What were they off to defend? Taiwan? But why? China has laid claim on Taiwan for a long while. The US has never acted aggressively on it before. Yet, when one connects together the above with a string of other events, an interesting picture emerges.
Recently the US allowed the sale of 105 F35 Joint Strike Fighters to Japan.
A deal which has been in the offing for a while now, but was propelled
through recently. Australia had earlier committed to a 40% defence
expenditure hike, spread over two decades, with all its investments aimed
at containing China. On top of all this, yesterday, the UK parliament
effectively shut out Chinese telecom giant Huawei from the country's 5G
projects and asked all telecom companies to uninstall Huawei equipment.
Canada and US are soon to follow suit.
All of the above would seem like war-making moves. What triggers it? What
will the fight be over?
THE HEART OF THE FUTURE
The US had earlier stipulated that no US companies will supply chips to
Huawei. Then again, on May 15, the US regulation required that any
non-American chip producers, that use American chipmaking equipment must
first obtain a special license to sell to Huawei. This has put Huawei's
future into a tailspin. Why? After all, China was racing towards
self-sufficiency in all technological matters. Why would it be so stumped?
At the core of this unravelling geopolitical drama, that's changing scripts
by the hour, are semi-conductors a.k.a. chips. But not just any chip. Chips
which measures less than five nanometers – about the width of two strands
of DNA.
Semiconductor chips are the brains of all our electronics, from mobile
phones to cars to fighter jets. The most advanced chips on the market today
have billions of switches on them. The latest 3-nanometer semiconductors
(N5P) being introduced by Taiwan Semiconductor Manufacturing Company (TSMC)
will "feature the world's highest transistor density and offer the fastest
performance," per a company release. In the 1970s, semiconductors housed
approximately 3000 transistors.
AN EYE TOWARDS THE FUTURE
Three major trends are defining the current geopolitical cold war between
US and China. It pivots around the Future of Warfare.
The FIRST trend will be the warfare of Algorithms, Deep learning, smart,
self-aware systems, AI and swarms.
These will not only be in next-generation war machines, from futuristic
fighter aircraft like the FX program, that is to follow the F35, to
warships, battle tanks, armoured vehicles to the equipment carried by the
infantry, but will also be in drones and smart munitions, nano weapons and
UAVs. All of these will be interconnected and all will be driven by
automation powered by artificial intelligence.
These will be largely remote-controlled autonomous pieces of hardware
embedded with the latest software with unbelievable power to locate,
identify and destroy targets with amazing precision. Predictive
capabilities of AI will enable strategists to be prepared and micro
adjusted all the time.
All this is made possible using the SECOND trend. Powerful communication
and logistics platforms that leverage 5G technologies for zero-latency
real-time responses; that is as essential for an autonomous vehicle to
avoid an accident, as it is to fire a guided missile with precision as soon
as a target is located.
Most importantly, all this hardware will have machine learning capabilities
to constantly improve their performance. For instance, the latest fighter
planes will be able to learn and adapt on the fly the dogfight techniques
to outmanoeuvre an enemy aircraft by studying the opponent while in combat.
This machine learning capability will be far superior to that of a human
pilot. A swarm of fighter drones will be remotely controlled by a digitally
dexterous soldier or even AI. The armoured vehicle, taking on terrorists,
will be unmanned and remotely operated. The superior ability to visualize
the battlefield, enemy logistics, decide and respond will all be AI-driven
and instantaneous. This is at the heart of the US' $732 billion defence
budget which is carrying out a digital transformation of the forces.
This requires an ability to transmit and receive a tremendous amount of
data, process it, correlate, calculate, coordinate and instruct at the
speed of light...almost.
The brain of this entire system is the mighty microchip – this is the THIRD
and most critical piece of the entire system.
Data may be the "oil" of the information economy, but without
microelectronics, those data are just assortments of zeros and ones.
Semiconductors, silicon-based "translators" of data into information, are
essential to the 21st-century economy and warfare, making connectivity and
all the resulting "information-related" innovations possible.
The artificial intelligence framework can be broadly characterized into
three layers.
- The infrastructure layer includes the core AI chips and big data that
support the sensing and cognitive computational capabilities of the
technology layer.
- The technology layer sits on top of this. Which has machine learning,
deep learning, AI platform, speech recognition, image recognition,
biometric etc.
- The topmost layer is the application layer, which technologies in the
second layer, uses to develop robotics, autonomous driving, business
intelligence, smart factory, personal assistance, customer service, etc.
AI chips form the brain of the AI technology chain and are central to the
processing of AI algorithms, particularly for deep neural networks (DNN).
The U.S. leads the world in leading-edge semiconductor research, design and
manufacturing. The Semiconductor Industry Association reckons that US
companies accounted for about half of the $469 billion global semiconductor
market in 2018.
This is China's Achilles heel. It must depend on the US and Taiwan for
semiconductors, and the US President Donald Trump is pinching China where
it hurts the most.
THE MAGIC POTION
Ultimately, semiconductor manufacturing equipment (SME), not chips, is key.
SME is the "primary and most complex input" in the construction of
fabrication facilities, accounting for about 80 per cent of construction
costs. Today, three countries claim 90 per cent of SME global market share:
the U.S., Japan and the Netherlands.
Late last year, the US after two years of pressure campaign persuaded the
Netherlands government to block a $150 million sale of the most advanced
Dutch chip manufacturing technology to a Chinese company.
Chip manufacturing is a highly capital-intensive operation and
technological redundancies are extremely rapid. The industry is divided
among "Foundries," which make the heavy capital investments as
manufacturers, and "Fab-less" semiconductor companies that design chips,
but do not manufacture them, and avoid the high cost of fabrication
facilities. The US leads the design while foundries are in and around the
South China sea, in Korea, Japan and Taiwan. Currently, China imports over
USD 200 billion worth of IC chips from the US, almost matching its total
imports of crude oil.
THE MAGIC POTION MAKERS
TSMC, the US$38 billion Taiwanese company produces more than half the
world's annual supply of chips. The industry has been a diplomatic asset
for Taiwan, entrenching the US and Chinese interests in Taiwan's stability
and autonomy. Taiwan has a dominant role in the international supply chain
for these tiny but strategically vital products. Together with South
Korea's Samsung and Intel from the US, Taiwan is at the cutting edge of
semiconductor technology.
All this while Taiwan and TSMC have avoided being caught in the Sino-US
trade wars. But not this time, as the US President, slapped a ban on any
company, anywhere in the world, which uses US technology from exporting to
China. Being a foundry, TSMC relies on US designs and SME to make the
semi-conductors and therefore is prevented from exporting to Huawei. This
effectively cripples the Chinese telecom company from developing and
servicing 5G technologies, because the TSMC semi-conductor is the brain of
the technology that powers 5G. The earlier ban was only on US companies
which had helped TSMC duck the regulations and continue to do business with
Huawei and China.
Taiwan's semiconductor industry has deep links to the United States. It
took off in the 1970s and 1980s when Taipei was looking for a way out of an
economic slump caused by the 1973 oil shock. A combination of industry
policy and unlikely personal connections with leaders in the Radio
Corporation of America saw a generation of Taiwanese engineers trained in
the United States. Today, almost all major US technology firms have some
presence in Taiwan. The US sources its most advanced chips for military
hardware from TSMC. Taiwan is also the second-largest market for US
semiconductor equipment.
A FEW NANO-METERS TOO FAR
A US Congressional Research Service report updated on November 2019 raised
alarms around China's ambition to dominate AI, and the semi-conductor
industry – two vital pieces that will give it military and economic
supremacy. The US has been aware of this strategy and has continuously
tried to stop China from getting ahead in this field. In September 2017
President Trump, following the recommendation of the Committee on Foreign
Investment in the United States (CFIUS), had blocked a Chinese firm from
acquiring Lattice Semiconductor, a US company that manufactures chips that
are a critical design element for AI technology.
The Future of Warfare will be an Algorithmic War, and the US is currently
holding the aces by controlling the semiconductor industry. All three major
global powers are readying themselves to dominate Artificial Intelligence,
which will power the next-gen combat. On July 20, 2017, the Chinese
government released a strategy to take the lead in AI by 2030. Less than
two months later Vladimir Putin publicly announced Russia's intent to
pursue AI technologies, stating, "Whoever becomes the leader in this field
will rule the world." The US National Defense Strategy, released in January
2018, identified artificial intelligence as one of the key technologies
that will "ensure the United States will be able to fight and win the wars
of the future."
As of now, China lags woefully in the semiconductor business, despite
announcing plans worth billions of dollars. This business has a highly
complex supply chain, cutting edge proprietary technologies, is extremely
capital intensive and burdened with rapid redundancies. Vital pieces of
this supply chain are controlled by the US, such as the chip manufacturing
machines, the design, while Taiwan has a dominance in the foundry i.e. the
putting together of the chip itself.
Countries like Japan and Korea also have capabilities in this business. All
countries are either hostile or have uneasy relationships with China. The
Chinese market is almost entirely dependent on foreign firms for
microchips. Domestic production accounts for just nine per cent of China's
semiconductor consumption – leaving 91 per cent of China's demand to be
satisfied by imports, 56.2 per cent from the United States. Chinese chips
have so far been able to achieve 14 nanometers while TSMC is currently at 5
nanometers going on to 3 nanometers. Thus giving it an unbeatable
technological edge over China.
MAKE OR BREAK
Yet semiconductor technology is vital to China's manufacturing base and to
China's top exports that include smartphones, personal computers, and smart
televisions. China's continued dependence on US and foreign semiconductor
technology has been a catalyst for Beijing to double down on policies to
promote homegrown companies. China is throwing $150 billion to create its
own capabilities in semiconductors. However, the issue is not money; but
access to technology, talent and most importantly the design and machines
that make the chip.
Some 30 new semiconductor facilities are either under construction or in
the planning stages in China – more than any other country in the world.
But even the most sophisticated fabricator in China must rely on licensing
chip designs from foreign firms and on high-volume commercial production
lines outside of China. And foreign firms still dominate niches in China's
semiconductor market such as microchip packaging and testing, semiconductor
equipment, memory and AI chips, as well as contract microchip making.
However, this grand plan to build its own design and fab plants will take
at least three to five years. Till then it has no option but to depend on
the US and Taiwan.
While earlier, Taiwan used to be just an ideological matter, it is now
imperative for China to control! China needs the foundaries. Given the fact
that the US has already agreed to 'One China', could China make a move on
Taiwan, the way it has on HK, and present the world with a fait accompli?
That might have well been a plan. A plan, which the US possibly came to
know about. A plan for which it was sailing in its Aircraft Carrier but had
to be recalled on account of a COVID outbreak. A plan for which China kept
its barrels dry from COVID. A plan to stymie which, the US flew in its B1B
bombers over the South China sea. It was possibly to distract China, from
carrying out that plan, that a distraction was created at Ladakh, which set
off tones of a second front for it and it had to divert resources to Tibet.
Soon the typhoon season will set in. All hopes of a quick dash will be lost.
EPILOGUE
The US-China trade war is an outward exhibition of a far deeper war to gain
supremacy in the Future Wars – The Algorithmic War, that will eventually
happen. And the TSMC five-nanometer chip can make the difference between
which nation will be the post-Covid superpower. The three-football field
long aircraft carriers are simply ringfencing TSMC & Taiwan from China;
they are protecting a chip that can well sit over a few strands of hair.
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