Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

In 1990, more than three quarters of the world's semiconductors were manufactured in the United States and Europe.

Today, those locations manufacture less than a quarter. Semiconductor

manufacturing has mostly moved to Japan, South Korea, Taiwan and China. No one seemed too

concerned with this for quite a while, but factory shutdowns, changes in demand and problems

with global supply chains led to a shortage during

the pandemic. The chip shortage disrupted all sorts of other supply chains and raised

awareness of how important semiconductors are in almost all modern manufactured goods. The semiconductor shortage was seen as possibly the biggest economic security issue of the pandemic,

bringing into clear focus how reliant the global economy is on a handful of microchip manufacturers in East Asia.

The recent sanctions on Russia, which have involved

cutting off Russian access to Western technology and trade disputes with China, have further

highlighted how chips are increasingly being viewed by governments around the world

as a national security priority.

It's not just the key role they play in consumer products that makes them important, it's

their uses in military weapons and cyber warfare.

On Monday alone, shares in top Chinese chip makers lost almost $9 billion in market value

after the United States announced new export controls on Friday that restrict the sale of

certain semiconductors made with US technology and semiconductor manufacturing tools unless

vendors first obtain an export license.

These restrictions are designed to curb China's plans for technological self-sufficiency

and their use of American technology in manufacturing advanced weapons.

During the pandemic chip shortage, no company came under greater scrutiny than Taiwan

...