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It's an existential question. Right now the US economy is entirely dependent upon Taiwanese semiconductor fabrication. This isn't a glaring problem yet, because

It's an existential question. Right now the US economy is entirely dependent upon Taiwanese semiconductor fabrication. This isn't a glaring problem yet, because China is also dependent upon the same supply chain, giving rise to a mutual incentive not to rock the boat too hard. However, China has dedicated substantial resources to building its own fab infrastructure since well before the pandemic [0], with the goal of establishing a parallel ecosystem that circumvents the US-controlled supply chain [1]. If the US does not follow suit, its dependence upon Taiwan becomes a massive liability. How much did we spend on the Iraq War, despite our own country being a major producer of oil and gas? Our economic incentive to entangle ourselves in Taiwan is even greater, but the stakes of military confrontation with China would be more dangerous. How much would you pay to avert such a conflict -- or worse, to avert the consequences of acquiescing to China's expansionism? Ironically, dependency on Taiwanese semiconductor fabrication reduces our ability to defend the island. Until the time that a fab interruption there would not halt our economy, Taiwan remains a US pressure point and China will continue to press it. I think $200 billion is a cheap price tag for a path forward that involves neither warfare nor perpetual paranoia about every perturbation in the South China Sea. Taiwan established itself as a semiconductor powerhouse largely because its government backed TSMC. South Korea's government bends over backwards for Samsung, which makes up about a fifth of their GDP. The way forward for the US may be similar in mentality: throw the government behind the industry. US fabs need resilient and high-quality infrastructure for power, water, and logistics. We can use the collimated power and authority of the government to yield a vastly more effective long-term solution than piecemeal tax credits on lithography scanners. [0] https://www.cnbc.com/2019/06/04/china-ramps-up-own-semiconductor-industry-amid-the-trade-war.html https://www.cnbc.com/2019/06/04/china-ramps-up-own-semicondu... [1] https://www.youtube.com/watch?v=LU2rNB34yY4 https://www.youtube.com/watch?v=LU2rNB34yY4

ac29 5y ago
> Right now the US economy is entirely dependent upon Taiwanese semiconductor fabrication. I'd be curious to see this quantified in some way. TSMC has a lead at the moment for bleeding edge fabrication, but Intel isnt that far behind and is massive in scale (revenue is nearly double TSMC, though its not an apples to apples comparison). A lot of the most impactful shortages this past year were in non-sexy parts like microcontrollers and other lower end chips that can be built in many different countries, since they are fairly simple (28nm, 40nm and even larger processes are commonly used). The world is intertangled enough that losing Taiwan for some reason would be pretty bad, but I cant think of another country better equipped to handle semiconductor production than the US (Korea and Japan do well also, but at smaller scale than the US).
- d110af5ccf 5y ago
  > TSMC has a lead at the moment for bleeding edge fabrication, but Intel isnt that far behind and is massive in scale Pull up a table of companies with cutting edge foundries by year. The list perpetually grows shorter as the cost to remain competitive grows higher.
sremani 5y ago
Their #2 company has failed miserably and exposed as fraud. SMIC is the only game in town in China. >> How much did we spend on the Iraq War, despite our own country being a major producer of oil and gas? With all due respect, from 2004 - 2007, all we were talking about is Peak Oil and US was not such a major producer then as we are today. So some recency bias here. >>The way forward for the US may be similar in mentality: throw the government behind the industry. Yes, US will become mercantilist again, and I will rejoice but the goddamn world will burn or not.
baybal2 5y ago
> Our economic incentive to entangle ourselves in Taiwan is even greater, but the stakes of military confrontation with China would be more dangerous. > How much would you pay to avert such a conflict -- or worse, to avert the consequences of acquiescing to China's expansionism? These are questions easier to answer than what most people think. There are countless unclassified defence studies with very good estimates of how much would USA loose in case of an all out war with a nuclear state for worst, medium, best scenarios. I'll encourage readers to check them themselves. Washington defence planners are most well aware of these things. The later question is much more important, and with more real world relevance. > consequences of acquiescing to China's expansionism? There is no limit on on how much "acquiescing" you can do before such states will come up with more claims. Remember "Finlandisation" precluding the WW2, and how it ended. Giving the most minimal concessions to such opponent will instantly lead to them wanting more, and more, until you will have to retaliate, but now against much stronger enemy. There is no "strategy," no political trick that works against opponent planning to attack you from the start no matter what. All treaties, political manoeuvres, compromise moves, even overt tribute payments will be only delaying the inevitable encounter in cul de sac. In Russia, people gave a simple way to characterise behaviour of such people: "A guy who wouldn't stop until punched in the face."
- distances 5y ago
  > Remember "Finlandisation" precluding the WW2, and how it ended. Finlandization means strong country affecting a small neighbour, not applicable to pre-WW2 appeasement policies.
  - baybal2 5y ago
    Finlandization started very much before the WW2, as major power were making compromises with regional hegemons, acceding to their claims on their neighbours "as something natural" It's big power saying "let them have it" basically, and to disastrous results every time.
    - distances 5y ago
SavantIdiot 5y ago
FYI: the automotive chips causing the crisis were made by two factories in Japan that caught fire (Renesas was one), not Taiwan. Needless to say, critical dependencies need to be onshored.
- MangoCoffee 5y ago
  automakers is the number one reason for chip shortage. they believe car sales will drop during covid peak but they were wrong. they didn't order from their suppliers thus suppliers didn't sign wafer agreement with foundries. i believed we going to have a over supply issue in the future with all these fabs being build and the demand will wane overtime
  - blihp 5y ago
    I'd be surprised if the autos are much beyond low single digits (if that) in terms of share as global consumers of semiconductors. The global auto market produces a combined ~70 million vehicles annually vs >250 million PCs, >1.25 billion smartphones etc. with just about everything these days containing at least a microcontroller. Sure, the semi shortage is a big deal to the auto industry, but the autos are almost rounding error to the semi industry.
    - SavantIdiot 5y ago
      There are about 100 MCUs per car. Even rear-view & side-view mirrors have their own micro-controllers. I believe the most common use are for voltage regulation.
      - blihp 5y ago
        Sure but quantity doesn't tell the whole story. Most of them are relatively tiny, in terms of die size. (obviously not so in the case of the more advanced end of the market such as Tesla, but rather the more common vehicles most are currently driving) So the point still stands that automakers aren't an out-sized user of silicon as the parent claims.
yyyk 5y ago
> Right now the US economy is entirely dependent upon Taiwanese semiconductor fabrication. Strong disagree. What kind of application would not be able to run at all on Intel's latest processors? I can't think of anything aside from maybe some future development of VR. Most HNers deal with software engineering, but the rest of the world simply does not have to have the latest and greatest. Assuming Intel stays in the back and the West has to use only Intel, applications will be a bit slower, processors will use a bit more power, there will be more focus on software efficiency and parallelism, and more cloud streaming. Hardly "entirely dependent".
- atq2119 5y ago
  This is dangerously careless thinking which completely disregards the complexity of supply chains. Modern IT infrastructure needs lots of different kinds of chips, not just CPUs. Most of them aren't manufactured in the US. If chips stopped shipping from Taiwan tomorrow, then sure, people would scramble to switch to other manufacturing, and presumably some of the gap could be filled from existing products or of Korea, but getting a design up on a new process can easily take a year, often more. Not to mention that building up raw fab capacity takes time as well. The impact on supply chains in the short term would be devastating even if the long term can be gotten under control. If the short term includes a war with China, then, well... it certainly complicates any sort of military scenario.
  - yyyk 5y ago
    >but getting a design up on a new process can easily take a year, often more. That's only relevant to companies that have to build all their own CPUs. The world is not HackerNews. 99.999999% of companies can do with the radical idea of using an existing older, slower, perhaps more power hungry processor. [It can be argued this already happened - all the Spectre/Meltdown mitigations costing performance, and the world kept trucking on]. Apple's bottom line may be temporarily hurt, and AMD will be in trouble, but that's hardly an economy-shaking threat. >Not to mention that building up raw fab capacity takes time as well. TSMC is actually rather small in the raw picture. >The impact on supply chains in the short term would be devastating even if the long term can be gotten under control. We were just having a huge pandemic. We can handle merely another chip shortage. >If the short term includes a war with China, then, well... Which is a different matter entirely.

ac29 5y ago

> Right now the US economy is entirely dependent upon Taiwanese semiconductor fabrication. I'd be curious to see this quantified in some way. TSMC has a lead at the moment for bleeding edge fabrication, but Intel isnt that far behind and is massive in scale (revenue is nearly double TSMC, though its not an apples to apples comparison). A lot of the most impactful shortages this past year were in non-sexy parts like microcontrollers and other lower end chips that can be built in many different countries, since they are fairly simple (28nm, 40nm and even larger processes are commonly used). The world is intertangled enough that losing Taiwan for some reason would be pretty bad, but I cant think of another country better equipped to handle semiconductor production than the US (Korea and Japan do well also, but at smaller scale than the US).

d110af5ccf 5y ago
> TSMC has a lead at the moment for bleeding edge fabrication, but Intel isnt that far behind and is massive in scale Pull up a table of companies with cutting edge foundries by year. The list perpetually grows shorter as the cost to remain competitive grows higher.

sremani 5y ago

Their #2 company has failed miserably and exposed as fraud. SMIC is the only game in town in China. >> How much did we spend on the Iraq War, despite our own country being a major producer of oil and gas? With all due respect, from 2004 - 2007, all we were talking about is Peak Oil and US was not such a major producer then as we are today. So some recency bias here. >>The way forward for the US may be similar in mentality: throw the government behind the industry. Yes, US will become mercantilist again, and I will rejoice but the goddamn world will burn or not.

baybal2 5y ago

> Our economic incentive to entangle ourselves in Taiwan is even greater, but the stakes of military confrontation with China would be more dangerous. > How much would you pay to avert such a conflict -- or worse, to avert the consequences of acquiescing to China's expansionism? These are questions easier to answer than what most people think. There are countless unclassified defence studies with very good estimates of how much would USA loose in case of an all out war with a nuclear state for worst, medium, best scenarios. I'll encourage readers to check them themselves. Washington defence planners are most well aware of these things. The later question is much more important, and with more real world relevance. > consequences of acquiescing to China's expansionism? There is no limit on on how much "acquiescing" you can do before such states will come up with more claims. Remember "Finlandisation" precluding the WW2, and how it ended. Giving the most minimal concessions to such opponent will instantly lead to them wanting more, and more, until you will have to retaliate, but now against much stronger enemy. There is no "strategy," no political trick that works against opponent planning to attack you from the start no matter what. All treaties, political manoeuvres, compromise moves, even overt tribute payments will be only delaying the inevitable encounter in cul de sac. In Russia, people gave a simple way to characterise behaviour of such people: "A guy who wouldn't stop until punched in the face."

distances 5y ago
> Remember "Finlandisation" precluding the WW2, and how it ended. Finlandization means strong country affecting a small neighbour, not applicable to pre-WW2 appeasement policies.
- baybal2 5y ago
  Finlandization started very much before the WW2, as major power were making compromises with regional hegemons, acceding to their claims on their neighbours "as something natural" It's big power saying "let them have it" basically, and to disastrous results every time.
  - distances 5y ago

SavantIdiot 5y ago

FYI: the automotive chips causing the crisis were made by two factories in Japan that caught fire (Renesas was one), not Taiwan. Needless to say, critical dependencies need to be onshored.

MangoCoffee 5y ago
automakers is the number one reason for chip shortage. they believe car sales will drop during covid peak but they were wrong. they didn't order from their suppliers thus suppliers didn't sign wafer agreement with foundries. i believed we going to have a over supply issue in the future with all these fabs being build and the demand will wane overtime
- blihp 5y ago
  I'd be surprised if the autos are much beyond low single digits (if that) in terms of share as global consumers of semiconductors. The global auto market produces a combined ~70 million vehicles annually vs >250 million PCs, >1.25 billion smartphones etc. with just about everything these days containing at least a microcontroller. Sure, the semi shortage is a big deal to the auto industry, but the autos are almost rounding error to the semi industry.
  - SavantIdiot 5y ago
    There are about 100 MCUs per car. Even rear-view & side-view mirrors have their own micro-controllers. I believe the most common use are for voltage regulation.
    - blihp 5y ago
      Sure but quantity doesn't tell the whole story. Most of them are relatively tiny, in terms of die size. (obviously not so in the case of the more advanced end of the market such as Tesla, but rather the more common vehicles most are currently driving) So the point still stands that automakers aren't an out-sized user of silicon as the parent claims.

yyyk 5y ago

> Right now the US economy is entirely dependent upon Taiwanese semiconductor fabrication. Strong disagree. What kind of application would not be able to run at all on Intel's latest processors? I can't think of anything aside from maybe some future development of VR. Most HNers deal with software engineering, but the rest of the world simply does not have to have the latest and greatest. Assuming Intel stays in the back and the West has to use only Intel, applications will be a bit slower, processors will use a bit more power, there will be more focus on software efficiency and parallelism, and more cloud streaming. Hardly "entirely dependent".

atq2119 5y ago
This is dangerously careless thinking which completely disregards the complexity of supply chains. Modern IT infrastructure needs lots of different kinds of chips, not just CPUs. Most of them aren't manufactured in the US. If chips stopped shipping from Taiwan tomorrow, then sure, people would scramble to switch to other manufacturing, and presumably some of the gap could be filled from existing products or of Korea, but getting a design up on a new process can easily take a year, often more. Not to mention that building up raw fab capacity takes time as well. The impact on supply chains in the short term would be devastating even if the long term can be gotten under control. If the short term includes a war with China, then, well... it certainly complicates any sort of military scenario.
- yyyk 5y ago
  >but getting a design up on a new process can easily take a year, often more. That's only relevant to companies that have to build all their own CPUs. The world is not HackerNews. 99.999999% of companies can do with the radical idea of using an existing older, slower, perhaps more power hungry processor. [It can be argued this already happened - all the Spectre/Meltdown mitigations costing performance, and the world kept trucking on]. Apple's bottom line may be temporarily hurt, and AMD will be in trouble, but that's hardly an economy-shaking threat. >Not to mention that building up raw fab capacity takes time as well. TSMC is actually rather small in the raw picture. >The impact on supply chains in the short term would be devastating even if the long term can be gotten under control. We were just having a huge pandemic. We can handle merely another chip shortage. >If the short term includes a war with China, then, well... Which is a different matter entirely.