This article originally appeared on the West Point Institute of Modern Warfare. 
At Stanford – Technology, Innovation, and the Great Power Race, we’ve just finished the fourth week of the new National Security Unit. Joe Felter, Raj Shah, and I designed the class on how technology shapes it. All elements National power (US influence and footprint on the world stage).
In Part 1, we learned that national power is a combination of a nation’s diplomacy (soft power and alliances), intelligence/intelligence, military power, economic strength, finance, intelligence, and law enforcement. This “whole of government approach” is known by the acronym DME– FIL And after two decades of focusing on countering terrorism, the US is now embroiled in a major power struggle with China and Russia.
Part 2 focuses on China, the US’s primary great power competitor. China is using all elements of national power: diplomacy (soft power, alliances, coercion), information/information (using economic power over Hollywood, controlling the Covid narrative), its military and economic strength (Belt and Road Initiative), as well as Western finance and technology. as exploit. China’s aim is to challenge and reverse the US-led liberal international order and replace it with a neo-totalitarian model.
The third part focused on Russia, which was challenging itself as a great power. We learned how Russia pursues security and economic interests in parallel with ideological objectives. Sometimes these objectives are complementary to each other. At other times, they clash, with Putin’s desire to restore Russia to great power once again leading a foreign policy that runs counter to the wishes of the Russian people. As Putin himself has said, “The collapse of the Soviet Union was the greatest geopolitical disaster of the century,” and that quote gives him a worldview window as he tries to make Russia a great power again.
After covering the national power (DIME-FIL) and China and Russia sections, the section now turns to the impact of commercial technologies on DIME-FIL. Today’s topic: Semiconductors.
Catch up on the episode by reading our introduction to the episode and summaries of Episodes 1, 2, and 3.
Unit 4 Required Reading:
Silicon Valley, the military and the journey to the fourth industrial revolution
Moore’s Law and the Global Semiconductor Industry
- Lee Bell, “What is Moore’s Law? WIRED Explains the Theory That Defines the Tech Industry” WiredAugust 28, 2016.
- Interactive Chart “Average Price of Hard Drive Storage per Gigabyte 1980-2014” Human development.
- Steve Blank, “The Chip Industry Tutorial” Stanford Gordian Center for National Security InnovationSeptember 2021
- Semiconductors: Technology and Market Trends 10.0 OppenheimerDecember 7, 2017
- James Timby, “Resisting the National Security Supply Chain.” Hoover InstitutionFebruary 5, 2021
- Yan Lin, “2 Charts Show How Semiconductor World Leans on Taiwan”. CNBCMarch 15, 2021
- Karen M. Sutter, “China’s New Semiconductor Policies: Issues for Congress.” Congressional Research ServiceApril 20, 2021
- Video: America’s Military Semiconductor Procurement Crisis; Asianometry
Semiconductor case study
Reading Assignment Questions:
Choose one of the following questions and answer in approximately 100 words based on the required reading. Please note that this assignment is graded and counts toward course participation.
- Describe the roles of Fred Terman, William Shockley, and Fairchild Semiconductor in the genesis of Silicon Valley. Who was instrumental in creating Silicon Valley, Fred Terman, or the Traitorous Eight?
- How would you describe China’s efforts to catch up in the semiconductor industry? Do you think China can safely contain TSMC (without the invasion of Taiwan)? Why or why not?
Discussion questions
- Put yourself in the shoes of TSMC Chairman Mark Liu: Do you see China as a competitor or a customer – and why?
- Now imagine you are an NSC senior director responsible for technology strategy. What is the first thing the US government should do regarding semiconductors?
Part 4: Guest speaker
Our guest speaker for our fourth session was John Hurley, a former member of the President’s Intelligence Advisory Board, a semiconductor and supply chain expert, and a former captain in the US Army.
Lesson 4
If you can’t see the slides, click here
Slide 4. The important role of semiconductors With great power competition. Both our commercial and military systems depend on semiconductors. China spends more on semiconductor products than it does on oil. We have seen technological advances as part of the 4th Industrial Revolution. Slides 5-7 DoD and IC have reminded students of the role of technology entrepreneurship here in Silicon Valley in turning Stanford into an outward-facing university.
Slides 9-11 Dual use technology. For the first time in 75 years, federal labs and our prime contractors are no longer leading innovation in many critical technologies, including AI, machine learning, autonomous driving, biotech, commercial space access, and more. Rapid developments in these areas are being seen by commercial companies – many in China. This is a radical change from where advanced technology came from. In the US, the government is learning how to adjust its requirements and acquisition process to buy these commercial, off-the-shelf technologies. (Products sold to the market and products sold to DoD are called “dual-use”).
Slide 15. Semiconductor industry. We begin our dive into semiconductors by mapping the semiconductor industry (Slide 3-15 from this required reading.) Five companies provide most of the wafer fab equipment needed to make chips. TSMC is a leading fab for manufacturing logic chips. (Slides 32-33 from this required reading.) More than half of the 29 new fabs starting construction in 2021-22 are in China and Taiwan.
Slide 16. The case of TSMC. We took the class through the TSMC case study and drew out the roles and interests of TSMC, China, Intel, and the U.S. Slides 17-18. We discussed China’s initiative for semiconductor independence, US export controls on Huawei (why and the consequences), various US semiconductor policy choices (Commerce Department, DoD, US chipmakers, US semiconductor suppliers, etc.), TSMC’s success. China makes Taiwan more or less secure, considering its goals of engagement with Taiwan.
Slide 19-20 Policy How do decision makers make policy? “What problem do we want to solve?” He begins by asking. Using semiconductors as an example, is China catching up with American technology? Or is China adopting this advanced US-designed technology in their military system? Or what happens to TSMC and the West’s access to advanced technology if China isolates or invades Taiwan?
How do policy makers pick and choose problems? Is the policy based on added value to specific stakeholders? Is it personal interest/need? Specifically for China and semiconductors, what are the solutions? Export controls? Stronger CFIUS rules? How do you consider stakeholder feedback (DOD, Commerce, businesses)? And once you create a policy, how do you implement it effectively?
Slide 21 -23. Mid-term assignmentImagine you are a policy maker. Write a 2,000-word policy memo describing how an American competitor could use a specific technology (semiconductors, AI, autonomy, cyber, etc.) to counter American interests. Suggest how the US should respond.
Slides 25-32 Group projects. We had several groups talk about their learning from the off-site interviews. Team ShortCircuit (slide 29) is working on how the US can improve its ability to design and manufacture semiconductors and develop and retain relevant talent. Stanford students heard from a professor that the ratio of software to hardware courses is 10-to-1, a complete reversal from decades ago. We discussed 1) Is that true or just a rumor 2) If true, was it similar at other research universities 3) Why did it happen (software startups being funded at outrageous prices)? 4) and what incentives and policies are needed to change that, and 5) those in the value chain who can be most effective (students, venture capitalists, government, etc.).
next week: Artificial Intelligence / Machine Learning
Lessons learned
- Semiconductors are 21 oilSt All economies work on them.
- Semiconductors are China’s biggest products.
- China’s roadmap is a national integrated circuit plan to build an indigenous semiconductor industry and accelerate chip manufacturing.
- The goal is to meet local chip demand by 2030.
- The US is dependent on TSMC in Taiwan for its most advanced logic chips.
- China claims that Taiwan is a Chinese territory.
- TSMC builds a fab in Arizona, but it only represents 2% of its capacity
- What are the options for US policymakers?
11/02/2021 Technology, Innovation and the Great Power Race – Part 4 – Semiconductors
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