scorecardresearch Skip to main content

The chip war is reshaping world politics

It’s been said that data are the new oil, the commodity on which the digital economy depends. Yet there’s no deficit of data in the world, nor do any firms or countries have a stranglehold on data production.

Chris Ratcliffe/Bloomberg

Sitting in the White House under a painting of Teddy Roosevelt, President Biden held aloft a large silicon wafer at a meeting in April and told the CEOs of America’s leading semiconductor firms that they were “falling behind on research and development.” “We have to step up our game,” Biden told them, launching America’s latest salvo in an escalating “chip war” to dominate the future of semiconductor technology — and shape the future balance of technological, economic, and military power.

The CHIPS and Science Act recently signed by Biden is just one of a series of measures governments around the world are taking to bolster their position in the production of advanced chips. They realize that semiconductor technology — the chips that make it possible to remember data, to process data, or to convert signals like radio waves into data — are a foundational technology of the modern world. Today, the complex supply chains needed to produce the most advanced chips are controlled by a tiny number of companies and countries, notably the United States, Japan, Korea, and Taiwan.


It’s been said that data are the new oil, the commodity on which the digital economy depends. Yet there’s no deficit of data in the world, nor do any firms or countries have a stranglehold on data production. There’s an infinite amount of information in the world that could be converted into data; the challenge is turning information we need into 1s and 0s that can be processed and remembered. For this, we rely on chips, the most advanced of which are manufactured with billions of microscopic transistors, each of which can represent a single digit.

The entire digital economy only exists because we can manipulate a growing number of these digits. Google and Facebook only exist because of the semiconductors on which their data centers run. The entire AI revolution has been made possible only because of semiconductors. Compared to 10 years ago, the data center chips that run AI algorithms have 50 times as many transistors and therefore comparably more processing power. Computer scientists working on AI have improved their algorithms over the past decade, but it’s safe to say they aren’t 50 times smarter today.


Though most people scarcely realize it, semiconductors — and the relentless increase in computing power they’ve enabled — define the modern world. That’s why control over their production is increasingly of interest not only to companies, but to governments. Today, a tiny number of firms have chokeholds over their production. Three companies — two in Korea and one in the United States — produce almost all the world’s DRAM memory chips, without which PCs and data centers can’t function. Five firms — three American, one Dutch, one Japanese — produce the critical machine tools without which chips can’t be manufactured. Three US companies provide the ultra-complex software without which chips with many billions of transistors are impossible to design. And Taiwan’s TSMC produces 90 percent of the world’s most advanced processors, all in a handful of facilities along the Taiwan Strait.

As geopolitical competition between the United States and China intensifies, chips are at the core. Today, China spends more money importing chips than it spends buying oil. China relies on US software and machine tools to manufacture the small share of chips it fabricates domestically; mostly, though, it buys chips from Taiwan, Korea, and the United States. Now, however, Chinese General Secretary Xi Jinping has declared semiconductors a priority and vowed to slash China’s imports by domesticating its own technology. The United States, which fears that advances in the Chinese chip industry will fuel the modernization of the People’s Liberation Army, is desperately trying to keep China behind.


Over the past five years, the United States has imposed major limits on China’s ability to access chipmaking technologies. China’s Huawei has been cut off from buying advanced chips, choking its global expansion. China’s biggest chip maker, SMIC, is now banned from buying advanced chipmaking tools from the United States. Washington is also cutting off the sales of certain types of chips to any buyer in China, notably advanced versions of chips called GPUs, which are used in artificial intelligence applications in data centers.

Whether the US chip choke on China succeeds in restraining Beijing’s modernization efforts remains to be seen. But it’s already clear that semiconductors will be a key ingredient in the future of warfare, whether for autonomous drones or advanced electronic warfare applications. America’s CHIPS and Science Act isn’t only about smartphones or about science. Control over the world’s most advanced semiconductors will shape the balance of military power, too.

Chris Miller is author of “Chip War: The Fight for the World’s Most Critical Technology,” a visiting fellow at the American Enterprise Institute, and an associate professor at the Fletcher School at Tufts University.