Chinese Whispers: the next technological arms race

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4.4 • 785 Ratings

🗓️ 11 July 2022

⏱️ 44 minutes

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Summary

Semiconductors are the most important thing that you've never heard of. These little computer chips provide the processing power for everything from cars and iPhones, to unmanned drones and missiles. In Beijing's Made in China 2025 industrial strategy, through which China seeks to move up the value chain to become a high-tech superpower, semiconductor self-sufficiency was one of the targets.

Beijing is falling far behind on this target. MIC 2025 stated the aim of meeting 70 per cent of China's demand through domestic production by 2025, but, seven years on, it is only meeting 20 per cent of its domestic needs (by one estimate). The world's leading manufacturer of semiconductors is in fact in Taiwan. The Taiwanese Semiconductor Manufacturing Company dominates more than half the global market, and controls 90 per cent of the cutting edge 5 to 10 nanometre sector (in this industry, size matters; the smaller the chip, the better). Even American companies like Intel outsource a substantial amount of production to TSMC.

A tech arms race is underway. In order to control the supply of this small but vital component, China and the US are desperately funnelling money into their own national champions, whilst 'kneecapping' each other's efforts, as Nigel Inkster tells Cindy Yu on this episode. He's the former director of operations and intelligence at MI6 and author of The Great Decoupling: China, America and the Struggle for Technological Supremacy.

They discuss Washington's relatively effective efforts on this front – from instituting export controls on western companies (not just American) that supply Chinese semiconductor companies, to pressurising TSMC to share its know-how worldwide (TSMC will open an Arizona branch in two years, thanks to pressure from President Trump). It's got wolf warrior and Foreign Ministry spokesperson Zhao Lijian hopping mad; he has accused the Americans of practising 'technological terrorism'.

Yet America's approach could be instructive for the UK, where there's a live political question over the Chinese acquisition of Newport Wafer Fab, a relatively low-end semiconductor manufacturing site that is the subject of an ongoing national security review.

Some in the West also fear that TSMC's success will lure China to invade Taiwan, while some in Taipei see the company as their 'silicon shield', Nigel says, as its accidental destruction (or at the hands of the Taiwanese or American governments) may deter China from an aggressive incursion.

On the episode, Nigel and Cindy discuss all this and more (whether China is inherently less innovative, how painful and inevitable a tech arms race would be, and Nigel's reaction to MI5 and the FBI's recent joint warning about Chinese espionage).

Transcript

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0:00.0	A Spectator subscription is now better value than ever before.
0:04.5	As a new subscriber joining today, you'll pay just £1 a week for unlimited online and app access in your first year.
0:12.7	To subscribe today, go to spectator.com.ukuk forward slash unlimited. Unlimited.
0:30.3	Hello and welcome to Chinese Whispers with me, Cindy Yu.
0:37.6	Every episode I'll be talking to journalists, experts and long-time China watchers about the latest in Chinese politics, society and more.
0:42.0	There will be a smattering of history to catch you up on the background knowledge and some context as well. How do the Chinese see these issues?
0:46.5	In 2015, China set the target of being a tech superpower by 2025. That is an industrial
0:53.0	strategy known as Made in China 2025 and it means that China
0:57.0	wants to move into high-tech areas like robotics, AI, biotech and also semiconductors, those computer
1:03.4	chips that go into pretty much everything in modern life, from iPhones to unmanned drones
1:08.9	in warfare. But China has actually not had much success in meeting
1:13.9	its targets for domestic production on this front since 2015. And the world's leading manufacturer
1:20.7	of these semiconductors is actually based in Taiwan. And given the current geopolitical climate we're in,
1:26.7	it means that there's a massive arms race going on
1:28.9	so that this technological race has become a geopolitical one, an arms race for the 21st century.
1:35.5	That's what I'm going to be talking about in this episode today, China's quest for dominance in semiconductors
1:39.9	and the geopolitical implications for that. My guest is Nigel Inkster, who is a former
1:45.1	MI6 director and now a senior advisor on cybersecurity and China for the think tank IISS,
1:51.7	and also author of a book called The Great Decoupling, which is all about America and China's
1:56.8	respective quests for technological dominance and the decoupling in global supply chains
2:02.5	that might come about it.
2:04.5	So Nigel, welcome to Chinese Whispers.
	...

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