view on the pros and the cons as well.
I'm of the opinion that what we have is good enough. What we need are consumer devices that are not made with planned obsolescence in mind. I have perfectly viable devices that are sitting around that I don't want to throw in a landfill, that are deprecated purely because of software changes. It's clear when we can afford to toss all of our ram / compute at running Electron applications.
Because sooner or later no one will buy it. They will buy the new tech with better performance at a fraction of the cost, and your firm will go out of business — or, if subsidized, have its budget laughed out of Congress.
A phone from 3 years ago, running software from 4 years ago would be as fast as anyone would reasonably need, but it gets obsoleted via software bloat.
More frameworks, more layers of abstraction and no confining force that forces anyone to write software that isn't a bloated mess.
greater variety is not a thing that would happen (and incidentally, as an electrical engineer, there's plenty of variety already). The hardware used in semiconductor foundries is all made by the same few companies, which is a major reason everyone gets similar advances at the same time- they're all working with the same tools.
The vast majority of variety in product lines comes from who is ordering the chips, not the foundries where they are made. Adding more foundries will not introduce any more different chips, just chips that have subtly different performance or reliability, which is already a nightmare engineers deal with continuously.
China sells the cheapest chips, and companies only buy the cheapest chips. Making more foundries in the EU and Europe will not change that fact. China will have the huge majority of demand. If anything, a reduction in demand will give more power to counterfeiters and raise the floor price you have to pay to avoid them. It won't really impact prices at all (counterfeit chips are almost nonexistent for anything costing more than a couple cents) but it will make life significantly more irritating for people like me.
>The hardware used in semiconductor foundries is all made by the same few companies, which is a major reason everyone gets similar advances at the same time- they're all working with the same tools.
it depend on the craft smith's skill. everyone have access to Python but some is able to craft a robust app while others app is buggy and unusable.
TSMC consistently have the best yields and quality chips
Acquired did a podcast deep dive in TSMC history which supports your argument — they’ve arrive at those yields from just a massive set of iterations. I had a lot more respect to the art + science aspect of chip manufacturing the more I learn about fabs, having originally thought it was a basic recipe easily replicated.
When I read greater variety I was thinking of a greater variety of functions not a greater variety of fabrication techniques. Like if you’re shopping for a regulator there are dozens of manufacturers with dozens of options. If you’re shopping for something strange… say a 16x16 switch matrix? I think there’s a single chip? Excess capacity because of a proliferation of fabs could lead to a lot of cool chips being made for a low cost. Which in turn enables new technology in that “these are cheap, what can i make with them?” way.
That assertion fits worse with this industry than like, any other. The constant flow of freshly obsolete semiconductor machinery literally feeds entire other industries. There is always a huge amount of easily available equipment to make high performance semiconductors because new technology is constantly replacing it with new tooling.
Expertise and facility time are the limiting factors. Low volume purpose built SOCs will never be cheap (outside chiplet-based designs) because the ability to fill out a production line is critical to amortizing the immense startup cost of a design.
It is already possible to have completely custom chips built in lots of <100 on older manufacturing nodes. Runs cost low five figures to low millions of dollars. Some college courses involve having an entire chip made. Anyone can order one on 20-30 year old equipment. There is no demand and it will never get significantly cheaper aside from mass-produced chiplet ICs.
You could say the same thing about something less niche like spectrum analyzers 20-30 years ago. They used to take up equipment cabinets, and you needed purpose built versions for specific analyses.
The thing about chips that is causing all the paradoxical effects we're seeing is that chip production extraordinarily specialized and capital intensive. You can't just build more chips - you have to build more chip factories for the type of chip you want. And if you build more chip factories than you need or factories of the wrong type, some of those factories will be unprofitable, will shutdown, at high cost, and then you will have fewer chips than you need, again.
If you wait on TSMC it would never happen. I'm bullish on Intel to pull this off. Intel has the expertise, the right CEO to execute, the government support, and most importantly the drive for survival.
Morris Chang (founder of TSMC)'s speech a year ago touched on 3 huge advantages Taiwan uniquely has. Having a whole, well-knit-together country with such intense knowledge & specilaization in making chips is something that would be extremely hard to recreate anywhere else. A community of practitioners is key. https://interconnected.blog/morris-chang-global-semiconducto...
The United States had extreme success growing really good chip designing talent with the digital foundry model. We simply gave college students & others access to the means of production. Something we see eFanless/Google/Skywatdr kind of doing these days, with free chipmaking (at 130nm). But how we get good at making the foundries, create a body of expertise in not chip design but chipmaking, at any level of density... hard problem.
What? I am reading the English translation and it seems based in truth to me.
1. The US of course has technical talent. However the vast majority would rather work in in the higher margin software industry, not hardware. If I am intelligent/hard-working enough in America to understand the physics behind semi-conductors, I would rather apply that to prop trading than Intel.
2. Manager-employee customs are vastly different across cultures. What is institutionalized in Japan is harassment in America. If he says Taiwan has a sufficiently different culture, I believe him.
It isn't that his point isn't true, it's just that it is tautological. It's sort of like saying cars are more useful in country X than country Y because country x has roads. On the one hand: yes. On the other hand: it used to be that no country had roads, so obviously this is a problem with a solution. The country has roads, because it has cars.
Since TSMC reached 7nm and 5nm first (and it will be years before Intel reaches parity with 5nm technology, and TSMC is expected to reach 3nm by that point...), its obvious for us to be focused on what TSMC/Taiwan is doing that we in the USA aren't.
TSMC seems to have achieved a sizable technological lead over Intel, that will perpetuate for the next few years or even decade.
It's not clear to me that onshoring would be without utility if it's not on the current node. Surely there are vast improvements to security and defense concerns to be had through onshoring even if it's (conservatively) 3 years behind the cutting edge.
There's also a good possibility that this would be useful in the market as well if it solves some supply chain issues. Car manufacturers won't need 3nm tech for quite some time, if ever. Hobbyist boards like the Pi have been hard to get for months now. Graphics cards that were 2-3 years old were going for huge premiums up until recently as well. All in all it seems as if there would be at least some markets for chip tech that isn't on the bleeding edge.
USA has plenty of older fabrication labs, and most of our critical technology is probably on 22nm or 40nm nodes (or older).
US Military equipment is pretty famously on old nodes / older technology for reliability and supply chain purposes for example. And its probably entirely domestic (Micron, Intel, GloFo).
The need for higher-end nodes is almost a "luxury" factor. There's a benefit if the latest iPhones were brought onshore and were US-made. This is for economic reasons (less economic disruption if China attacks Taiwan), even if it leads to slightly higher costs.
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I know that TSMC is pissed off at the "culture clash" in Arizona (one of these "on shore" US fab-labs) however. I can pretty much imagine a "Gung Ho" (1986 movie) situation occurring there. It doesn't look like the Arizona fab-lab will be complete in time, and TSMC is blaming US worker culture.
Do we? The current, continuing semiconductor shortage argues otherwise.
I mean, the fact that a "switching regulator" can go out of stock borders on the absurd unless those fabs are busy producing stuff with higher margins.
"North America" is producing 2,623,000 wafers per month in 2020. In 2014, North America was producing 2,245,000 wafers/month.
And remember: wafers are raw silicon. Since geometry continues to shrink (22nm, 14nm, 10nm, 7nm, 5nm), even here in the USA, each wafer is making more and more transistors.
In any case, the issue is one of demand. COVID19 stressed the fab-labs like never before, requiring semiconductors to make laptops, cellphones, cameras and many other components. The car-manufacturing shutdown followed up by the rapid production increase was also a problem.
By all measures, the worldwide supply of chips has increased. Its just that demand has outpaced supply.
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It really does seem like the "cryptocoin" industry is eating up a lot of our production capacity. But also the rise in deep-learing platforms (GPUs/TPUs), SSD storage, and other transitions to semiconductors.
Taiwan / TSMC are allies. The solution is rather simple: convince them to build a lab in Arizona. Lo and behold: TSMC is building a lab in Arizona.
The debate is largely over. We're just dealing with the details / qualms right now. Culture clashes as Taiwanese business managers are learning that US workers have a different culture than they expected (and vice versa).
Taiwan / TSMC doesn't like it, but they probably recognize it as necessary. We USA folk have to be reminded though that this technology belongs to another country, we're merely "hosting" them.
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There's also some other knock on effects: Japan is asking TSMC to build a factory within Japan (after all, if USA gets a fab, shouldn't Japan deserve one?). TSMC likely doesn't want to spread itself too thinly around the world.
This overall discussion isn't about one-or-two key / emergency factories being built around the world. That has already happened.
The overall discussion is "how much" should TSMC spread itself around the world and build redundant supply chains?
They are not just "allies." The Taiwanese gov't had heavy handed intervention from its inception to what it is today. IMO, this has little to do with "culture" and more to do with the gov't protecting jobs and keeping their know-how and infrastructure in Taiwan.
This is not about fabs. This is about expertise. A TSMC fab in Arizona is nowhere close to being enough to satisfactorily address our security concerns with respect to critical infrastructure. We won't stop until we can stand up the entire supply chain using domestic intellectual capital. In fact, we aren't going to stop until that domestic intellectual capital not only exists, but is safely redundant.
None of the other nations will stop at a domestic fab either btw. This issue is not going away, and I suspect the EU is as determined to stand up a domestic supply chain as we are.
And don't even get me started on China. We can assume they are probably much further along than is generally known. Because they always are.
Morris Chang's point is that TSMC is able to draw upon Taiwan's very best talent, as the country's most attractive employer. Likewise, Samsung is among the most prestigious Korean employers. In contrast, where does Intel rank among US employers?
Samsung still has overwhelming access to talent-base & are a top employer. I don't know how loyal employees are or not, what the experience is like from the inside. They could make bad products but most people's first pick. That a company can mismanage & make bad business decisions doesn't necessarily mean people would prefer working elsewhere in the country.
> Taiwan will be surrounded by half a dozen Chinese aircraft carriers
Every time U.S. aircraft carriers enter a discussion, the reams of developments in anti-ship missile and swarming tactics with aerial or maritime drones (or fast boats) comes up.
That's because China can launch anti-ship missiles from any Chinese highway to threaten US Carriers.
In contrast, the weapon-platforms of Taiwan / US Navy are simply more constrained. Sure, US Destroyers / Cruisers are good missile platforms and US Aircraft Carriers / F35 fighters are also good delivery mechanisms for anti-ship missiles...
But China has the advantage of land-based missiles, land-based air force, AND sea-based naval forces to triple-team up against the US Navy.
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Chinese Carriers hanging around the Straight of Taiwan and hugging their coastline (under protective cover of Chinese missile-forces / Chinese air-forces) is the expectation.
We're not concerned about Chinese Carriers trying to say, attack Hawaii (which would be the opposite situation: US Air Force supporting US Navy in defense). The near-term threat is the gross geographical advantages of the China-Taiwan fight.
There's a mild expectation that if a Chinese / Taiwan fight were to occur, US Marines might be forced to make landings in the Chinese mainland to destroy Chinese land-based missile forces and even the odds.
> China has the advantage of land-based missiles, land-based air force, AND sea-based naval forces to triple-team up against the US Navy
Point is if China leans into its fleet for fire support (it’s currently not clear if they will do this or rely on land-based or aerial firing platforms), there are anti-ship missile systems Taiwan could be outfitted with to compensate for far cheaper than those ships cost.
> There's a mild expectation that if a Chinese / Taiwan fight were to occur, US Marines might be forced to make landings in the Chinese mainland to destroy Chinese land-based missile forces and even the odds.
That sounds remarkably unlikely and irrational. If China touched the US mainland it would mean immediate full-scale war, the opposite should be assumed.
> sounds remarkably unlikely and irrational. If China touched the US mainland it would mean immediate full-scale war, the opposite should be assumed.
Agree landing marines is aggressive. But missiles strikes should be assumed.
China would be the aggressor. And the things being attacked would be directly militarily relevant. If China retaliated by hitting Guam, I would call that fair play. (Hawai’i, for historical reasons, would be a stupid thing to hit.)
Russia is currently the aggressor and Ukraine has far more Western support than Taiwan could reasonably expect. Still no Western countries are "closing the skies" or attacking Russian military assets. China is a far stronger opponent than Russia, so I don't see why that would change.
The US would be going it comparatively alone against China in a Taiwan conflict. I believe the best way to protect them is helping them arm themselves to the teeth such that China sees only a brutally pyrrhic victory as a possibility.
> China is a far stronger opponent than Russia, so I don’t see why that would change.
China is a weaker strategic threat despite being a stronger local conventional threat. That would seem to me to make outside direct intervention more likely (though not necessarily more likely than not.)
> The US would be going it comparatively alone against China in a Taiwan conflict
There is nothing as centralized as NATO or the EU in the region, but there are numerous US bilateral and a few small multilateral security arrangements, and China is one of the main things motivating those arrangements.
Why would China be a weaker strategic threat than Russia? They have 10 times the population and a massive industrial and technological base. Fewer nuclear weapons but more than enough to trigger the apocalypse. Much stronger trade relations, economic diversification, and growth.
Kendall, Air Force Secretary, said “When you look at it objectively, China is a much greater strategic threat than Russia is”.[1]
Yeah, that was sloppy. What I meant specifically is that, while China has a strategic nuclear arsenal, it is insufficient to really count as a MAD threat, so it lacks Russia’s trump card against intervention.
No one would bat an eye if a Carrier Strike group launched F35 fighters to attack the Chinese mainland to disable missiles before they were used. In fact, this is 100% expected strategy for this situation.
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What about a Marine WASP-class assault ship launching helicopters to do the same thing (except cheaper)?
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What about a few Marine Special Ops units infiltrating the beaches under the cover of darkness to support those helicopters? If they're discovered, they could be "plausible deniability" units and arguably the USA never even landed in China.
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What about the regular Marine infantry establishing a beach-head to support those Special Ops units, but never advancing further than just the beach?
Etc. etc. Its a smooth and slippery slope. Its not exactly clear where or how to draw a line. In any case, the Chinese missile forces are going to be a severe issue. I expect at a minimum, F35B fighters from Carriers to be utterly destroying any missile-site they discover. That absolutely means attacks on the Chinese mainland.
Something like this is almost a necessity, so that US Marines could do "something" to support the US Navy. Its probably too much to ask the US Navy to solo all of China by themselves.
> No one would bat an eye if a Carrier Strike group launched F35 fighters to attack the Chinese mainland to disable missiles before they were used. In fact, this is 100% expected strategy for this situation.
> Something like this is almost a necessity, so that US Marines could do "something" to support the US Navy. Its probably too much to ask the US Navy to solo all of China by themselves.
We aren’t striking Russian forces despite their deliberate targeting of civilians and numerous war crimes. Why would we attack a far more dangerous adversary first? The moral argument is clearly not enough, and we have no defense pact.
We’d risk giving them their Pearl Harbor moment, and facing the carefully directed rage of a 1.4 billion population command economy under single party authoritarian rule.
> No one would bat an eye if a Carrier Strike group launched F35 fighters to attack the Chinese mainland to disable missiles before they were used. In fact, this is 100% expected strategy for this situation.
This isn't an accurate understanding of current US military or foreign policy thinking.
> Military strategists, planners, and force requirements developers should anticipate America’s civilian leadership needing effective military options short of mainland attacks on China. RAND analysts seem to appreciate the risks of homeland attacks, suggesting that “as low as the probability of Chinese first [nuclear weapons] use is, even in the most desperate circumstances of a prolonged and severe war, the United States could make it lower still by exercising great care with regard to the extensiveness of homeland attacks and by avoiding altogether targets that the Chinese could interpret as critical to their deterrent.”
Attacks against the mainland are certainly possible, depending on circumstances, but it's neither the default nor expected.
> That sounds remarkably unlikely and irrational. If China touched the US mainland it would mean immediate full-scale war, the opposite should be assumed.
Then your assumptions need to be set appropriately.
That is: China will have its full set of highways and railroads in-tact to deliver missiles to the US Navy. That will be the US Navy fighting at a severe disadvantage.
Furthermore, US Marines will largely be sitting around doing nothing. Having additional troops from a separate branch of the military doing __SOMETHING__ would at least help even the odds. (Marines do have some ships, but the Marines specialized in Sea vs Land situations, not sea vs sea kinds of battles)
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In any case, the Taiwan situation is a very difficult fight to think about. US Navy will be at a severe disadvantage in almost every concievable scenario, and its difficult to see how other branches (US Army, US Air Force, or US Marines) can help in a significant manner. (Sure, some islands here and there can station some US Air Force, US Army can also station some troops in Taiwan. But is it enough to make a big difference?)
We have no defense pact with Taiwan, and are not obligated to engage. Our official stance is strategic ambiguity, but Ukraine has showed how unlikely we are to join the fight. We will try to follow much of the same sanctioning, intelligence, and providing arms playbook, but with less international support.
Your scenario presumes we are in open conflict with Chinese troops, in which case landing marines is merely an escalation of a war that’s already begun.
How useful are anti-ship missiles in Ishigaki Island (Japan), Batanes (Philippines), etc.?
If Taiwan is loaded with anti-ship missiles, cruise missiles, naval mines, loitering munitions, artillery, modern fighter jets, etc., any Chinese invasion is at the very least going to come at very steep cost in life/military hardware.
And then the economic costs (to everyone in the world) are going to be extreme.
> How useful are anti-ship missiles in Ishigaki Island (Japan), Batanes (Philippines), etc.?
Better than nothing, but the Chinese mainland has literal highways and railroads to deliver more-and-more missiles.
When all else is equal, the winner is decided by logistics. Who can "deliver" more missiles to a location first? I'm willing to bet that Chinese highways and Chinese railroads have superior logistics / delivery than Ishigaki Island or the Batanes.
That is: the winner will be decided by "number of missile deliveries to the Strait of Taiwan". (A lot of people get caught up in thinking about the "last mile" of delivery: F35 jets or Destroyers or MLRS systems. But the "first mile" of railroads / highways is just as important, and leans severely to a Chinese advantage)
> If Taiwan is loaded with anti-ship missiles, loitering munitions, artillery, modern fighter jets, etc., any Chinese invasion is at the very least going to come at very steep cost in life/military hardware.
Putin just proved to the world that "Just because its a bad idea" doesn't mean it won't stop the autocratic dictator from doing something stupid.
China attacking the world-capital of semiconductor manufacturing would piss off the world for sure. But "pissing off the world" doesn't seem to enter into the calculus of these leaders. EDIT: I'm also willing to bet that Xi Jinping cares about Chinese soldier's life only a _little_ bit more than Putin cares about Russian soldier lives.
> When all else is equal, the winner is decided by logistics. Who can "deliver" more missiles to a location first? I'm willing to bet that Chinese highways and Chinese railroads have superior logistics / delivery than Ishigaki Island or the Batanes.
That's an interesting point.
One on hand, rail/highways are superior to anything ocean-going for transport, and cargo ships are easily taken out and would need extremely effective escorts.
On the other hand, rail/highways are much harder to protect because of their length.
If cargo ships could still reach Taiwan with escorts, I wonder if Taiwan could have enough supplies to deny China access to their rail/highway systems such that it negated their numerical advantages.
> That's because China can launch anti-ship missiles from any Chinese highway to threaten US Carriers.
The Chinese need not resort to mere land batteries. The Chinese have a fleet of well over 200 Xian H-6 strategic bombers to launch whatever anti-ship standoff PGM they can mount to the wings or fuselage. And the new H-6N is aerial refueled.
A few years from now when these are operationally armed with sufficient quantities of supersonic/hypersonic/flocking/maneuvering/whatever anti-ship missiles China will have absolute control of the sea around Taiwan; foreign war ships, cargo ships and anything else that isn't a submarine will be permitted to remain in the area at China's pleasure.
There is a reason that foundries are rapidly being built in the US, Europe, etc.: the shot callers at the top of these semiconductor manufacturers know that one day in the not too distant future Taiwan will be blockaded in China's play to reunify and there is nothing the West can do about it without risking the destruction of capital ships full of propulsion reactors.
I bet every US military platform uses chips from Tawain... if China was to take or even blockade Tawain it would be bad for the us military industrial complex. Not to mention the worldwide recession, job cuts and other problems not being able to put that one last needed chip into products like cars would cause.
This is precisely why USMC infantry training pivoted back toward more traditional (for the Marines) landing tactics in the Pacific, away from desert operations.
The fact China hasn't already invaded makes this doubtful. More likely is trying to install a pro-CCP politicians and pursuing annexation politically.
The US has had a very close relationship w/ Taiwan for decades including military training and access to newer military hardware.
Also discussions about china attacking a US ship are rather silly since that would be an outright declaration of war. The amount of firepower available to the US would level mainland cities.
Too much to lose for them to make an invasion likely.
I doubt this. you'd need to continue having a thriving economy, not only that for an aircraft carrier group to be effective you'd need quality fighter jets that can take off with equal or more payload than the US (which does not use a ski ramp for this reason) and compete with it's 5th or 6th generation planes. In addition you would need adequate defense fleet, especially submarines quiet enough and capable of detecting threats and countermeasures.
Even the Taiwanese F-16V will be able to obtain air superiority in the present, 10 years is awfully short for it to master jet engine manufacturing.
In 10 years it would be lucky if CCP survives internal issues due to a dwindling economy and inability to service and maintain much of its core infrastructure rather than an external one.
I could definitely see Xi taking some of the islets close to its coast line but doing so would give the US justification to station its airbase permanently and start a Russian style sanction.
They've repeatedly signaled and backed this up with a real aircraft carrier that sails between the straits. They aren't doing this just for show. The ball is in CCP's court, if they venture too far past their coastline they are going to face USN + JSDF.
Again, Taiwan is NOT ukraine. It's semiconductor supply is critical to national security and the economy.
US also signaled they would hit China with sanctions and I don't think it's a bluff. China needs US more than US needs it.
USN hasn't had the balls to sail carriers through the strait in 20+ years even under Mike Pompeo at the nadir of US/PRC relations since Nixon. Clinton sent 2 during last TW strait crisis for shits and giggles. Strait transits are down to DDGs and coast guard vessels now.
PRC doesn't even need Navy to venture outside the first island chain to destroy East Asia semi, or conduct massive crippling cyber warefare on CONUS. Reality is US has very limited options protecting East Asia interests and US is now existentially vulnerable in multiple domains that can't be solved with biggest military budget and 20 aircraft carriers.
PRC is moving to sanction proof economy and decoupling anyway, eating sanctions for taking back TW is built into the equation.
If there's a war in East Asia, I would bet against China. It should be clear that having the world's largest standing army don't really matter, we can see what a paper tiger Russia turned out to be and PLA has far worse corruption. Especially since the PLA only has had success fighting its own, it's lost every single war and hasn't fought a major war since losing to Vietnam in a quick war.
The US + allies aren't exactly worried here. It possesses complete air superiority in the region as well as early warning radar.
I mean if a small country like Taiwan could lodge missiles at the Three Gorges dam that would completely flood the mainland, think what Korea or Japan can do without even the US helping.
The PLA is a paper tiger and this angers a great deal of PRC nationalists and sympathizers but its the truth. There's very little chance it could enter into a prolonged war with QUAD + South Korea, Taiwan.
I don't know what this sanction proof economy is about but it clearly isn't working out for Russia with Ukraine.
And largest navy, airforce, and missile capabilities in region with A2D2 bubble to support. I'd like to see any security analysis from last few years that suggests US can divert enough assets in theatre to rival PRC, especially as gap projected to widen with time. Literature in last few years is exactly US+allies worrying because they can't concentrate enough forces in region. It's fascinating how PRC is paper tiger advocates have to draw on outdated facts or three gorges memes to deny reality. Like TW having capability to destroy Three Gorges that require bunker busters larger than any conventional missile can carry. They don't.
Also PRC won vietnam strategically, the kind of victory that matters. Wars are beyond K:D ratios. Plus fought US/UN, USSR when both were nuclear powers and PRC agrarian shitshow and still managed to secure strategic objectives, all of which less significant than TW, while PRC was more ill-equipped. There is 100% chance PRC would fight prolonged war over Taiwan, because it has never not fought over redlines. And like Ukraine, very little chance of substantive outside support simply because everyone else is as or more vulnerable.
Sanction proof = unlike RU, or most PRC trade partners, PRC is comparable to US in terms of trade dependency (not much). And unlike regional US partners, sufficient in domestic resource production to weather war economy for a long time. As well as have enough supply chain dependency over strategic resources like rare earth and leverage over threatening east Asia semi to deter prolonged war at least a few decades. If there's a broader war in East Asia, I would bet against everyone. Including US. Difference is, as with Vietnam, PRC has track record for accepting existential fights.
Is it really "balls" to not sail an aircraft carrier?
Last time it happened was during the Taiwan straight crisis where the PRC fired missiles - which a defector in the PRC told Taiwan had no warheads - deliberately near Taiwanese cities.
Why respond with a crisis level military show of force when - thankfully - there's no crisis?
PRC also unofficially communicated missiles drama weeks ahead to TW, so there wasn't any "crisis" either, but US sent 2 carriers as show of force because it could, knowing PRC had no capabilities to counter. Force balance is different now, and for all the US hyping about increased PLAF flights into TW ADIZ or clipping median line last year, basically another crisis brewing, USN still only sent DDGs for strait transits because they can no longer risk using CSG as show of force.
None of these issues constitute a crisis nearly as much as '96 - an alternate interpretation is that the PRC is still terrified of a CSG appearing in the strait so they deliberately do not cross US red lines, even when much closer US/Taiwan relations cross theirs.
Alternate interpretation doesn't jive with analysis last few years that PRC has overwhelming A2D2 advantage in region. The parsimonious explanation is US doesn't want to put CVNs at risk or expose carriers to growing PRC ELINT capabilities, including around SCS islands where FONOPs are also conducted with DDGs or smaller vessels. Lanzhou came within 50 meters of Decatur in SCS a few years back, PLAN hasn't been not scared of US in backyard anymore.
Proof is in the pudding. PRC has not initiated another crisis since '96, Taiwan US relations are much closer than 30 years ago and have crossed many of the PRCs red lines, and the US military capabilities have not been standing still either. Looks like cooler heads have prevailed, which is good news for all three parties.
Which neglects the point that USN aren't using CVNs to conduct FONOP in PRC SCS features that US does not recognize. There's no explanation other than being risk averse considering other developments.
>PRC has not initiated another crisis since '96
The crisis in 96 was US initiated when House passed bill to allow TW president Lee to visit Cornell after first denying him. Current rekindling of US/TW relations have not gone that far, i.e. US haven't renamed Taipei representative office, consistently reasserted One China Policy, maintained strategic ambiguity, the upgrading of diplomatic contact with TW still adheres to PRC redline (not meeting TW Foreign Minister in DC reserved for representative of sovereign states).
Though US is inching closer. Time will tell if cooler heads will prevail, with PRC domestic propaganda now talking about preparing for war if/when US plays TW card. Granted it's retired HuXiJin, but it's not good sign when he escalates spiels from "warning US" mode of last few years to "prepare the country for war", specifically describing "real sense of crisis" over current developments.
in the past 5 or so years, off the top of my head:
- phone call between Trump and Ingwen
- confirming US military presence in Taiwan (alleged PRC red
line)
- Officially released videos showing US military training with ROC forces in Taiwan
- Higher and higher level US officials visiting Taiwan
- Vice presidents of respective countries seen talking together
The things you list that the US still is not doing, I fully expect them to start doing. It would be in the framework of the US one china policy, but it would continue the trend of salami slicing their way to dual recognition. It would probably be in PRCs interest to negotiate the status of Taiwan with Taiwan directly to save face before this happens.
Not sure why you're so pre-occupied with the lack of aircraft carrier transit. Let's say one was targeted by PRC missiles while transiting in international waters. Do you think that would be the end of it? The repercussions of that would hurt the PRC more than vice versa.
US troops for training, not redline, understood exception as resulit of TW relations act. I expect US to continue salami slicing as well, and I anticipate situation will turn hot eventually. There's no need to negotiate with TW, it's ultimately a US/PRC force balance issue.
Re: carriers, I was highlighting to OP that there are constraints to US actions imposed by PRC, both militarily and in other examples, i.e. politically. You insinutate it's not US caution but PRC fear, which makes no sense in context of how careful US is shifting TW policy, because force balance is not disproportionate like during 3rd strait crisis anymore, US repercussions are approaching existential as well. As for who loses more, up for debate, but IMO a reigning hegemon has more to lose.
Assuming this is true, makes Taiwan even happier they hold TSMC in country, otherwise what incentives does the rest of the world have for helping Taiwan out, except the whole, we are the good guys stance? We know the we are the good guys message is only good so far.
I think the PRC saw how well Russia has fared against modern weapon systems in Ukraine and is probably getting cold feet. Taiwan has had more time to prepare and very advanced domestic manufacturing; the missile spam would be dense enough to make a Macross fan blush.
And with respect to the Type 003, where is the J-35 or whatever they're calling it? Still not ready. The only plane they've got for these ships is the J-15, which has the RCS of a barn. Carriers without planes are like tigers without teeth. Furthermore the PLAN's lack of operational experience with carriers is stark, to put it mildly. Those ships will be good at one thing: being reefs.
I suspect that outside of... 'mainland China' (I'll phrase it for clarity) and the island just off the coast of 'mainland China'; the rest of the world really just wants stability in the region and no further conflict. Generally the status quo is OK for the rest of the planet, and the other nations would be happy to call 'mainland China' China and the island off of that recognized as the sovereign nation of 'Taiwan' (or something else other than China, since the name's already taken by a larger military power).
I wonder what it would take to get that to stick until we grow up enough as a species to cease having countries and instead have a united single government like Star Trek.
>> grow up enough as a species to cease having countries and instead have a united single government like Star Trek.
This would require everyone to think very alike which we will never be. there's simply too much diversity.
why not aim for more of a everyone have it their own way kind of model where more of the power is sent to local governments? this way there would be less conflict and more happy people, rather than only one way for everyone (one size does not fit all)
Division reflects an 'us' vs 'them' mentality. This leads to all the things Yoda talked about.
A single governing body is the only chance at equal justice and opportunity for all; assuming it isn't corrupt, but with that assumption failed there is no justice anyway.
> to bring a full supply chain back and try to be fully self-reliant is totally not efficient. ... At the end of the day, that additional capacity could become non-profitable capacity."
It doesn't matter if it isn't profitable, because if cars, trains, and computers go offline because of chip production supply chain issues then a huge portion of the workforce can't participate. If regional war blocks trade from Taiwan we will be hosed within a matter of years.
the pandemic and its effects showed that the cost benefits of globalization are beaten by the national security benefits of onshoring. i think we will see more critical manufacturing, even at great expense, move back to the u. s.
To be more accurate, the pandemic showed that onshoring beats globalization... in a pandemic.
The cost benefits were wildly outstripping the national security benefits before 2020! That's why globalization has thrived!
I know that's the point, and I'm sort of willfully misinterpreting what you're saying. But the cost benefits of globalization aren't going away, and people's fears of the pandemic and supply-chain disruption will fade with time.
Critical manufacturing simply will not be onshored by participants in capital markets if it costs more. It's the kind of thing that only a government can really make happen, and the U.S. government does not seem willing to impose massive costs on ~all of its largest industries.
Semiconductors -- maybe. There's a lot of focus on this particular industry right now, and Intel + the CHIPS Act might be able to make waves in the U.S.
But I think it's incredibly unrealistic to expect any significant share of global manufacturing to move back out of Shenzhen any time soon.
I don't think it's fair to say the national security benefits were tested before 2020. Risks are rarely considered until after they are exploited; everything that happens in an airport security line is based on something that actually happened before they added that requirement.
No, I know -- that's my point. They hadn't reaaaally been tested before, and they probably won't be tested again for a long while.
Regardless of whether it is correct to account for the risks of globalization, it's very unlikely that people will -- again, particularly when those people are participants in market economies -- because the risks are so infrequent, unpredictable, and catastrophic that people just don't like to think about them.
I think this type of thinking, while relevant, ignores other hidden costs associated with off-shoring the majority of our manufacturing.
1. The environmental costs are not insignificant with both the lack of environmental regulation and added ocean shipping (yes, I know people are tired of hearing about environmental impact)
2. The humanitarian cost of offshoring our manufacturing is not insignificant. We may not have the best humanitarian track record in the world, but we aren't setting up suicide netting or sending manufacturing to Uyghur prison camps.
Don't get me wrong, I think a certain amount of global trade is not only necessary but healthy. It strengthens treaties and national ties. This reduces war risk and national coalitions... all good things. But a certain amount of self interest and a healthy middle class bolster our own country. We have lost our ability to stand on our own two feet for any amount of time.
Good point, and I think assembling all these reasons alongside national security risks is our best shot at actually convincing our governments to enforce some amount of change.
Environmental impact is a really important concern. But aren't we just deciding _where_ that impact will occur? I don't think environmental damage in China is inherently superior to environmental damage in America; not for any reason other than, "I live in America, so of course I want America to be have a clean environment." I think the environmental impact of these industries could be reduced but profit overrules all other considerations.
One thing I'm curious about is how you define "critical manufacturing"? Manufacturing seems like a directed graph where each node is a product or material and the edges are dependencies or inputs to that product.
So if you want to onshore manufacturing of a particular product, you need to also onshore all of its dependencies. My contention is that the graph is so densely connected that you end up having to bring entire supply chains onshore and this effectively means every country needs to manufacture everything.
> this effectively means every country needs to manufacture everything.
depending on your exact goals, it could be worthwhile to bring a little bit of every node on the graph onshore. you retain critical experience, and have at least some hope of ramping up. getting a bunch of functioning, complicated businesses to expand is way easier than creating them from scratch.
This is, in fact, why I think its great people still have an interest in low-tech methods for doing and making. In a Carrington Event[0] we will need people with that knowledge. Those without it will be much worse off.
You really only have to focus on parts of the supply chain that are required to produce, fuel, food, medical, and military equipment that also are not produced anywhere in the world except by a potential a adversary or next to a potential adversary.
It's a big undertaking sure, but it's really only onshoring pieces that are produced exclusively in China or next to it.
I can't think of much now that the US relies on for fuel, food, medical, and military equipment that is exclusively made in China. Especially the latter.
This is a good question, and IMHO it's about threat-modelling. Three events come to mind: pandemic, war with China, and a Carrington Event[1]. The last one is interesting because it would destroy most electrical infrastructure, and it's not clear that the US retains the ability to manufacture those components. I'm not sure, but I don't think huge transformers have a ton of components, so your other (valid) concern about dependencies wouldn't apply in that case. Fabs are at least somewhat similar in that they don't recombine a huge variety of components in different ratios like Shenzen does.
Some manufacturing can presumably be spun up with not too much effort if you have other heavy industry around and access to raw materials. Chip fabs require way more than retooling a line. We could quantify the problem as the amount of time it would take to bootstrap a domestic industry if the current suppliers turned off the spigot.
Ahh this makes a lot of sense. So you rank each node in the graph by how many other nodes depend on it PLUS how hard it'd be to spin up that industry if we need to - then tackle the high value ones
> One thing I'm curious about is how you define "critical manufacturing"?
It’s a good question. For me, critical means you can’t walk away from a deal because you need the product, meaning you end up being extorted. Food and energy meet this criteria. Do chips? Maybe. And if so, then yes, you’re absolutely right that you would need to secure the supply chain/graph too. Maybe not the whole graph if you work back to the point where there is a diversity of competitive sources.
It's a huge proportion of the graph, it would be like an economic Manhattan project, but 10x bigger. But if things continue on the current trajectory with China's rapid military build-up, base-building around the SCS, threatening Taiwan and the other Asian nations, it may become necessary.
If we can at least make sure "the west" has it covered that's a great start, and the US is definitely capable if the will is there. Probably unrealistic for every tiny South American or European country to do literally everything.
For countries that want to maintain a high degree of sovereignty and have the resources to do so, it’s probably the way to go. 100% is impossible of course but directionally the smart move.
I think what I'm getting at is that unless you do 100% of the graph (at least with your allies) you're eventually going to be dependent on an adversary. Like you might not solve anything by bringing chips onshore if your only supply of silicon for those chips is offshore. So you're just pushing the problem down the stack...
The pandemic and its effects showed that the cost benefits of globalization are beaten by the national security benefits of onshoring.
That doesn't seem like the way to put it. What you seem to mean is "the pandemic showed serious downsides to globalization and I imagine onshoring would work better".
The thing is, the pandemic indeed showed downsides to globalization, financialization and extreme capitalization of industries (though with chip manufacture, that's hard to avoid). But a significant part of this involves companies having no interest in abandoning or modifying their approaches even when it had horrible consequences - because usually it didn't having horrible consequences for the company in particular. Hospitals still only entered into multi-year supply contracts with factories even if, in the case of PPEs, it their workers and patients were dying of covid, 'cause emergency acquisition sets a bad precedent. Etc.
States could ameliorate some of these problems with simple regulations but that didn't happen and seems unlikely now 'cause profits matter.
I can imagine some gestures to onshoring 'cause that's extra money that can thrown at companies but it seems pretty certain the mechanisms of "globalization" will continue.
As Moore's law slows down, fabs will have longer life near the leading edge.
So, for example, 45 nm rolled out in 2007. If in 2005 you were crazy enough to try to bootstrap a 32 nm fab, you might have hoped to have the line completed a year behind the industry if you were lucky. (You have to get it working, get the customers,and get them shipping in volume to get the business healthy.)
So Joe's Tool and Die startup fab rolls out their 32->36 nm process in 2010. And they luck out because the 22->28 happens in 2012 (a 3 yr gap vs the typical 2 yr at that time.)
But 22->28 rolls out and JT&D is playing catch up again.
If the same cycle stretches to 5 years, the technology ramp becomes much more manageable.
TSMC is in part a Taiwanese defense asset. They don't want anything moved because right now having so much supply chain in Taiwan chains the rest of the world to Taiwan's security against the PRC.
And he's saying it wouldn't be "profitable" because they'd have overcapacity.
But countries wanting to bring it in-house may not care about that, or be willing to pay for that.
Ignoring shortages, Russia would be much happier right now to be oversupplied with the chips they need than having to get them through China. And lots of other countries are now re-evaluating what risks may be inherent in their supply chains.
That's likely why they're trying to dissuade people from doing it; also if you DO bring something in-house you're likely to bring in the highest margin chips, which of course affects TMSC's bottom line.
This is an oft-repeated meme that doesn't align with the historical facts. TSMC is a distant secondary factor in the geopolitical competition over Taiwan, which is a continuation of the Chinese civil war that started in 1927 and has never officially ended.
If TSMC didn't exist, or was located in e.g. Vietnam, Taiwan would still be a vital strategic asset in Washington's stated policy to contain Communist China (as part of the "first island chain" [1]). There would still be a geopolitical competition without TSMC.
The problem is TSMC points a gun back at us. Look at the Ukraine playbook: "ok Russia go ahead and try to invade, we'll turn it into a bloodbath for you while we cut you off from as much of the global economy as possible"
The threat to wreck China's economy if they invade becomes a lot less credible when we'll be cutting the legs of the entire global economy in the bargain. It becomes more of a mutual suicide pact and gives China reason to think we'd cut a deal if it came down to it.
Again, this narrative doesn't align with the facts.
Suppose TSMC never existed. USA would still be totally economically dependent on China in 2022. If USA declares war on China, USA will have an acute economic crisis within weeks due to half a trillion $ in missing imports. This has nothing to do with chips from TSMC.
The geopolitical leverage of TSMC is vastly overstated by people who get their geopolitics from geopolitical non-experts like Zeihan and Stratechery.
This is exactly correct. If China took out TSMC, we would have an unimaginable global catastrophe on our hands that would make Covid look like nothing. There are far too many eggs in that basket.
If China invaded Taiwan, and the world response was something like the response to Russia's invasion of Ukraine (economic isolation), it would mean losing 500 billion dollars of imported products, and an uncountable loss of products that are dependent of that 500 billion. Look at what a small kink in chip supply is doing to car pricing and supply. Imagine instead of a kink in the supply chain, the supply goes to zero for several years. Now imagine that affecting thousands of products that are either wholly manufactured in China and Taiwan, or dependent on components made in China and Taiwan.
The number of chips within a five foot radius of you at this very moment that were manufactured by TSMC could easily be in the double digits. So imagine that all of the devices containing those chips are no longer able to be produced because nobody else can make the necessary chips.
The semiconductor industry would be set back a few decades because the main production facilities for the current node and many previous nodes would be gone. It's not just the equipment, but also the institutional knowledge about how to operate it best.
This is absurd. No, we definitely wouldn't. Most people wouldn't notice if TSMC disappeared.
In a couple years they might go, hey, why isn't my iPhone 42 any faster than my iPhone 35.
But most devices and datacenters would keep running for literally years. Occasionally there would be a disaster that is hard to recover from due to missing supplier inventory. The average warranty on such devices is like 3 years, and many can perform long beyond that.
This should be compared with critical commodities like oil. The oil produced yesterday will not last anywhere close to 3 years. Mass starvation would happen within weeks if the oil supply was cut off.
Not to mention a lot of critical technology doesn't need <10nm chips, and can use less advanced chips manufactured outside of TSMC.
TSMC makes a lot more than iPhone CPUs. A lot more. And they do a lot more than cutting-edge process nodes -- they have active 180nm fabs. Microcontrollers, ADCs, DACs, ASICs... almost anything you can buy that contains electronics can have ICs manufactured by TSMC.
Now think about all the non-consumer equipment with embedded electronics -- trucks, trains, container ships, industrial equipment, medical equipment. Suddenly there are no spare parts available. It takes months to redesign and re-manufacture new electronics, and the supply of non-TSMC components will be unpredictable as everyone rushes to change all at once.
On top of that, other foundries in Taiwan (like UMC) would go down, we'd be cut off from all the fabs in China, and if the war expands China might target fabs in South Korea and Japan. It wouldn't be mass starvation in weeks, but it might only be a few steps removed from that.
Why do you think most people wouldn't notice? Computer and phone prices would probably double or triple. Think gpu shortage but with everything.
Since the world would have to fall back to older fabs we'll probably go back 10 years or more in time. A lot of current software is not optimized for such old tech or would be impossible to run. Can't run ML algorithms on an iPhone 6 cpu.
Apple probably wouldn't be able to sell phones or computers for a year or two. Would have to redesign everything for older fabs. Is an M1 cpu even possible on say 30nm?
Apple has enough money to probably survive two years without income but a lot of companies would just go bankrupt. Can't sell anything if you lost access to the factories.
This won't happen because China would also take a hit. TSMC is safe as long as China doesn't have a cutting-edge semiconductor industry that can replace the lost output from the latest nodes.
A long-term geopolitical goal of the PRC is to challenge the hegemony of the US blue-water navy over the oceans, or at least of the immediate surroundings of East Asia. Having US-friendly regimes on Taiwan, the Philippines and Japan would make it difficult for the Chinese Navy to operate outside of that island chain in a conflict.
On the other hand, if China assumes control of Taiwan and TSMC with it, that need not have any impact on the rest of the world. Rather, it would provide a strong financial incentive not to push back as hard on China as we have on Russia.
In other words, part of the desire to onshore chip fabrication (and other manufacturing) is in part so we can sanction China harder if need be. Dependence on TSMC weakens our resolve to defend Taiwan for political reasons, it doesn't strengthen it.
> the rush by major economies to onshore semiconductor production is "unrealistic" and that expanding capacity would not help alleviate the global chip shortage.
OR, maybe the countries are just using that as pretense because they think the CCP will make a move on Taiwan, and it’s easier to say this than say that out loud.
> Chang said that costs for manufacturing in the US are simply prohibitive, and TSMC has the data to prove it thanks to 25 years of manufacturing at its plant in Oregon. Chang said the plant is profitable, but expansion plans have all but been abandoned.
>"We were extremely naive," Chang said, "in expecting comparable costs, but manufacturing chips in the US is 50 percent more expensive than in Taiwan."
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>It's perhaps hard to square Chang's position with TSMC's $12 billion investment in an Arizona fab, and news that it raised an additional $3.5 billion in bonds for the factory. Then again, he did leave in 2018 and said that the decision to build the new US fabs wasn't his.
>"We did it at the urging of the US government, and TSMC felt we should do it," Chang said. Still, he believes that all the billions of subsidies being ring-fenced by the US for increased domestic semiconductor assembly will still fall far short of the necessary amount needed to boost homegrown chip manufacturers.
What we’ve learned the last 18 months is that chip production is vital to the economy, not just national defense. It doesn’t matter if it is profitable. If American businesses can’t run chip production on American soil at a profit then we’ll have to subsidize it. Either way we absolutely can’t continue with such an absurd reliance on Taiwan and China.
> It makes sense that all the major economies hope to bring the chips for infrastructure or defense uses onshore, but to bring a full supply chain back and try to be fully self-reliant is totally not efficient
Unfortunately, sometimes you've got to trade efficiency for robustness. Taiwan has China dangling over its head like the Sword of Damocles.
Honest question, what would be the outcome in terms of chip manufacturing ability if China didn't invade Taiwan, but just decided to level the whole island with an eye towards repopulating later with Chinese nationals? Have Chinese fabs come along enough to allow them to just destroy Taiwan instead of mounting a costly invasion?
I'm curious to see if the chip supply constraints will result in device designs that make more efficient use of them. I think some auto manufacturers are already doing exactly that.
After the German debacle over having to kowtow to Russia to receive oil and gas and essentially in doing so fund the killing of Ukrainians, everyone has to be rethinking who they are reliant on and making sure they are strategically diverse.
China is the obvious example of this where we need to break out the supply chain across more countries. I fully expect this to happen through a combination of corporations and countries realizing their exposure to "China doing something nuts" and acting accordingly. You already see Apple doing this, for example, with India.
Apple is also attempting to mobilize Indian workers before China's working population declines enough to be noticeable. The cost of business in China (regardless of international policy) is guaranteed to rise as the number of available hands decreases from mass aging.
No, the cost of business in China isn't rising because of demographics, it's rising because China is no longer an impoverished country. Wages in it have grown massively.
I was referring to the future, the demographic situation is guaranteed to raise costs. I'm sure the extra leverage China's citizens have from their earned wealth will play/is playing a part as well.
In addition to geopolitics, wouldn't overproduction of chips be beneficial to consumers in the form of cheaper chips and greater variety?