Most people know that microchips are essential for computers, cell phones, automobiles, aircraft, and… well, all of today’s advanced technology. So what is a chip, really? It’s an important thing to understand if we want to know why China has lost the chip war and why that will be a factor, besides its geography, and demographics, that will disintegrate China during this decade.
The material used to create a chip (also called a microchip, computer chip, or semiconductor) is silicon. Chips are made by melting silica sand to become large quartz crystals that are then sliced into thin wafers. On such a quartz wafer, tiny transistors and circuits are etched into a complex multilayered pattern that routes electrical currents, turns them on and off, and accomplishes the tasks in its designed programs. In an advanced chip the size of your thumbnail there are billions of transistors and circuits with sizes almost on an atomic level, so it is understandable that the quartz used to make such a high-end quartz chip must be extraordinarily pure… like 99.99999999% pure! China can make quartz for solar panels, but no way can they reach a purity level of the quartz required for super semiconductors.
Among obstacles that China must surmount before it could even try to manufacture ultra-pure quartz, is that 80% of the world’s pure silica sand needed for the top range of computer chips comes from a single mine -- in North Carolina! That point was overlooked by Junhua Zhang in his 6 April report for Geopolitical Intelligence Services (GIS) titled, The U.S.-China Chip Race Heats Up. There are other issues he neglected to mention.
The greatest hurdle China faces in advanced chip manufacturing is that China cannot make a chip’s transistors small enough. The size of each of the billions of transistors on a powerful chip is measured in nanometers (nm). One nm is a billionth of a meter, and most computer chips powering advanced electronic devices and computers use technology based on 7nm to 10 nm processors.
Taiwan produces chips in the 5nm range. China’s domestic chip production, on the other hand, is concentrated between 90nm and 28nm, “dumb chips” that are mainly for appliances in the Internet of Things, like a refrigerator that can remind you to buy more milk. Useful for designing hypersonic missiles… not so much.
Why is the size of transistors and circuits on a chip so important? In chips with tiny transistors and circuits, the electric currents travel a much smaller distance, and less heat is generated. Think of your cell phone shutting down when you leave it in your car in the sun on a hot day. Chips with the smallest transistors and circuits remain cooler, providing sustainable performance. More importantly, the more transistors a chip has, the more calculations it can perform and the more powerful it will be.
As a result, a fabrication plant that can produce 5nm chips costs billions of dollars and takes years to build. Could China build such a plant? Not without thousands of foreign experts to help, the same kind of experts who first helped China build 90nm chips.
In 2015, China’s dictator for life Xi Jinping launched the “Made in China 2025” plan that mandates 70% domestic chip production by 2025. However; besides resident foreign experts, China doesn’t even have a research team for chip research. It was estimated by GIS that building an advanced chip industry in China requires 800,000 foreign professionals by 2024. After the Trump administration’s sanctions on China and legislation passed in 2022, GIS added that it would be “amazing” if China retains even 8,000 such competent workers.
The thing that is destroying Xi Jinping’s dream of creating any high-end chip production is a U.S. Act signed into law on August 9, 2022, named Creating Helpful Incentives to Produce Semiconductors and Science Act (the CHIPS and Science Act). That law, and the subsequent regulations enforced by the Department of Commerce, will ultimately end all China’s plans for manufacturing or buying high-end chips. China’s importation of all chips fell 27% in the first two months of 2023, higher than the total decline for all of 2022.
New regulations announced by the Commerce Department in October last year that restricted “U.S. persons” from involvement in chip manufacturing in China led to mass resignations of American executives from Chinese firms.
Lidang, founder of Hedgehog Computing and Lab, Tweeted that the new regulations had the effect of “paralyzing Chinese manufacturing overnight,” and that China’s chip industry was in “complete collapse” with “no chance of survival.” Japan and the Netherlands then agreed to ban China from buying their chip-making machinery components, tools, and spare parts.
Sanctions, plus the CHIPS Act, have not only eviscerated China’s chip manufacturing plans but have caused a tsunami of key U.S. and foreign manufacturers to build and expand plants in America. For example:
Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s premier manufacturer of advanced chips. TMSC is now building a plant in Phoenix, Arizona, that will start commercial operations next year. The plant will cost $40 billion and create 21,000 jobs.
Korea’s SK Hynix, the world’s second-largest memory chip manufacturer, has agreed to build a factory in the U.S. at a cost of $15 billion dollars.
Samsung, another Korean company and the world’s second-largest contract chip manufacturer, is building a $25 billion plant in Taylor, Texas, that will produce chips by 2025.
Micron, an American company, is planning to build a $100 billion chip plant in Syracuse, New York that will employ 50,000 workers.
Intel, another American company has announced it is committing $20 billion to build at least two semiconductor fabrication plants in Columbus, Ohio, that will be operational in 2025 and employ 3,000 people.
There is other important news. Demonstrating American dominance of chip design, IBM announced the development of 2nm chips! Those chips will have a 45% higher performance and 75% lower energy use than the most advanced 7nm chips. Among other things, the Intel breakthrough 2nm chip will use less energy to greatly increase computer speed.
Naturally, there are loopholes in the sanctions and CHIPS Act programs. There are always foreign companies that will purchase advanced chips and resell them to China, plus U.S. companies seeking profits from dealing with China. The Commerce Department must sanction the former and seriously discourage the latter.
Apple, all of whose products are assembled in China, will ultimately move back to the U.S. when they experience the loss of American workers willing to work in China added to China’s routine theft of intellectual property and Chinese restrictions on expatriating profits.
Similarly, Microsoft has facilities in 13 Chinese cities, and its quest for sales and profits is exemplified by Bill Gates, the man who owns the most shares in the company. According to Zhang’s GIS report, Gates said in March, “I don’t think the U.S. will ever be successful at preventing China from having great chips … we are going to force them to spend time and a bunch of money to make their own chips, but [give them] five to 10 years and they take money out of their poverty program. The idea that we could ever sell them chips, we’re just eviscerating that.” Does that sound like a business mogul who puts sales to China ahead of national security?
So we now can feel just a bit more comfortable. If Washington continues to enforce sanctions and promote the CHIPS Act, the United States is well along the path to tightening long supply chains and becoming the world’s preeminent producer of advanced chips – not to mention hobbling China’s attempt to surpass us in technologies like quantum computing, space exploration, satellite production and operation, control of artificial intelligence, and research into aerospace and missiles.
And remember, if China steps too far out of line, we can always go after their dumb chips that power their exports of appliances--and set up Malaysia and the Philippines as their cheap labor replacements!
Great insight and information. All over my head of course, but I try to stay informed. One question: where is the silica processed into quartz? It seems that process would take buku energy, more than any wind or solar panel farm could produce.