The New Arms Race: Semiconductors (Microchips a.k.a. CHIPS)

In my previous post, I shared the interview CNNs Fareed Zakaria had with the Chairman of the Taiwan Semiconductor Company (TSMC).

Why is the Chairman of TSMC an important voice to listen to?

Because TSMC manufactures 90 percent of the advanced semiconductors (chips) used around the world. Chips used in the U.S. and the West, including China.

As we know, semiconductors are in just about every electronic device that we use, from our coffee maker and cars to drones and satellites.

One fundamental point the TSMC chairman made is that it is not in any country’s interest to invade Taiwan.

Why?

Because to invade Taiwan would mean to disrupt semiconductor manufacturing.

As David Sanger recently wrote in the New York Times, “China can’t afford to risk its destruction. And the United States can’t afford for it to be destroyed.”

This is otherwise known as the “Silicon Shield.”

Can we depend on this?

Depending on China to not take Taiwan does not give the world sustained comfort.

As the U.S. Secretary of Commerce, Gina Raimondo recently said, “We are dependent mostly in Asia for our supply of semiconductors…we buy almost all of them from Taiwan…we are in a very vulnerable spot.”

Therefore, every country should have an interest in advancing their own semiconductor production, especially the U.S. and the West.

Hence President Biden’s recent signing of the Chip and Science Act that directs $52 Billion in subsidies to the U.S. semiconductor design and manufacturing industry.

What Complicates this Massive Effort?

One thing that complicates this urgent effort is that although some countries (like the U.S. and the West) are devoting billions and will compete in good faith to advance their chip R & D—other countries, such as China, will not only continue to devote a lot of money, but will almost certainly ratchet up their efforts to steal semiconductor R & D from the West and Taiwan.

Who Recognizes this More than Taiwan?

Taiwan is already clear about that. That is why they have raised the penalty for committing economic espionage by recently enacting their new National Security Act.

As reported in Nekei Asia in May, “The National Security Act would make it a crime to engage in ‘economic espionage’ or the unapproved use of critical national technologies and trade secrets outside of Taiwan.

“Sentences would be set at up to 12 years and 10 years in jail, respectively.

” ‘High-tech industry is the lifeline of Taiwan. However, the infiltration of the Chinese supply chain into Taiwan has become serious in recent years,’

“Taiwan’s chip industry know-how and its experienced workers have long been a target for China in its push to develop its own semiconductor industry.

“There have been many indictments involving chip trade secrets being stolen by Chinese companies in the past few years, according to the Taiwanese government.”

And that is the point of this post.

China will ratchet up its efforts to steal semiconductor R & D.

How will China do this?

How China has always done it: INFILTRATION

Infiltrate companies and public/private research institutions devoted to the design and manufacture of semiconductors.

This semiconductor issue should make all companies that manufacture or use chips, as well as IP risk analysts, attorneys and investigators, public and private pause and take notice.

Gird Your Loins — China is Coming for Your Semiconductor IP

As David Sanger wrote in the same New York Times article, “… China has both a commercial and a geopolitical motive to make the world’s fastest chips, and the United States has a competitive motive to keep Beijing from getting the technology to do so.

“It is the ultimate 21st-century arms race.”

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