Our Tenuous – and Crucial – Microchip Dependency

Michael EdesessNo piece of technology is more crucial than the microchip. Its supply was central to the cause of the post-COVID-19 inflation, and the stability of the U.S.-China relationship hinges on its manufacture.

Chris Miller’s must-read book “Chip War,” winner of the Financial Times business book of the year award, could not have been published at a more opportune time. At its publication date in October 2022, the world was emerging from a crippling COVID-19 pandemic. The pandemic illustrated crucial linkages that the complacent globalized world of commerce had blithely came to depend on, but that events revealed were unreliable.

Specialization in the hyperefficient supply chain created two vulnerabilities that were barely recognized before COVID-19, but that became central during the pandemic. Almost all personal protective equipment (PPE), including rubber gloves and surgical masks, were made in China. When demand for them suddenly ballooned when China was under lockdown, there were severe shortages. The shortages led to brutal competition for PPE, between countries and even states of the United States and the federal government.

Second, 60% of all microchips and 90% of the most advanced ones are made in Taiwan, almost all of them by a single Taiwanese company, TSMC. And the incredibly expensive and technologically advanced machinery that TSMC needs to fabricate those microchips is made by a single Dutch company, ASML.