4 Things We Learned About Semiconductor Chips from Chris Miller

Over the last several decades, the semiconductor chip has become a linchpin of military, economic, and geopolitical power. Recent export controls and regulations by the U.S. government have brought this issue to the forefront.

That’s why we turned to Chris Miller, respected economic historian and acclaimed author of Chip War: The Fight for the World’s Most Critical Technology. On a recent webinar, Global Trade Advisor Anne Marie Lacourse interviewed Miller on the key concerns for U.S. industries and the financial institutions touched by the semiconductor trade.

Their conversation offered many valuable insights to businesses looking to navigate new and emerging investment chip restrictions, but here are our top picks: 

>> Learn more about the recent shift in the U.S. and Chinese semiconductor industries <<

While the U.S. government’s interest in imposing export controls on semiconductors is rooted in a desire to stop the Chinese military from constructing advanced military technology, there are additionally widespread civilian applications for these same chips — and that’s part of the challenge of regulating them.

According to Miller, the specific semiconductor chips that the government is concerned with for military usage are Graphics Processor Unit (GPU) chips. “These are the most advanced pieces of manufacturing that humans have ever invented,” said Miller. “They’re capable of manipulating materials like silicon at almost the atomic level.”

GPU chips are used for training artificial intelligence (AI); and in military applications, this can help create advanced autonomous weapons. They’re also the exact types of chips and servers that are needed to train the AI for self-driving cars for civilians. 

U.S. regulations are broad and far reaching, but civilian Chinese firms are purposely left out of export controls. Miller said that private Chinese companies are free to access American chips, so long as they do so outside of China. Companies can bring their data to places like Tokyo or Singapore and utilize advanced chips to train their data for civilian purposes. The chips cannot enter China, where the U.S. would have less visibility into their usage.

However, Miller explains that this puts a major decision before the Chinese government. Authorities will need to decide whether they will allow Chinese companies to take their data outside of the country, as this could pose data protection and security issues. Miller said it’s still unclear what China’s response to these U.S. regulations will be.

Currently, the U.S., Japan, and the Netherlands are the only three countries that make the tools needed to manufacture cutting-edge chips. Recent export controls are focused on ensuring China cannot access the chipmaking tools they would need to go beyond the basic chips they currently manufacture.  

To ensure this, the U.S. asked Japan and the Netherlands to replicate its export controls program. After negotiations, both countries followed suit. According to Miller, this wasn’t a big ask as these two countries had already begun to shift their approach to relations with China. For example, the Netherlands listed China alongside Russia in its latest report on national security concerns. Additionally, Japan has significantly increased its defense spending in response to new developments in its relationship with China.

The semiconductor industry won’t be the only affected industry and the export controls have the potential to affect a greater array of industries. He said any industry with a heavy reliance on data processing – including biotech, automotive, and many others – will likely feel the effects.

One example he cited was electric cars. These vehicles rely heavily on chips, and China is a major exporter of these cars, on top of being the largest global exporter of vehicles in general. The cloud computing industry also finds itself in the middle of this debate because its data centers make heavy use of GPU chips. 

While these industries may not be directly implicated in the export legislation as currently written, Miller suspects they will feel the effects indirectly.

To hear more of Chris MIller’s insights on the wave of changes that could result from new semiconductor export controls, watch our extended interview here.