His new book, chippewa. Im im im holding it right here. I read it. I as i just told the author, if you told me that i was going to enjoy a 400 page book on the history of semiconductors, i would have said you were crazy. But this reads like a spy novel. It is. It is. It is absolutely gripping, believe it or not, you know, going back to the 1950s when they semiconductor. First of all, the concept of the semiconductor. But subsequently the the evolution of the industry began. So im just so thrilled to be joined by professor chris miller. And chris, i really again great book could not have been more timely considering the congressional passage of the chips act. And well get to that. But let me start with the fairly obvious question, which is, you know, youre a professor. I looked at the list of the books youd written. Youd written mostly on russia about the transformation of the russian economy, about about vladimir putin. Also very timely, but not about not much about the sort of protagonists of chip world. Not a lot about the taiwanese, the chinese, the japanese. What tell us. Sort of what what prompted you to get interested in the topic and to do the research that resulted in this in this Remarkable Book . Well, thank you, jim. First of all, for hosting this conversation. When i started this research about five years ago, i was thinking i was going to write a book on the cold war arms race, because one of the key questions that had motivated me was why was it that in the cold war, the soviet union could make nuclear weapons, they could make missiles and rockets that shot the first satellite into space, but they could never miniaturize Computing Power. And that seemed to me an important question for the history of the cold war. But as i began to dig into that, i came to realize that the answer to that question had to do with the origins of computer chips, which first emerged in missile and rocket guidance systems in the early cold war. And i came to realize this just as the Us Government was ramping up its competition with china to control the future of chip technology. And i sort of put these two pieces together. The history of chips in Missile Technology and the current uschina competition, and realize that there was an entire history of the last 60 years that you really couldnt understand. And without knowing much about computer chips and i admit, when i started, i knew very little. But today ive come to the conclusion that the really the core to understanding globalization, the balance of military power and how our economy has changed as the first chips were invented in the late 1950s. Yeah, yeah. You know, as i was reading your book, i sort of thought, you drew you dont you do draw an analogy between chips and oil which, you know, everybody has an intuitive feeling about why oil and energy are at the core of so much geopolitical action taken and you you know, it really comes across. You may be, by the way, if your book catches on, you may be the dan yergin of semiconductors, but its very much in the very much in the tradition of those books that sort of tell a general population about some of the powerful economic forces underlying geo political events. Im thinking of guns, germs and steel and that sort of thing. So many people will be watching us right now who dont necessarily have the same sort of intuitive feel for the importance of Semiconductor Chips that they might have for oil. Because, of course, most of us put gasoline in our cars. So for those who have yet to read the book, make make the argument about why semiconductors in some ways are the, you know, oil of the 21st century, or at least critical to not just our economies, but to our National Security. Well, the first thing to say is that the typical person doesnt realize it, but we touch dozens that in many cases, hundreds of chips each day in your smartphone, there could well be a dozen different chips, your computer only functions, things, the chips inside of it. When you log on to the internet, the internet exists on large numbers of servers, which are which are boxes of semiconductors, mostly when you sit in your car, your car will have dozens, in some cases hundreds of chips inside of it, turning your dishwasher. Theres chips there, too. And your microwave today, almost anything with an on off switch except for a light bulb will have some sort of chip inside of it. And although we never see the chips unless you take apart your iphone or your computer, in fact, you rely on them for almost everything in day to day life. So theyre as important to the Economy Today as energy is and as we put Computing Power in more and more things, were going to become even more reliant on chips going forward. So theyre as ubiquitous as oil, even if we see them less frequently than we do pumping up our cars. But theres a difference with oil and the difference is that unlike oil, the computer chip production process is concentrated in a small number of countries and controlled by just a couple of companies in the oil industry. We think of saudi arabia being a big player, but the saudis produce. 10 to 15 of all the worlds oil. By contrast, 90 of the most advanced processors chips today are produced by one company on the island of taiwan and across the supply chain thats used to produce advanced semiconductors. Theres a number of parts of that process in which one company or a small number of companies play an indispensable role. So theres even more concentration of production in semiconductors than there is in the oil industry. So lets talk a little bit about the Security Side of that from two different angles. One of the remarkable moments in your book is when you talk about, you know, the world watching what america does in 1991, in the first gulf war, where precision guided munitions, land right on top of tanks, these are of course, munitions that have been flown from far away, probably off the deck of an Aircraft Carrier. Theyve been dropped by planes at High Altitude and they hit their targets with perfect precision. And theres a whole bunch of other things that happened in 1991 in your book. Makes that point that the russians, the chinese and everybody else said, holy smokes, when they saw that. So so talk a little bit about that, but also talk about, you know, you sort of talk about it the way our our entire lives are surrounded by chips. Theres another very interesting moment. Your book, where you say, you know, a chip may not make your coffee, but your coffee maker is going to use a chip to determine the mix and the temperature. So talk a little bit about the both the incredible advantages, but the strategic vulnerabilities that come from this permeate of our daily lives. Bye bye bye, semiconductors. If you start with the Defense Technology side of things, although chips emerged out of the demand for smarter guidance, computers on Missile Systems in the cold war today, defense uses constitute maybe one or 2 of chips that are produced. So its a relatively small end market compared to smartphones or computers or even automobiles. But more than ever before, Defense Systems are reliant on computer chips and the persian gulf war, as you mentioned, was one of the first instances where we saw what the application of Computing Power to Missile Systems and bombs could accomplish in terms of precision. But today, 30 years later, our military is even more reliant on computer chips and in fact, every military is increasingly reliant on computer chips. And if you project forward ten or 20 years more and look at what the Defense Department in the us or other countries militaries are planning to roll out, theyre envisioning technologies that rely even more and Computing Power will demand even more memory, even more digital signals processing, all of which is about semiconductors. So envision, for example, an autonomous drone flying through a battlefield. But drones in a need, a lot of Computing Power, a lot of memory and have a lot of sensors on it. And all that requires chips. And so as a result, as you say, chips arent just about our coffeemakers or our dishwashers, although thats important. And wed struggled to live without them. Theyre also about accessing the most advanced Defense Technology. And i think one of the interesting things weve seen in the russiaukraine war over the past couple of months is that when russian munitions have been acquired on the battlefield in their guides, computers have been taken apart. One of the things that has been discovered is that russian missiles often rely very heavily on smuggled chips from the outside world, from the us, from korea, from taiwan, because our chips are so much better than theirs that theyve concluded theyre best off smuggling in older american chips, that older korean chips for their own Missile Systems. That shows you just how reliant they are. And the entire worlds militaries are on getting access to the most advanced chips that they can. You know, youre going to need to ride an additional chapter or maybe the two of us will write an op ed because i you you finish the book. I think just maybe as as the russian attack on ukraine occurred. But, you know, even today, sitting on the intelligence committee, as i do, i see this even today, military planners look at the number of tanks, the number of aircraft, the number of men. But what were seeing in ukraine right now is a is a transformation in that as a as an input around military strength. Because as the ukrainians and the russians are demonstrating as we speak, you can have as many tanks as you want. But if those tanks are up against munition lines that have highly advanced processors, the numbers almost dont matter. So so, you know, one of the conclusions here is and by the way, the other the other story of ukraine is that is the sharing of intelligence, which is enabled, of course, by the but but i think you could even make an argument looking at russia, ukraine, that that really we got to sort of junk the old ways. The old World War Two ways of thinking about military power and really evaluate both the quantity and quality of ships on the battlefield. Yeah, i think thats absolutely right. And as you say, its not just the chips in the munitions that are approaching their target. Its the satellite photos. Its the signals intelligence. Its the communication of all of this data from the battlefield to Decision Makers to munitions itself and communications, signals intelligence. This is all about accessing the most advanced semiconductors. And right now, ukraine has had the benefit, both of russias lag in the sphere, but also of the us supplying its extraordinary intelligence capabilities, which are largely made possible by by semiconductors, by sensors and by Computing Power that theyve enabled. So let me take you in a direction back to the coffee maker. Let me take you into a direction that you dont go much in on your book, which is the vulnerability associated with the permeation. And through through all of our lives. Back to that coffee maker, it is the internet of things. Theres just going to be nothing that isnt wired. There isnt going to be anything that isnt suffused with chips. Now, i pretty quickly get out of my own area of expertise here, but chips can be hacked. The software can be hacks, its chips can be accessed. Talk a little bit because it doesnt you dont you dont dwell on this in your book but talk a little bit about the kinds of vulnerabilities that may be out there because of the internet of things, because of everything being full of chips and what you guys like me do about that. Its true that there are some instances of vulnerability is being discovered inside of chips where they were designed in a way that made their data visible. For example, to parties that should have been able to acquire it. A couple of famous examples of this in recent years are vulnerabilities called specter and meltdown, which were visible in pc chips. But i think if you if you step back and look at the number of vulnerabilities in hardware like chips versus the number of vulnerabilities in software error, what you find is a lot easier to do produce and to exploit vulnerabilities in software. And so i worry a lot more about the types of traditional cyber vulnerabilities we think about than i, i do about hardware problems. It is an issue that we need to focus on. And i think if you look, for example, at where darpas the Defense Departments advanced research arm is putting a lot of their focus, its on how to verify that the chip you put in a military system actually works as intended, especially as the us military relies even more on chips produced abroad. But i think the scale of vulnerabilities in hardware is a lot less than you get in software, that the real vulnerable that i worry about is not that the chips we get will be compromised, but that we wont be able to access the chips in case theres some sort of emergency or war in east asia. Yup, yup. Okay. So lets lets set the stage for that conversation. And this conversation ends with the question of of of of what do we do now . But lets lets that set the stage for that. Theres theres theres sort of two ways of thinking about innovation, right . Theres sort of lets lets just call it sort of an american or a western way, which comes through in your story loud and clear. Right. Youve got its an incredible cast of characters, including like an idaho based potato farmer, you know, a disgruntled, you know, Software Programmers who get angry at each other in palo alto, etc. Its chaotic, right . Its totally chaotic. And yet out of this chaos, you get the. And i should point out, chaos, support id by research and development funded by the federal government, arpa and other programs and the pentagon out of this seeming chaos and a cast of characters that as out of a hollywood movie, you get the very best, even today, you get the very best innovation bar none. The other model, of course, is more or less think of it as a chinese model or, you know, you certainly talk about it as an old soviet model, which is were going to build a city and this city is going to be dedicated to semiconductor and it will have a bureaucrat who is running it. This is kind of what the chinese are doing now. They are literally building, you know, Artificial Intelligence cities. Which of those two models wins in the end . And whats the pluses and minuses of those two very, very different models . Well, i think answering that question, first off, depends on what youre trying to accomplish. And for the us, what were trying to accomplish is innovating on the frontier of knowledge. So we dont know where were trying to get to next because were relying on the next generation of scientists and engineers in entrepreneurs to figure out what the next best thing is. Whereas if youre behind and trying to catch up, you already know what youre trying to accomplish. Youre trying to accomplish what other people did five, ten, or 15 years ago. And so its a bit more straightforward of a process to identify the priority and then catch up to it. So in some ways, chinas got an easier task because theres still trying to catch up to where we are and where some of our allies in in asia, like the taiwanese or the koreans, are. But setting aside that, i think the us method or the western capitalistic method has obvious benefits. Its produced the innovation that you mentioned, the innovation that led to the emergence of a chip. And its spread across society, its driven down costs in a really tremendous fashion today weve got Computing Power that costs one billionth of what it did, 60 years ago. So the Cost Reduction is is really extraordinary. But the chinese have some assets as well. For one thing, most of the Electronics Systems that chips get put into, whether its smartphones or computers or servers, are actually assembled in china. So the chips are imported from abroad, from korea, from taiwan, from the us. China spends more money every year importing chips than it does importing oil, but theyre assembled in china. And so china has some influence in how they are used and they get in a final system. So thats one advantage that china has that we dont have. Second is that china is pouring tons of money into their Semiconductor Industry. Its hard to get an exact figure, but its certainly in the many tens of billions of dollars and probably in the hundreds of billions of dollars over this decade. And so even if chinas success rate is pretty low, the amount of money that theyre pouring in is going to guarantee them some successes. And so the challenge we face is not only to have a higher success rate than china, but have a such a better rate of success that were able to counteract the fact that theyre spending a lot more money than we are. And so thats really the structure of the race today. And i think although the chinese have made many errors along the way and all of theres a lot of inefficiency in their system, it would be wrong to write them off if if any country has shown in the last 40 years that theyve got a lot of capabilities, that theyve got a government that is willing to put any resources necessary towards achieving its goals. Its chinas. And so it would be wrong just to rest on our laurels to say our system has worked in the past, effort will work flawlessly in the future. And i think we need to be focusing again on making sure, a, how can we jump ahead, increase the speed of innovation, but also be how can we make sure that chinas not taking advantage of our technology as its trying to overtake us . Yup. Yup. And of course, my question is a little bit of a trick question, because for the free market purists who would say that innovation comes out of a purely free market environment, the chaos of Silicon Valley and all of the stories that you tell, the reality is that this industry would never have gotten off the ground in the United States had the pentagon not really dumped immense amounts, not only basic research through darpa and stuff, but in the early days of semiconductor, it was really the pentagon was the only customer. Right. And they were, as you say, in your book, you know, they they were paying any price. This was not a consumer business. Right. So even this incredible chaos, constructive chaos of innovation in the 1950s and 1960s was driven by largely by the by the pentagon. So check me on that. Am i right about that . And secondly, let me ask the next obvious question, which is, you know, today, so much innovation is is is not happening necessarily inside of darpa. Its happening. And, you know, its the old Hewlett Packard model. Right. Six guys writing Software Code for ai. You know, does does the american cutting edge today require to, you know, the old school pentagon dumps billions or is it just supporting those five or six people in a garage . Well, i think youre right that the the origins of the chip emerged not solely from from private sector forces, but there was a really careful balance that was calculated between the role of the pentagon and defense spending and the role of private firms. And what you find is that the pentagon was pouring funds into research, into microelectronics in general. But its also the case that the two engineers who invented the chip were working not on Pentagon Research contracts or specific for defense projects, but on their own. They were pursuing their own interest in their own invention. So there was always a bit of a balance. On the one hand, Companies Liked Getting Research dollars depending on the other hand, the companies that did the best were the ones that kept the pentagon and the government in general a little bit at arms length, because they realized that the big market was actually not selling for the Defense Department. That was always a limited market. It was sizable but limited. The big market was the consumer market. And so the firms that really succeeded were those that were able to take technology that they tested in the defense market and then turn it into a mass market, Consumer Product. And that, i think, is still the challenge today. You know, we still see the government playing a actually pretty significant role when it comes to really cutting edge research, not in terms of commercializing products, but in terms of the far out tend to 20 year time horizon. But then the turning of those products, those speculative technologies into commercial products, thats still a role, i think, where we ought to leave private sector firms to drive things thats worth well over the past the past 60 years. And i think Congress Actually deserves a credit in the chips legislation for putting some additional funds towards the far off r d, making sure weve got these new ideas that are filtering in in into our engineering system and then letting companies pick them up and run with them and find the right commercial end, use. Yeah, yeah. No, i that story really comes across in your book, you know, in politics, i sometimes wave this phone around because, you know, in in the political argument, there is the argument i was sort of questioning you with, which is, you know, is it private market or is it Government Support . You know, if you if you look at your personal device, whether its an iphone or whatever it is, you know, immense amounts of wealth created by the Consumer Product companies that put it all together. But almost everything thats cool about it, whether were talking about the semiconductors or the Global Positioning satellites that are spinning above our heads or the Voice Recognition software that stops it all traces back to some extent to original government research. Right . So when when americans hear, you know, that their taxpayer dollars are going to basic research and entities that theyve never heard of, like darpa or whatever, thats actually a its a thats a strategically important thing for us. Thats absolutely right. And i think weve seen drhp in the last couple of years double down on its focus on microelectronics and semiconductors. And thats something that will almost certainly yield military benefits. But i think youre right to suggest that as those technologies mature, theyre going to have profound economic benefits as well as us companies can pick them up and then commercialize them. So lets lets keep unpacking this. You know, vulnerabilities question because you know, congress did just act with the chips act. I think theres a lot of misinformation and beliefs out there that that probably could be straightened out a little bit. But lets lets lets start on the consumer side. At the end of your book, you make an argument that if moores law, this idea that the number of processors on a semiconductor doubles every whatever it is at year or 18 months, that if that stops, you paint a pretty catastrophic picture. You know, you suggest that that companies will fail, economies will be vulnerable. I didnt really get that because at and it stopped me when i when when you disagree with me, it sort of feels to me that like if the increase the remarkable increase in amount in Processing Power on chips out there slows down, moores law begins to erode. Isnt it just true that well have like less cool iphones, well have less functionality . You know, our military weapons wont be quite as you know, james bond. Why why do you paint such a dire scenario around the slowdown of moores law . Because and again, check me on this. Im not an expert, but eventually moores law hit some physical barriers, right. The size of an electronic and a chain. So, so, so, so talk a little bit about that. Thats right. So moores law is actually not a law. Its a prediction, although its often called a law coined by one of the cofounders of intel, gordon moore, in 1965. And he saw that the number of transistors you could put on a chip, which is roughly a proxy for its Computing Power, was doubling at the time, doubling annually. Since then, its doubled once every two years or so. And thats proven true since that point all the way up to the present, which is why the cost of computing has fallen by around a billion fold and the number of transistors you can put on each chip, and thus the amount of Computing Power on a chip has risen by about a billion fold since then, just to be an example, the first commercially available chip in the early sixties had four transistors on it, so could remember or process for ones or for zeros or for digits in total. Today, if you buy a new iphone, itll have 15 billion transistors on it. So thats the increase. More moores law has given us and its had ramifications far beyond just smartphones or computers. I think its actually hard for us to conceptualize how that type of exponential growth really works over time. I mean, imagine if airplanes flew twice as fast every year or if the size of houses grew at a rate. So if they doubled every year and the rest of the economy weve seen nothing like this growth. And so weve come to take for granted the idea that well have more Computing Power we can apply to almost every problem without limits. And thats been correct. Thats been what the Semiconductor Industry has delivered since 1960. But if you look out about a decade away, as you say, jim, were going to reach a point where we start hitting physical limits, where its its too its now no longer possible to create circuits that are any smaller. And right now, the circuits in your phone, for example, each one will be smaller than a coronavirus. So were already talking about tiny transistors and shrinking them further can be a problem. Now, youre right to say that if the ability to shrink transistors stops and our ability to get more Computing Power out of each chip slows down that the economy is not going to freeze. But productivity growth has been really dependent on our ability to solve new problems with Computing Power and i think if you look across the economy, the the number of sectors that are hugely dependent on Computing Power today to solve the hardest problems in them, whether its health care, whether its automobiles, whether its advanced manufacturing, all of them have been transformed in the past decade by computing. And if that growth rate stops, i think our entire economy will feel really tremendous shock because weve all taken for granted the improvements that the Semiconductor Industry have given us basically for free. Okay, okay, great. So lets take lets take another even far more dire scenario that is actually very, very current right now. And that is the possibility of conflict in the Taiwan Strait and in particular. Well, or more broadly speaking, in asia, you make the point in your book that tsmc on taiwan, theyve got a number of fabs, i guess on the western side of that island accounts for an immense amount of the productive capacity in that industry. Obviously the trade ties that Global Supply chains, meaning, you know, any given product will have stuff made all over the place that needs to move around and ships and stuff. You do paint an apocalyptic picture of what happens if theres military conflict in the in the Taiwan Strait. And i, i want you to really explain this clearly because, you know, people are envisioning today that possibility. And im a little worried that people are thinking about the possibility of going to war in the Taiwan Strait as you know, an iraq war. But a little bit worse. Right. You know, its just and i think its really important that people understand how very sensitive that region is to the possibility of violence. And you really paint a very grim picture. So talk, talk, talk a little bit about kind of what happens to the Global Economy if risks are perceived, too. I mean, forget about war, but but go to war. What happens if all of a sudden that region becomes immensely unstable today, taiwan produces 90 of the most advanced processor chips, the type of chips that is in a phone or a pc or a data center or on a cell phone tower and over 35 of all new Computing Power each year is produced on taiwan. So taiwans importance to not only the global tech industry, but the World Economy really cant be under estimated. You know, just this past two years, we had a Semiconductor Shortage globally, which caused hundreds of billions of dollars in damage across the Global Economy. For the Auto Industry alone, which faced delays in the ability to access chips, there was a 200 billion global cost in terms of cars that werent possible to be finished because the chips werent available. And yet the chip shortage happened even as the number of chips we produced actually grew. So the world produced 8 more chips in 2020 and had a double digit rate of increase in the number of chips in 2021. Its just that demand grew even further, and as a result of that, we didnt have the the number of chips we needed and the cost was measured in the hundreds of billions of dollars. Imagine a situation in which it wasnt a question of demand jumping ahead of supply, but supply falling by one third because thats the share of new processor chips that are produced on taiwan. The results would be catastrophic. Itd be almost impossible to buy a smartphone the next year. Data center buildout would grind to a halt around half of pc processors slightly less than that, are produced by tsmc, taiwans biggest semiconductor company. A cell phone towers are crucially, crucially reliant on chips made on taiwan. The Auto Industry would face delays far worse than it faced this year. And then down the chain of goods that rely on semiconductors from dishwashers to microwaves. If theres a third fewer processor, chips in the world, that is a lot of goods that wont be produced and the cost will almost certainly be measured in the trillions. Once you consider all the downstream effects of that, so that the impact would be dramatic, far worse, an order of magnitude worse. Than the Economic Impact globally of the russiaukraine war this year, for example. I think were talking about an economic shock thats thats on the on the level of what we experienced in 2020, when we had to shut down part of the World Economy due to covid. And its something that were not at all prepared for, nor is it something that we can easily remedy, because if we were to lose taiwans chipmaking capabilities, its not like we could set up new facilities in the us and have them running in a couple of months time. The reality is that tsmc, the Taiwanese Company that specializes in processor chips, produces the most advanced chips in the world. They do things that no other company in the world knows how to do. So we just lose that capability. That would take a decade to rebuild it. Okay. So that that that is dire enough in and of itself. But i bet you in your answer, you focused on taiwan and tsmc and thats important. But, but i want to get back to those supply chains and whats actually happening in japan, whats happening in korea and whats happening in china. So lets just imagine theres no war. But because the chinese have decided that up there theyre attacking ism against taiwan, we decide that were going to isolate economically china. So now chinese products, chinese manufacturing facilities, chinese chip operations are no longer available to the west. What what happens then for first officer say that youd have ramifications far beyond electronics. So from toys to textiles to shoe production, theres a lot that goes on in china. But just in the Electronics Part of the the economy itself, most of the chips that china buys are sent on to export in third countries later on. So theyre put in a smartphone, put in a pc, put in a server, and then sent abroad. And so if trade with china were cut off, that would all become impossible. Now, we could still probably build smartphones, but we need to find new places to put them together. Wed have the components because the components are mostly korean, taiwanese and japanese made, but we wouldnt have the army of hundreds of thousands of Assembly Workers that today know how to do it. So could you start off assembly in india or vietnam after some time lag . You could, but it would be far from a seamless process. It would be immensely costly and disruptive as well. So so let me let me take this to what feels like it may be a positive attribute of this integration. And in fact, you make reference to it in your book. Theres some taiwanese executives who believe that because as the world is, if i may use a negative term, really hostage to a wildly dispersed operation. Its not just taiwan, its also korea and japan. And its the ability to sail ships in, you know, in asia, in waters. It begins to feel a little bit like what we thought a lot about when i was a kid, which is the mutually assured destruction associated with nuclear weapons. Right. We we sort of all relied on the notion that the catastrophe where the soviet union and the United States to go to war, the catastrophe was so bad and so unthinkable that policymakers would do everything to avoid it. And in fact, they did so is that is that an apt analogy . I mean, you know, should should i take some comfort in the notion that when people really come to understand what military conflict in that region looks like, they will perhaps step back from the brink because of the effects it would have on the World Economy, which, as you say, in your book, boy, you thought the global depression associated with covid is bad. You aint seen nothing yet. If you have, you no military conflict in the region. Why . I think this idea of mutually assured economic destruction might be true, but i have to admit my confidence in it is slipping. I think one reason is that if you look at the russiaukraine war and the russia europe relationship, this was the thesis that led germany to integrate its its Manufacturing Sector with Russian Energy supplies over the past two decades on the idea that the more integrated russia was economically with europe and with germany in particular, the more likely russia was to behave internationally and that that bet has paid off very badly for the germans integration, did nothing to secure them, and arguably gave russia a powerful weapon to use against the german economy. I think weve seen just this year an example of why countries dont always prioritize their economies when theyre trying to achieve geopolitical aims. And i look at the chinese leadership today, and i admit that im becoming less confident that theyre focused primarily on economic considerations. If you look at how chinas developed since Deng Xiaoping in the late 1970s, certainly theres been a lot of focus on the economy. But the past couple of years have been different. Weve seen xi jinping lead a really costly and economically disruptive attack on his own tech firms that has crushed their valuations on chinese stock markets. Weve seen the perpetual asian of the zero covid policy in beijing. I mean, just think china could have imported effective vaccines from pfizer, moderna two years ago now, but chose not to for reasons of National Pride and as a result of it has had to impose repeated lockdowns across, its country at Major Economic cost. That does not look to me like a government that is focused above all on gdp growth. And so i look at chinese policymaking today, and im much less confident that economic rationality will persist. Im also not all that sure that the information thats landing on xi jinpings desk produced by his intelligence agencies, is giving him a clear picture of exactly how complicated supply chains are and how reliant china is on on peace for its economic stability. So i think anyone whos highly confident in mutually assured economic destruction, i think isnt really reading the news properly over the past couple of years because everything that im seeing from the russiaukraine war, the collapse of the russia, europe, Energy Relationship or chinas own zero gold policies, suggests to me that theres a lot more uncertainty about where china is headed and its willingness to bear economic costs in the final point is that if youre sitting in beijing and you think that the us is less able to bear economic costs than you are for pursuit of geopolitical goals, china might wager that a costly but short war might be something that it could win. And the us would be unwilling to fight because the cost would be too high for the us to endure. And so i think when you put all those pieces together, im not confident that mutually assured destruction works, hope that it does. But i think we should prepare for the eventuality that it doesnt. Good, good. Were going to come back to that preparation. Itll probably be the last topic we have a chance to explore, but because this is so important, i want to i want to push back a little bit. And the way i want to push back is by saying i completely agree with that. Leaders like putin and angie are talking in terms of nationalism and National Glory and honor. These are things that are not economically inclined and it leaves a guy like putin to do what he has done. But heres my pushback. Whether he knows it or not, putin has destroyed his country. Hes just and is taking russia back 50 years. Hes got hundreds of thousands of people leaving his military has been shown to be a paper tiger. Its getting its kicked in ukraine. You know, thats a terrible strategic thing. You know, all these restive regions are now saying, hey, we shouldnt these guys. But, you know, hes set his its been an unmitigated catastrophe. And with the passage of time, its only going to be more so he may lose his head, right . Who knows . But anyway, thats my point number one. Point number two, just to keep this conversation going, chips are fundamentally different than oil, right. And what i mean by that is the russians can pull oil out of the ground, put it in a tube and send it to india or to china. If we decide that the chinese dont get to export chips to china or india who are currently buying russian oil, we just have to say, hey, you know, because we actually control critical elements of the production process through companies that do you ultraviolet lithography. We cant cut off russian oil but we can cut off russian chinese chips. Right. So arent those to a fundamental strategic difference says, oh, and by the way, let me add a third. The third one i would add just to sort of keep youve talking about the subject is that you russia has been in economic mess for a very long time. That has survived because it sits on a pool of oil. The deal in china since i was a child was you dont get to play in politics. Chinese citizens like you. We are going to put up with a lot of repression in exchange. Were going to make you wealthy. Our economy is going to grow 10 every year. Oh, my gosh. That deal goes away overnight. When that happens. So, so, so address, address those three. What i would argue are pretty profound strategic differences. Visa v what russia did in ukraine. I think youre right that the war has been a disaster for russia. And i hope that the chinese see it that way as well. But im not sure that theyre looking at the failures of the Russian Military and assuming that their military will perform just as badly. Maybe it would. Maybe it would that i dont know the answer to that. But i also dont know what xi jinping thinks the answer to that is as well. He might well think the russians are poorly organized, but were i dont know. Im on the question of of us control of core chipmaking technologies. You know, thats absolutely right. Today, if you want to make an advanced semiconductor, you cant do it without us software and us made machine tools. And this is a huge strategic advantage right now. We do know the chinese are pouring funds into their program to domesticate these technologies right now. Theyve got a long way to go, but its a key focus of the chinese government. And over time, we should expect that theyll make at least some progress. Its going to be a long road for them, but their prioritizing this as a as an issue not only of technologic policy or economic policy, but an issue of National Security. But, yeah, theyre vulnerable right now. Theres no doubt about it. And and just as we speak, the Us Government is rolling out new restrictions on the ability for china to buy some of its chipmaking technology and therefore to produce advanced chips at home. So i agree with you on that. Well see how long this advantage lasts. I hope it lasts a long time, but i think we have work to do to solidify. The this advantage relative to chinas own domestic efforts. I think the chinese social contract at home, you know, i, i think its probably right that the chinese populace would be deeply unhappy with a Major Economic crisis, even if it involve them taking over taiwan. But the question isnt really whether the chinese polity could survive it. But what does xi jinping . Xi jinping think they could survive . And right now i worry the chinese think that their power has grown dramatically. Every assessment of the balance of military power in the Taiwan Straits suggests that the balance has shifted dramatically in chinas direction. The chinese leadership thinks that theyre given too small of a role in the world stage relative to their Economic Growth over the past couple of decades. And so i, i think there is a risk for the chinese that overconfident and and and try something in taiwan i dont know that its the most likely outcome over the next couple of years, but its a lot more likely today than it was just a couple years ago. And so i think as a result, weve got to at least prepare for it and take it seriously because the days when the us could simply diffuse the chinataiwan crisis, like bill clinton did in 1996 by simply sailing an Aircraft Carrier through the Taiwan Straits, those days are over. The reality is that chinas a really serious military competitor and the chinese it and i think that leaves them in a position to take more risks and they would have in the past. Yeah, yeah. Well, an unknowable answer, you know, and National Security people need to not hope they need to plan. And so to some extent, to some extent, were having a little bit of an academic conversation here. But one critical part of planning that i feel very strongly about, i think your book makes a huge contribution here. Policymakers in china, in asia and in the United States need to understand the implications of their actions. And your book does a great job talking about the economic devastation visited upon the world. Associate it with disruptions, particularly catastrophic disruptions in this industry. So thats thats really, really important. So in the remaining time we get to the question of, okay, so what do we do about it . And, and, and i want to draw this out because i read your conclusion. I was like, okay, chris is going to tell us exactly what we need to do about it. And and you definitely have some ideas, but i want to tease something out. Lets start with this. Congress just passed the chips act in a bipartisan fashion. Yay, thats great, right . Bipartisan. Thats wonderful. Spending a whole bunch of money on something that would have been unthinkable probably 20 years ago. And American Industrial policy, i will tell you, the europeans are not happy with us because they dont like us subsidizing, our businesses, all that good stuff. But heres the key question i have for you. A lot of people supported the chips act because they said, you know what, its to do, its going to stop those vulnerabilities in the Global Supply chain. Well be able to assure our automobiles dont get hung up in parking lots because they dont have chips. Everything will be great because itll all be right here. Is that going to be the result of the chips act . I think probably not. Or at least not in any sort of direct fashion. And the reality is that were going to rely on International Supply chains to produce chips for the foreseeable future. Theres crucial machines produced in the netherlands or in japan that you cant make chips without in in korea and taiwan, there are unique capabilities that other dont have. And and this international is not a bad thing. This is provided the efficiencies that have reduced the cost of Computing Power and made all the computing we take for granted possible. I think that the risks that we need to be aware of are where are their geopolitics, the vulnerabilities that we havent focused on and prepared for. Now, im not worried about the fact that were reliant on the netherlands to provide one of the most important types of tools using chip making. You know, theyve been a friend for many decades. We see the world in a similar ways and the likelihood of problem arms coming from that direction is low. Similarly with japan, theres a lot of overlap between how the us and japan see the world. Our chip industries are synergetic. Thats not problematic. The risks are twofold. I think. One is that we become increasingly reliant on china not only to assemble electronics, but increasingly to produce chips because chinas massive subsidy campaign is going to see its share in the global chip industry grow. Itll start at the low tech end of the industry at first before trying to move up the value chain. But i think in less Current Trends change. Chinas going to be a much bigger player in the chip industry in 2030 than it is today, and that creates more vulnerability, more reliance on china. Number two is the taiwan question. You know, on the one hand, i think weve got many reasons to make sure that taiwan is defended and secure against a chinese attack on the other hand, i think anyone who looks at a situation where 90 of the most advanced chips are produced in one small island, that happens to be the worlds nastiest geopolitical dispute, i would say thats not a great way to structure your tech industry. And so the more we can do to diversify where advanced chips are produced, whether in the us or in korea or in europe, thats great. I think thats an important step that will limit chinas ability to hold the rest of the world hostage to a potential military escalation in and around taiwan and and the chips act, i think, makes important steps in that direction by funding more advanced chip making in the us. And i think the key to understand the chips act is to say that actually other governments have been funding their own chip industries for a long time, providing tax incentives, for example, that make it cheaper to manufacture chips in many parts of asia than in the us. And so what really doing this legislation is just equalizing the cost to making it cheaper abroad, not because of labor cost differentials, not because workers are cheaper, but really because of tax incentives and tax policies in other countries. And so its not like the market was working efficiently to see chip industries migrate to asia. Instead, it was tax policies in other countries that were providing the subsidies that made it more Cost Effective to do so. And so i think congress is right to say we cant let that determine the geography of where this Crucial Technology is made. We need to provide someone incentives our end to make sure weve got at least some of most advanced chips made onshore. Yeah. No, in your this is this is even more complicated than you say. You hold a small up as an example of a dutch company. Interestingly enough, asml actually has one of their primary manufacturing facilities right smack in the middle of my Congressional District in southwestern connecticut. And in in wilton, connecticut. And so its not just where the Company Comes from. Its where they do their business. So, okay, lets lets lets just spend two or three more minutes on that. You know, the chips act is going to send about 50 billion to an industry. Thats pretty remarkable relative to the way washington used to think about free markets and the way people used to think about picking winners and losers so over what time period do you think that expenditure is likely to make us more secure and and how much more secure . What kind of bang are we getting for the buck there . I think we are actually already seeing some of the impact of of the chips legislation. Weve seen major announcements by companies to build new facilities in the us, both us Companies Like micron building a facility in new york, intel in ohio, but also by foreign Companies Like samsung, for example, is building a new facility in texas and tsmc, the world leader is going to build a meaningful new facility in arizona, all because of the chips act. And so thats thats already happening construction is underway on some of these projects. Were going to see them operational over the next couple of years. Thats a positive step. But its not going to mean that east asia is no longer important, that were not going to have International Supply chains that are very complex. But it is going to mean that were to have more diversification and more production in the us rather than in geopolitical. That, i think does leave us more secure in the second part of the chips act that people talk about less but is actually really important is only around 40 billions of dollars are devoted towards these incentives for manufacturing the rest about 10 billion is going towards more spending on r d and next generation technologies. And i think this is a smart way to structure the legislation and its not only about today, its also about tomorrow. And weve seen the Us Government has a pretty good track record when it comes to funding scientists and engineers to think about whats beyond the current cutting edge of what commercial firms are able to do and investing more in that. And i suspect that when we look in 20 years or 25 years and ask what was the biggest impact of chips act will actually not have been the manufacturing level. Thats important. Itll have been the increase in r d spend, which i think is going to be really impactful over the next decade or two. Yeah, yeah. Im a big fan of the concept. The more i, the more i study innovation in this country, the more i dedicate time in washington to making sure we dont lose out on the race of of investment in research and development. So, chris, i think weve got time for two questions. We probably got just over 5 minutes or so. So question number one, im glad hear that you believe that the chips act is money . Well spent. The follow on question, of course, is what else should we be doing in the service of, you know, security and stability in this critical, critical segment . Well, part of whats happening right now and i think theres more work to be done is is actually mapping out the supply chain of semiconductors and understanding where are we vulnerable to disruption, especially in east asia. Earlier this year, it emerged that most of the worlds neon gas, which is one of the gases you need to produce chips, was produced either in ukraine or in russia. In ukraine, it was actually produced in the steel plant in mariupol that russia besieged for several months before finally taking it. So it was a major disruption in neon gas markets earlier this year that it could have had a big impact on chip markets, ended up not having that effect because there was some stockpiling in some other sources of supply that came on line. But it was in illustration, i think, of the way that we only barely understand just the number of inputs, the chip making. Theres 2000 different steps that needed to take to make the typical advanced chip. And so mapping out the supply chain and understanding the vulnerabilities to countries like russia or china, i think is a crucial part of the effort. And were still in the process of doing that. I think the second thing is, although the government, i think has woken up to the challenge, i think Many Private Companies are only beginning to realize that geopolitical risk in east asia is real, that chinataiwan risk is real, and that they need to start thinking more seriously about their security of supply and their Manufacturing Processes in case something goes wrong in east asia. I think its a positive sign that apple is moving a bit more of its assembly to vietnam and especially to india. Its a slow stop. Its a small share still of apples assembly, but its a sign at least of diversification and of preparing in case something does go wrong. I think more Companies Need to start thinking along those lines, not because we want it to happen. We certainly dont. Not because its the most likely outcome. I think theres still a good chance we can avoid Something Like that, but the more prepared we are, the more china will realize that the cost of moving on taiwan are large and that their costs that were for china are large, and the costs that were able to sustain because weve done our preparation. And thats something that a couple of years ago wed done no preparation for. Now i think thanks to the chips acts, were beginning to prepare for, but the more prepared we are, the less likely china actually is to try to move on taiwan. Yup, yup. Well, ive got one more question that gets us into sort of science. But you know, the other thing that i need that we need to do, and i think your book is a good step in this direction, is we really need people to understand the catastrophic cost of instability in the Taiwan Strait and around the Taiwan Strait. What that means for people. And were just talking economically here. Were not even talking about loss of life and that sort of thing. I you were. You are too to remember this. But in 1983, there was a movie, wargames, in which you know, the Nuclear Apocalypse is about to occur. And joshua, the computer does all the calculations at the end. It arrives at this conclusion, which is the only winning move, is not to play. And thats not an argument for anybody backing down, but its an argument for people to sort of take a deep breath and spend as much time thinking about avoiding that catastrophe as they are thinking about how to win that catastrophe. But we have time for one more quick question, which is one thing that i really enjoyed about your conclusion is you do acknowledge that probably we are going to see a radical technological leap at some point away from the silicon and the and the and the electrons running around on pieces of metal, ever smaller pieces of metal and silicon to a whole new technology. Take take us into the realm of Science Fiction and tell us where where does this industry go in the next 20 years and what are the implications for for regular people . Well, at some point, as we discussed earlier, moores law is going to slow down. It will be impossible to make transistors even smaller than the the size they are now. At that point, well need to turn to alternative of computing right now, theres a lot of investment going into quantum computing, trying to find ways to make that commercially viable. I think at some point we will have commercially relevant quantum computing though were still some years away from that at this point. And then theres other ways of doing computing, using dna, for example, or other types of biology which could down the road replace silicon chips. I, i think were were still a long way away from seeing that play a big role. You know, the reality is that the entire computing infrastructure is based around silicon today. All the engineers who design chips, all the ultra precise machinery that works on chips is designed around silicon. And so were going to be in a silicon computing infrastructure for a long time, but people are already thinking hard and investing a lot around finding the next paradigm. And i its important for us as a country as well to think about what are the pathways to making sure that the next computing paradigm, whether its quantum computing or something else, that becomes more important, is also something that the us and its allies play. The biggest role in, because it will certainly have not only economic ramifications, but also like silicon chips, major security ramifications to excellent, excellent well, chris, thank you very much. A big thank to cspan for arranging for this conversation. We have been talking with professor chris miller, whos an associate professor at the Fletcher School at tufts, about his remarkable new book, chip war the fight the worlds most critical technology. Really enjoy the read and i hope i hope it gets out there and lots of people read it. Thank you,