Preamble to War on Chips: National Escalation Points
The book “Chip Wars”, which we read not long ago, has been published in Chinese, and got its debut, and I am honored to write the preface for the Chinese version of the book. This speech is the full text of the preface.
Preface to “Chip Wars”: National Escalation Points
Chris Miller’s “Chip Wars” is wonderful, with technological adventures, business war stories, and even great power games, and won the Financial Times 2022 Best Business Book Award, which is very popular around the world. But we Chinese readers will have more complex emotions when we read this book, and deserve to have more important gains as well.
Because the chip is now a major event for China’s national destiny.
As we all know, the chip war between China and the United States has intensified in recent years, and the U.S. government has made up its mind to jam China’s neck on the chip. China of course can not be defeated, but we need to understand that this is not an ordinary fight. The fight here is not just about technology, but also about the culture of innovation, markets, systems, ways of doing things and the spirit of adventure. Perhaps Miller’s book will stimulate our thinking and give us a deeper understanding of the world today.
In some people’s minds, after more than 40 years of reform and opening up, China’s economy is highly developed, with the world’s strongest supply chain system, Chinese manufacturing has ruled the globe, and China’s quantum information, 5G technology and other technologies are leading the “fourth industrial revolution. …… China has already “won the hemp”. And I believe you will have a completely different view after reading this book “Chip War”.
Objectively speaking, today’s China’s economic and technological development level, not only than the United States, and even in the 1980s is rising in Japan can not compare. At that time, Japan already had a series of companies such as Sony, Sharp, Toyota, Honda, Toshiba, Canon, Nikon, and so on, which possessed their own core technologies, their own designs, and their own brands, and which were highly sought after by consumers all over the world. Japan used to beat the US to near despair on chips. Even South Korea, a decade or two ago, already had globally recognized companies like Samsung, LG, and Hyundai.
In contrast, China today still has few global brands and few exclusive technologies, except for Huawei and ByteDance. The big companies at the top of the list in China are state-owned enterprises like oil, banks, power grids and telecoms, and some national brands only manage to be household names in China. China’s economy is big and the numbers look good, while our real economic strength, especially our ability to innovate, is still far from the developed world.
China is “necked” by more than just chips. We are in the industrial mother machine, medical instruments, agricultural breeding and many other areas are subject to others. Our industrial upgrading is far from complete. Chip is just a focus, but through the chip, we may be able to reflect on some people in the past that kind of naive world view.
Simply put, Miller’s book can correct our three misconceptions.
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*The first misperception is that any high technology can be “stacked”. * One of our default, unexamined beliefs is that if you invest enough human and material resources, you can do anything that anyone else can do.
Since others can make high-end chips, we can also make chips as long as the leadership attaches importance to it, the government supports it, and invests money regardless of the cost, right? No. Many things in the world is indeed “stackable”, such as building a bridge and paving a road, as long as you have a lot of people, can always be done; but some things are “not stackable”, such as Chinese soccer. Things that cannot be stacked often require the whims of high-level talent, complex environments, and unattainable opportunities.
Many people like to compare the chip war with China’s previous research and development of nuclear weapons: both are high-tech, China used to be able to develop nuclear weapons, why can’t we develop high-end chips now?
Because nuclear weapons is actually a simple technology, is quite stackable. When China first developed nuclear weapons, the US and the USSR already had ready-made successes, and we all knew the basic principles, the direction of research and development was very clear, and the technical items involved were very limited. And there’s no need to think about commercial profitability in getting a nuclear weapon - just getting it made is enough to create a nuclear deterrent.
To engage in nuclear weapons, you only need a few of the smartest, unstackable talents like Deng Jiaxian and Yu Min at the very core, and below them a few hundred engineers and scientists who are good at doing calculations and who can accomplish tasks based on their ideas; the rest are replaceable people like workers and soldiers, as many as you want, all stackable.
To build a chip, from chip design software to photolithography to silicon, every step of the way requires the whims of many smart people, and there are no “miracles” here. You need thousands of “Deng Jiaxian” and “Yu Min”, and they must all be doing great work in their own industries.
There are no secrets about the science of chips, it’s all out in the open. But it is very difficult to achieve technical feasibility, especially commercial profitability. It doesn’t make sense to spend 100 million RMB to build a chip, we have to ensure mass manufacturing, yield rate, update speed, and we have to make sure it’s cheap to do.
For this you need not a big project, but a whole ecosystem. And such a system can only be accomplished by the world’s top technology companies.
In his book, Miller goes to great lengths to talk about the landscape of chip technology in the world today. Take the production of 5 nm chips below the extreme ultraviolet lithography, the initial design principles from the United States, the actual formation of products is the Netherlands ASML company, it took 30 years of research and development to complete the commercialization. ASML is not its own research and development, it always needs the investment and cooperation of major companies, especially the need for thousands of small high-tech companies to do parts suppliers. For example, extreme ultraviolet lithography in the laser is a German company was commissioned to develop out, it has 457,329 parts - all these parts even if there is a performance is not up to standard, the overall performance of the lithography machine will be greatly reduced.
Ask China if it’s possible to make all of these things on its own. The reality is that Made in China has never left the world without technical support.
Yes, we have some leading-edge research like quantum information, carbon nanotube chips, and the like, but these are still at the stage of exploring scientific possibilities - there are countless similar studies around the world betting on them - and they’re a hundred thousand miles away from being technically feasible, commercially profitable, and simply They are not even close to being technologically feasible, commercially viable, or commercially profitable, so there is no such thing as the Fourth Industrial Revolution.
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*The second misconception is that innovation should be led by government. * Some of us tend to visualize the government as an omnipotent force, as if the government said there should be light and there was light.
An examination of the history of chip development in the United States, Japan, and the Soviet Union reveals that precisely the greater the government involvement, the less successful it was.
The U.S. government does play an important role in the growth of chip companies, but chip R & D or production or, the main body has never been a business rather than the government. The government is at most in the * above * pull a hand, such as providing military orders, funding national laboratories and universities of scientific research - but never “pick winners”, no direct support which company, innovation has never been a company like biological evolution on their own Innovation has always been a matter of individual companies taking risks and exploring, like a biological evolution, and the winners and losers coming out.
Japan’s approach can be called the “Asian model”. The government pushes from below and gives loans and policies to help you grow bigger and stronger regardless of the cost. If you have the advantage of latecomers, this approach may be able to achieve rapid success in the early stage, but later will be reversed, because the company being pushed up to lack of cost consciousness and the spirit of risk-taking, there is no real innovation.
The Soviet Union, needless to say, was a direct government operation that was never tested in the marketplace and failed most miserably.
If government is allowed to lead innovation, it is not innovation. The government would not be an innovation department. Innovation, first and foremost, is something risky, something that requires whimsy, something that requires you to explore freely in all directions. Innovation means waste, it means upheaval of the existing pattern, it means relentless bankruptcy and elimination …… These are not what the government likes. The government always does things to be stable, conservative, and not to take risks.
We talk about innovation all day long, but we don’t know that it is pseudo-innovation to talk about innovation without talking about risk and disruption.
Miller in this book tells a lot of scientists, inventors, especially entrepreneurs, full of personal heroism, are not stackable. One of the people I admire most in this is TSMC founder Chang Chung-mou. With his own strength and by his vision, this man not only brought a chip industry to Taiwan, China, but also directly changed the pattern of chip manufacturing around the world. I wonder if a government-led endeavor can produce such a character.
However, the government has an idle hand. If you hold a powerful force and hope to get a result, you will not be able to resist. Chips are an area where governments are prone to get carried away.
Miller said in his book, from the beginning, American analysts know that some of China’s industrial policy is purely “a waste of money”.
When Trump screamed cheerfully, but the United States is really afraid of Huawei. Huawei is a private company, Huawei very understanding of the international market, Huawei earns foreigners’ money, Huawei’s R & D spending with the top U.S. companies in a quantum leap, Huawei is a worthy competitor to do Intel and Samsung’s Chinese companies. The primary target of the U.S. chip war is Huawei, not “big funds”.
The best result of government-led innovation could be the fostering of a few uncompetitive local companies, and the worst result would be the creation of a huge pile of debt.
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- The third misconception is that we should be independent. * Independence is a wonderful word, everyone wants to be independent, especially if you’re out there being bullied.
The essence of independence is that I am not dependent on anyone. But this pursuit has become obsolete in the age of globalization.
The reality is that as far as chip technology is concerned, not even the United States can be autonomous. The U.S. must rely on photolithography from the Netherlands, silicon from Japan, and manufacturing from China and Taiwan.
The so-called chip war, the United States stuck China’s neck, precisely to force China to go independent. This is called “weaponizing interdependence”: in order to fight you, I will not let you rely on me.
Interdependence is a condition of survival; isolation is a form of suppression. Modernization has formed a global “circle”, and only when the people in the circle receive all kinds of benefits and help from the circle and rely on each other can things be accomplished, and there is no future for independence from the circle.
The right way not to be strangled is not to be independent, but to make ourselves more dependable, so that the whole world, including the United States, will have to rely on us, thus bargaining with the United States that if you dare to strangle me again, I will strangle you.
Originally, China could have used its unique supply chain and Made-in-China to jam the neck of the United States, and the U.S. government had a very hard time with that. But in recent years, we have not been able to do that.
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Understanding the three misperceptions, what is the big picture of the real world?
China’s economic growth since its reform and opening up is due to the fact that it has an abundant young workforce, a large market, and has coincided with the historical opportunity of globalization, which is the “latecomer’s advantage” that we have been able to take advantage of.
When you are lagging behind, the biggest advantage is that you can imitate. You know the direction of improvement, you can directly introduce technology, you can copy the work. This period of technological upgrading is of course stackable, investment in manpower and material resources can be. The Asian model works quite well.
Entering the 21st century, however, the Chinese economy reached the next stage. The technologies that were allowed to be imported were already imported, and the rest had to be developed on their own, and innovation went to no man’s land. Labor is getting more expensive and the population is aging. Globalization is ebbing, and countries like the United States are no longer treating China as a developing country and are beginning to confront it.
Under these circumstances, if we continue the previous development model, then, in the words of economist Yang Xiaokai, China’s latecomer advantage will become a “latecomer disadvantage”. China may fall into the “middle-income trap”.
Therefore, China needs a national upgrade. We need serious innovation based on the spirit of adventure. We need to go out of China like Huawei to understand the international market and establish a global brand. We need countless big names like Zhang Zhongmou and Ren Zhengfei with extraordinary temperament. We need to grow non-stackable advantages.
- The chip wars are just the ticket. *
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Now the situation is very clear, the U.S. government will never take the initiative to give China a chance. Industrial policy is a fish out of water, self-reliance is a dream, and bending the road to overtake is just wishful thinking. It is impossible to achieve overnight success on the chip issue.
But the son of a thousand gold is not dead in the city. China has its own strategic advantages, and the U.S. government can not do whatever it wants. The biggest advantage is that China is the world’s number one chip user today. Chip companies around the world - including U.S. companies - all want to work with China, the U.S. government to engage in decoupling, in fact, is not sustainable.
With this certainty, we can have the present hand and the wonderful hand.
This hand, from the low-end chips, slowly climb up. Now more than 7 nanometer chip China can do, and the demand for such chips is also very large. First take the low-end chips to practice, China can appear a number of truly competitive companies.
This hand also includes in accordance with the standards of developed countries, the establishment of a truly suitable environment for innovation, training truly innovative talents. At the very least, China’s private technology companies have enough security, dare to make long-term investments? Does China have an environment that allows high-level talent to grow? Don’t forget that figures like Deng Jiaxian, Qian Xuesen, and Yu Min were all early college students. Can we first not use rote learning education and graduate school exams in the English kind of project stuck in the neck of their own people.
The more important hand is to further reform and open up, so that the world can rely more and more on China as it now relies on the United States.
Doing a good job of this hand, we can wait for the wonderful hand. Miller mentioned in the book, the world chip industry has suffered a number of major crises. 2008 global financial crisis, the chip can not be sold; 2021 because of the epidemic crisis, car chips suddenly can not buy. If this kind of opportunity comes again, and China has a master strategist at that time, using some methods, we can get the technology we want, and we can make a big difference.
So we have to be good at this hand and wait for the good hand, and we have to be careful to minimize the use of the mundane hand that just spends money and doesn’t do anything.
The pattern of the world chip industry is fragile, the key nodes are only a few, the United States is only one of them. China can participate in, because we have a large volume, as long as we have been left on the table, there must be a good card can play.
If we can learn anything from the chip wars, I think it’s these truths first and foremost.*The war will change us. Don’t fail this war *. *