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Peter Zeihan

Geopolitical Strategist

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Taiwan’s semiconductor industry is not in danger of collapse

Mar 8

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Peter Zeihan

Geopolitical Strategist

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Taiwan has dominated the advanced semiconductor chip industry. Developed nations like the United States rely on the technology for their own advanced products, including cars, computers and phones. Chinese rhetoric and military actions around Taiwan have set off alarm bells around the world, raising concerns about what might happen if the Taiwanese industry is interrupted, sabotaged, or even physically destroyed in a Chinese invasion of the island.

Straight Arrow News contributor Peter Zeihan says there is little cause for concern. U.S. semiconductor companies like Intel, Zeihan says, have already made plans to hedge against these scenarios with plans to expand domestic production in the near future. Moreover, the concern that the Chinese have any interest in destroying the advanced Taiwanese industry is unwarranted, Zeihan argues, given that the Chinese cannot replicate the Taiwanese tech by themselves.

Below is an excerpt from Peter’s March 8 “Zeihan on Geopolitics” newsletter:

One of the most asked questions I receive is “what keeps you up at night?” So, I figured I would turn that question into a series called “Things I (Don’t) Worry About” where I’ll discuss all the things that have me tossing and turning and what helps me sleep like a rock. First on the docket is the semiconductor industry.

I’ve done a number of videos on semiconductors in recent times, so my concerns shouldn’t come as too big of a surprise…but let’s dive right in.

The production of semiconductors can be equated to the personification of globalization. These dinky little chips have one of the most complex supply chains in the world; think dozens of highly specialized companies helping chips move along the value add chain until they are finally ready to be jammed into your smartphone.

With that in mind, you can start to picture how little it would take to disrupt the entire semiconductor industry. This makes the competition between industry leaders Intel and TSMC that much more important, as it will help to expand operational capabilities and increase resiliency in the supply chain.

The bottom line is that even if China does not decide to invade Taiwan, we are already looking at a scary future for all that tech we know and love.

Hey, everybody, Peter Zeihan here coming to you from Colorado. And we’re going to start an open-ended series today called the worry list people have been writing in with like, are you worried about this? Are you worried about that? And we’re gonna start go through and through some of them. First one is on Taiwan, are you worried about global semiconductors and a scenario where the Chinese invade the island and a little bit, but not a whole lot? Here’s the thing. All semiconductors are a group effort. And anything that is better than about how come an arbitrary number, let’s call it 25 nanometers, which is something that’s going to be in your cell phones and your computers. And then once you get sub 10, then you start talking about artificial intelligence, electric vehicles and that sort of thing. Anything that’s above 25, or below 25. Better than 25 is something that is really a team effort. The company that does the lithograph he is not the person who’s the chemicals processing is not the one that does the doping, you might have these big facilities where everything comes together, but it takes dozens, hundreds 1000s 10s of 1000s of companies to make it work. And the further down the scale you go, the smaller it’s ship, the more players there are, the more specialization there is when the more of those players that there isn’t competition. So for example, if you’re talking about TSMC, which is what everybody’s worried about 90% of the high end chips in the world all come from one town. So you know, if the Chinese were to invade Taiwan, that could be an issue. But it’s not like the Chinese could operate them because there’d be 10s of 1000s of companies that are involved in other something like 5000 of them that only produce one product for one end user, and they’re not in one place. So for the Chinese to take that stuff over and operate it number one, they don’t know the labor, not at home, not in Taiwan. Number two, they would have to convince the entire global ecosystem that it’s okay for China to just take this stuff. And if only a handful of them say no, like I don’t know the US government, then it’s just a big paperweight in China itself, they have a hard time doing anything that is smaller than 90 nanometers without extensive outside help, because they don’t have the staff necessary to do the quality checks on the chips themselves. After each round of baking and doping, which for low end chips can be several 100 runs for high end chips is several dozen depends on which technology you’re using. There’s a lot of variation, anyway. So the reason I would be concerned is because the same thing applies to the Chinese to a lesser degree applies to everybody else. So let’s assume for the moment that Intel, which is generally considered to be the number two company in the world, had an army and they conquered Taiwan, if they were under any degree of sanctions, they would have the same problem that the Chinese would they can’t do it themselves. Now, I would say that over all Intel is a more rounded company than TSMC because Intel actually designs chips in house whereas TMC is only a fabricator. And that means there’s more steps of the supply chain that Intel has within its own staffing and facilities. And that’s one of the reasons we should be looking very seriously at Intel in another attempt to this year and next year to overtake TSMC, and to become the world’s leader again. But again, they are not doing this by themselves. And so of all the economic sectors out there that I am concerned about in terms of manufacturing, semiconductors is the one as the world’s globalizes that I’m very, very concerned about. Because once you get below that 25 nanometer level, things start to require a lot of players and if a handful of them fall out, things get problematic. And if you’re talking sub 10 nanometers, we’re just not gonna be able to do it at all, regardless of what happens to Taiwan.

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