Lorenzo Maria Pacini
Taiwan is an island, so the sea is the domain to which it belongs, and a sea power like the U.S. cannot forego a maritime engagement.
Not long now: as soon as a sufficient number of microchip factories are relocated from China to Europe, the USA will have no reason to wait any longer: it will be war in Taiwan.
An object that cannot be renounced
Let us assume that microchips are indispensable nowadays. Almost nothing we see around us every day would function in the same way. Literally. Communication, medicine, industrial automation, automobiles and entertainment. Microchips are at the heart of the Internet, which has transformed the way people work, communicate and access information. They are fundamental to the development of emerging technologies such as artificial intelligence, the Internet of Things (IoT) and blockchain. These technologies are shaping the future, whether we like it or not, and we are 100% living in it, all of us.
Before the invention of microchips, computers and electronic devices used vacuum tubes and discrete transistors. These components took up a lot of space, consumed a lot of power and generated heat, making computers large, expensive and unreliable. The invention of the transistor in 1947 by John Bardeen, Walter Brattain and William Shockley was an important step towards miniaturisation and energy efficiency.
The next breakthrough came with the invention of the integrated circuit. In 1958, Jack Kilby, an engineer from Texas Instruments, succeeded in building the first working integrated circuit, which consisted of a transistor, some resistors and a capacitor, all connected on a single piece of semiconductor material, silicon. Shortly afterwards, Robert Noyce, co-founder of Fairchild Semiconductor, developed a similar approach but with improvements that facilitated mass production. These inventions made it possible to combine multiple electronic functions in a single chip, drastically reducing the size and cost of electronic devices.
Microchips became indispensable for several reasons:
- Miniaturisation and portability: microchips made it possible to reduce the size of electronic devices, making the development of portable devices such as smartphones, laptops and smartwatches possible.
- Energy efficiency: Compared to discrete components, microchips consume much less power, helping to extend battery life in portable devices and reduce overall power consumption.
- Speed and performance: They can perform billions of operations per second, making it possible to run computers, servers and complex devices that require high performance.
- Economy of Scale: mass production of microchips has lowered costs, making the technology accessible to a wide range of applications, from industrial to consumer.
- Versatility: they are extremely versatile and can be designed for a wide range of applications, including processors, memories, sensors and communication devices.
Now, the question is: who produces microchips in the world? The leading manufacturer is China.
Who consumes the most microchips? The answer is: the United States of America.
What does this mean? It means that there is a dependency link that has enormous geopolitical and strategic value. And it is now a much more serious problem than before.
The microchip shield
It has been called the 'microchip shield': Taipei's primacy over microprocessors would guarantee an improbability of an attack by China, which would push the U.S., which depends on Chinese chips, to intervene.
In other words: an agreement for a low-intensity war, but one that cannot last forever.
Indeed, there has been conflict, with companies being sold and bought, both by China and the U.S.
Taiwan's King Yuan Electronics Co (KYEC) had sold its entire stake to China in April 2024, selling its Suzhou subsidiary for 4.9 billion yuan (around USD 676 million) to the consortium comprising King Legacy Investments, Le Power, Anchor Light Holdings, Suzhou Insustrial Park Investments Fund, TongFu Microelectronics Co and Shanghai State Enterprises Integrated Improvement and Experiment Private Equity Fund Partnership. The company's stated reason was that China needed to cater more for the production of chips for AI. The deal was made just days after the promulgation of one of the sanctions packages issued by Biden.
Another emblematic case is that of Taiwan Semiconductor Manufacturing, whose Arizona plant has achieved greater production success than its Taiwanese 'twin', giving the U.S. an advantage. In the case of this company, a very significant detail is added: in the event of a conflict, U.S. intelligence will allow Taiwan to stop producing microchips, which would result in a huge global financial shock. TSMC's chips are used in almost every electronic device in the world, just imagine what effect this would have.
The point is that microchips cannot be given up. This condition leaves no escape. The shield protects against something, but if this something manages to get hold of the shield, what happens?
The geopolitical and strategic urgency of changing course
2024 was a terrible year for the U.S., in terms of microchips.
Intel's stock - the leading company - has had a rough history, plunging almost 60% since January and falling precipitously in early August, when investors led by Warren Buffett triggered a massive selloff that caused major technology stocks to lose nearly $3 trillion in value in a perfect storm of recession fears, concerns about rising capital spending related to artificial intelligence, and inflation.
The stock slump has shed light on Intel's woes, with a flurry of news reports beginning late last week citing informed sources revealing that the company is in the 'most difficult period in its 56-year history', is seeking strategic advice from big banks, and is considering selling its chip-making operations.
The news has important significance for the U.S. government. Intel is not only one of America's oldest chip-making companies, but 'a key national security asset, signalling Washington's ability (or inability) to compete with Taiwan, South Korea, China and other chip-making goliaths.
Intel currently has more than two dozen fab and post-fab sites, most of them in Oregon, Arizona, California, New Mexico, Colorado and Ohio, but also in Ireland and Israel. The potential reduction in investment risks jeopardising the company's ambitious expansion plans, with capital expenditure expected to fall by $10 billion by 2025.
The company's problems have been bad news for the Biden administration, which in March poured $8.5 billion into the company's coffers through the CHIPS & Science Act, which provides $39 billion in subsidies for chip production in the U.S., $13 billion for semiconductor research and workforce training, and lucrative tax incentives.
If Intel is reformed and restructured to the point where it loses its chip-making power, an important element of not only the outgoing Biden's but also Trump's economic agenda could go up in smoke.
But it is not only Intel that is the problem.
The U.S. can no longer delegate the production of what it needs to foreign countries. Decades of manufacturing decentralisation have proved great in the short run but disastrous in the long run. Actually, they had already been looking ahead to the issue for years.
In 2022, Congress had debated the Taiwan Policy Act 2022, a bill that focused on expanding both the nature and amount of U.S. military aid the U.S. government is authorised to provide to Taiwan, including a hefty sanctions package to China. The matter was discussed during Nancy Pelosi's diplomatic trip to the region, an open provocation to Beijing that also caused concern in Japan and Australia.
Executives from IT companies Micron, Intel, Lockheed Martin, HP and Advanced Micro Devices also arrived at the bill signing ceremony. Curiously, just at the same time, the U.S. technology sector also announced an increase in investment. Micron spent $40 billion to create jobs in the U.S. And Qualcomm and Global Foundries entered into partnership agreements under which $4.2 billion will be invested in microchip production and expansion of existing businesses.
The chip issue passes into the hands of the Trump administration and it will be no picnic. The presidential entourage is full of anti-Chinese who are prepared to face the enemy.
Trump's will is to move chip production to Europe, in addition to America, by taking advantage of the new trade agreements that are about to be signed. For Europe, the war economy set-up is perfect for boosting the production of these small electronics.
TSMC, for example, invested as much as EUR 10 billion in Germany at the end of 2023 for a plant built in Dresden in which to produce chips by the end of 2027. An event that has been facilitated by the European Chip Act, a kind of photocopy of the American one, intended to double microchip production within a few years.
In Europe, Intel's Americans are banking on Magdeburg (in addition to France and Ireland). Italy is at stake with an area in Veneto and one in Piedmont: an investment of 5,000 jobs. In perspective, the supply chains are getting shorter and it is important that, if the production of electronic components will get closer to the outlet markets, Italy will become a reference point for the Old Continent.
Beyond the investments and partnerships that can be signed, the issue is also to be considered from a strategic point of view.
We have to expect a possible move of this kind: the moment a sufficient amount of microchips are produced and secured outside of China's orbit of power... then the U.S. can attack, trying to take Taiwan.
It is for this reason that the U.S. is also employing various vassal countries, such as Italy, in 'commercial' explorations in the China Sea, even touching neighbouring states such as Indonesia and the Philippines.
What does the Sea have to do with all this? Simple: Taiwan is an island, so the sea is the domain to which it belongs, and a sea power like the U.S. cannot forego a maritime engagement. The large U.S. deployments around Taiwan over the years now pose a real threat to China.
The point is that neither the actual amount of these microchips needed nor when it will be reached is known. And this means that an attack could be around the corner, any day.