But what I realized is actually the exact opposite.

If you take nuclear weapons, that technology has barely improved since the 1960s.

It's so easy to make nuclear bombs, even the North Koreans can do it.

But chips are everywhere because they're cheap and they're tiny.

And making things very inexpensive and very small is extraordinarily difficult.

Today, there are just three companies capable of producing cutting-edge processor chips, the types of chips that go in phones or computers or are used for AI.

For many of those devices, they rely on chips that, in some cases, can only be made by one company in a single factory in Taiwan.

The key risk that hangs over not just the chip industry, but really our entire economy, is that something goes wrong between China and Taiwan and the Taiwan Straits, such that they lose access to chips made in Taiwan.

My name is Chris Miller.

I'm a professor at the Fletcher School and author of Chip War, the fight for the world's most critical technology.

Well, I first got interested in chips when I realized you really couldn't understand how the world works without them.

When we think about technology, we think about social media, we think about search engines, we think about apps on our phones, but undergirding all this are chips.

A chip is a piece of silicon, often the size of your fingernail, and in it is carved thousands or millions, in some cases, billions of tiny devices called transistors, which flip circuits on or off, on and off.

And when they're on, they produce a one.

When they're off, they produce a zero.

And all of the ones and zeros, undergirding computing, undergirding data storage, all of your Instagram likes, all of your text messages, these are all just long strings of ones and zeros, which are created on the chip by these circuits flipping on and off.

Before transistors, computers used vacuum tubes, which were sort of light bulb-like devices that would turn on and off, on and off to produce the ones and zeros.

They were cutting edge for their time, but they had huge inefficiencies.

They wasted a lot of heat, for example.

They worked pretty slowly.

And they also, because they created light, attracted moths.

And so computers had to be regularly debugged in the early days of computing, which meant removing moths from the lights that they were attracted to.

In the middle of the 20th century, William Shockley, John Bardeen, and Walter Brattain invented the first transistor while they were working at Bell Labs.

It was part of AT&T at the time.

Invented at the laboratories, the transistor brought Bell scientists one of the two Nobel Prizes they have won for discoveries in physics.

They were initially planning to use these as part of the telephone network.

Though it was primarily developed for the betterment of telephone communications, the versatile transistor now appears in a staggering variety of devices and equipment.

Individual transistors were connected via wires in a way that was okay if you had a handful of transistors, but if you had a thousand connected together, you had a jungle of wires you had to manage.

The first chips were invented by engineers working at Texas Instruments and a company called Fairchild Semiconductor in Silicon Valley.

The first engineers realized that you could take multiple transistors and make them on a single piece of semiconductor material.

And so that was the first chip, a piece of material with multiple transistors carved into it.

This single silicon crystal will be trimmed, then sliced and diced.

The objective, semiconductors.

Patterns are made by a photographic process and then micro-machined by chemical etching to produce nearly 1,700 transistors on each slice.

And so the jungle of connections was replaced by a single block of material, which was much more reliable and also much more easy to shrink in its size.

At first they were building chips primarily for the U.S. government, for the space program, for example, and for weapons systems.

But they realized early on you could take the exact same chips that the government wanted to guide spacecraft and use them for commercial applications like computers or pocket calculators.

And that set the industry off into its first phase of growth in the 1960s and 70s.

All the calculator know-how you'll probably ever need.

Over time, a new set of companies emerged.

Intel, for example, was founded in 1969, and it quickly focused on making chips for personal computers, which at the time was a very small market.

But they correctly bet that soon everyone would have a personal computer.

And Intel, even today, is the world's largest producer of chips that go inside PCs.

Gordon Moore was one of the two co-founders of Intel.

He's most famous today probably for coining the term Moore's law.

Moore's law is not a law of nature.

It's not a law of physics.

It's really a law of economics.

Moore's law predicts that the number of transistors per chip and, as a result, the computing power per chip will double every couple of years.

And that's been empirically true since the 1960s.

If you're able to find a way to shrink, shrink your transistors smaller, you will be able to find a larger market as well.

And that has incentivized huge investments in shrinking, in improving manufacturing processes, and making chemicals more purified, which means that the capabilities of chips have gotten vastly better and continue to get much, much better at a faster rate than anything else.

So I like to think, for example, of airplanes to illustrate the difference.

If airplanes doubled in speed every two years from the 1960s up to the present, we'd be flying faster, literally, than the speed of light.

But chips have done that.

Chips have increased in that capability because the scale of the transistors has shrunk.

Chips today are measured in nanometers.

And so that makes them only slightly larger than atoms, far smaller than bacteria, smaller than a mitochondria, half the size for the most cutting-edge transistors of a coronavirus.

There's basically nothing we manufacture at such tiny scale.

When you go inside one of these massive facilities called fabs, what you find is that there are huge machines and not much else, because humans are way too imprecise for manufacturing at nanometer scale.

The machines that make chips can cost $350 million a piece.

And they cost so much because they require some of the most precise components ever used, like a mirror that's the flattest mirror humans have ever made, a laser that's the most powerful laser ever deployed in a commercial device, and a ball of tin that falls through a vacuum and is struck twice by that laser, explodes into a plasma measuring 40 times the temperature of the surface of the sun.

And this plasma emits light at just the right wavelength, 13.5 nanometers, to be bounced off the mirrors in exactly the right geometry and land on your chip to carve the transistors into the silicon.

It's the most complex and expensive machine that humans have ever made.

And it's required to make all the most advanced chips.

And that has enabled the explosion of computing power, both in terms of the computing capabilities in high power data centers or in your phone, but also the application of computing to all sorts of devices.

Today, there's computing everywhere.

It's in your dishwasher, it's in your refrigerator, it's in your coffee maker, it's in your car.

And it's possible to put computing everywhere because today it's so cheap, we can produce it almost for free.

The chip industry was a global industry from really the earliest days.

Because chipmaking requires ultra purified materials and hugely complex equipment, everyone requires a set of partnerships to give them the materials and the intellectual property and the software and the tools that they need to produce advanced chips.

So in the U.S. right now, most of the key chip firms only design chips.

Most of the manufacturing of chips happens in East Asia, in Taiwan, for example, or in Korea.

Many of the chemicals that go into chipmaking come from Japan.

And the machines that are used to make chips come from either Silicon Valley, where some of them are still made, or the Netherlands or Japan.

So the industry has globalized, but it's also specialized in the process.

And so there's not a single region today that can make cutting edge chips on its own.

If you take, for example, the primary processor inside of your smartphone, it was probably made in Taiwan, but it was made in Taiwan using chipmaking tools from the Netherlands and from the United States and from Japan.

It was produced using chemicals from Japan, and then often assembled and packaged in Malaysia before ending up inside of your smartphone.

And that's typical.

During the pandemic, the supply and demand dynamics from the chip industry were out of whack.

A lot of people ordered new computers, for example, to work from home.

And so PC production shot up in ways that weren't expected, or people bought fewer cars in the early days of the pandemic.

And so car production declined and companies couldn't predict what type of chip they would need.

The effect of that was to create shortages of certain types of chips.

Car companies in particular found they couldn't get the types of chips that they rely on.

The thing about cars is if you're missing just one chip, your car often doesn't work.

And during the pandemic, car companies found themselves often in that situation.

Just a single chip, often even the cheapest chips, were causing them to have to leave cars in the factory parking lot as they waited for the right chip to arrive.

That created hundreds of billions of dollars of losses for manufacturers like automakers.

And that matters because the shortages we saw in 2021 and 2022 are tiny in comparison to the shortages we would see if to a large-scale chipmaker like those in Taiwan.

The biggest chipmaker in the world is the Taiwan Semiconductor Manufacturing Company.

When it comes to advanced processor chips, like the chips in your phone or the chips in your computer, TSMC makes around 90% of them.

In 1987, there was an American engineer named Morris Chang.

The Taiwanese approached him and said, would you like to build a chip factory in Taiwan?

And he said, yes.

At the time, most chips were manufactured and designed by the same companies.

But he established TSMC in Taiwan with the aim never of designing chips, only of manufacturing.

That's exactly what TSMC has done.

And it's enabled TSMC to win among its customers some of the largest companies in the world.

Apple, NVIDIA, Qualcomm, AMD, they all rely on TSMC to produce its chips, which means that TSMC is the largest chipmaker in the world by far.

They've got an extraordinary market share and are arguably the most important company in the world because the chips that they produce, we rely on for basically everything.

China and Taiwan have been at odds ever since Chiang Kai-shek and what was left of the Nationalist Army fled the mainland for the islands back in 1949.

Anything that disrupted chip production in Taiwan would be catastrophic for the world economy, especially if China carries through on the threats it regularly makes to use force against Taiwan to take control of the island.

China fired 11 ballistic missiles right over the island and encircled it with warships to prove it can strangle Taiwan whenever it wants.

Even a small move, a small conflict would be disastrous for the chip industry because Taiwan needs to import energy, needs to import chemicals, materials, tools, spare parts from Japan, from the United States, from Europe, energy coming in from the Middle East.

And if any of this is disrupted, chip production could break down.

And if chip production in Taiwan breaks down, that matters for everyone because everyone uses Taiwanese-made chips.

Both China and the U.S. see chips as really central to the technology competition between them right now.

China's worried that because it relies on importing chips from Taiwan and from Korea, which are both U.S. allies, it's going to be cut off in the future from getting the chips that it needs.

And right now that's already happening to some degree.

The U.S. is limiting the ability of AI firms like NVIDIA to sell their most cutting-edge chips to China.

And the aim of these regulations is to give U.S. firms an advantage, to make sure that U.S. companies are leaders in AI and that the U.S. gets to write the rules of how AI will play out.

Today, China is the world's largest importer of chips.

They spend as much money each year importing chips as they spend importing oil.

There's nothing that China's more reliant on the outside world to purchase.

Right now, the most advanced Chinese firm, SMIC, is about five years behind TSMC, which might not sound like a lot, but that's two and a half Moore's laws behind TSMC, which means that for the most cutting-edge applications, you really take a performance hit if you want to use a Chinese manufacturer versus a Taiwanese one.

That's the U.S. goal, to throw sand in the gears of China's AI ecosystem and hope that the U.S. can race ahead as a result.

The biggest change in the past couple of years has been the explosion of investment in AI.

The release of ChatGPT in late 2022 encouraged all the big tech firms to spend tens of billions of dollars building vast AI infrastructure, which means data centers full of the most capable semiconductors.

One of the key trends in the history of AI is that more advanced systems require being trained on larger volumes of data.

If you want to train a system on more data, you need more computing power, which means better chips to train it.

So today, companies like OpenAI or Anthropic are spending millions and millions and soon billions of dollars training their AI systems, and most of that budget goes to buying chips, buying ultra-advanced semiconductors from companies like NVIDIA.

One of the key challenges of AI is going to be to drive down the cost of deploying AI systems.

To make AI really widespread across the economy, we need the cost of using it to be so cheap, we don't even think about it.

It's sort of like Google search today.

No one thinks, what's the price of my Google search?

Because it's approximately zero.

Google spends a bit of money on the data centers, but it's so low, you don't have to think about it.

Today, AI is actually pretty expensive.

A single query to ChatGPT is an appreciable amount of money.

There are a lot of companies that are exploring how do you do deployment more efficiently.

NVIDIA's chips, which are at the center of the AI ecosystem right now, are pretty general purpose in their capabilities.

They can train many different types of models and are useful both for training and also for deployment.

But if you design a chip for a specific type of model or a specific type of deployment, you can make it perfectly optimized for that use case.

And so a lot of startups right now are looking at individual workloads or individual deployment opportunities and saying, we're going to design a chip that's perfectly tweaked for that use case.

This is startups tackling this industry, but it's also big tech companies, Facebook, Microsoft, Google, they're all designing their own in-house chips as well, because they know the specific workloads that are inside their data centers.

And they've realized if they design chips specifically around those workloads, they can operate more efficiently in many cases than a general purpose AI chip like NVIDIA's can do, which I think is going to be really important in making AI cheap enough and therefore prolific enough to make a major impact on the economy.

When I look at the surge of investment in AI chips right now, I see no reason to doubt that Moore's Law won't continue for a very long time.

That means more advanced chips, which means more computing power that we can apply to all sorts of AI and all sorts of devices.