- il y a 2 semaines
The Geopolitics of Microchips
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TechnologieTranscription
00:00Good afternoon. So good to see everyone here. Thank you for being with us.
00:05I have the pleasure to moderate this discussion today between myself and Alicia Garcia Guerrero.
00:13She's with Brueger.
00:17And when I first heard about this conversation on microchips, I've come from the policy world,
00:22I was very surprised that microchips had become such a big geopolitical issue.
00:27In fact, when I was asked to do this conversation, the last maybe two weeks, every single day,
00:35I hear a little bit something about the new Cold War, the new geopolitical kerfuffle.
00:41So I wanted to start with Alicia. Tell us, what is this about?
00:46What is it exactly that we're talking about?
00:48What do you mean by geopolitical issues on microchips?
00:54So hello, everybody. I hope you can hear me.
00:57I hear a lot of noise out there.
01:00So I need to compete with all of those stands and your time.
01:05It's going to be tough, but I hope we can make it interesting and crispy.
01:09So you may wonder what the hell I'm doing here with my name.
01:13And, you know, OK, I live in Taipei.
01:14I don't know whether that helps a lot, but I can only tell you that this topic of the geopolitics
01:20of chips
01:21beyond wonderful books being written basically makes my day because I live this on a daily basis in Taipei.
01:30And this is not only about U.S.-China strategic competition.
01:35It's about global competition.
01:37We're in Europe here, and I can only tell you that this is so relevant for Europe.
01:41And it is geopolitical because we came to realize, sometimes even randomly, in my case as a researcher in economics,
01:53that the first number I remember that kind of blew my mind in 2018 or so when I realized that
02:04China's imports of chips were larger than oil.
02:09And actually, they were the largest import product at the time already.
02:13And we hadn't even talked about geopolitics then.
02:16So, you know, something you need so desperately for an economy like China, and for that matter, for many countries
02:23in the world,
02:23if you're producing something as China is, this means that it becomes geopolitical if there is a tiny island right
02:32in front
02:33which produces 90% of advanced semiconductors, and that's Taiwan.
02:39Well, it's interesting.
02:41I actually had a question for the audience.
02:42If you go to your app and you scan the code, there's a question for you.
02:49I was wondering if anyone, this was news to me, what was the exact number of chips that Taiwan produces?
02:56Like, would they have a huge part of the share in the market?
03:00Okay.
03:01So, Taiwan only has that concentration for high-end chips, so anything below 7 nanometer.
03:07It doesn't have that concentration for legacy chips whatsoever.
03:13China produces a huge amount of legacy chips, but those are replicable.
03:18So, the whole point is that Taiwan produces chips that are not replicable,
03:22and that is what makes Taiwan indispensable for chip production.
03:27That is only fab, fabrication.
03:30But bear in mind that we Europeans, believe it or not, also have some kind of indispensability for chips,
03:37which is lithography machines.
03:39So, this is ASML.
03:41This is a Dutch company, exactly producing, basically having the monopoly on high-end lithography machines,
03:49IUV machines, to produce those high-end chips.
03:54So, there's kind of two indispensability or choke points, if you ask me.
04:00One is the lithography machines, IUV.
04:02Second is high-end chips produced by TSMC in Taiwan.
04:09So, the interesting part about all of this, and by the way, I encourage you to go on the stage
04:132 active poll,
04:15if there's another question that is interesting, and I was wondering how many people here can guess that question,
04:21or can guess the answer, but for me, when I was reading about this,
04:25the interesting part was that there's actual interdependence in the industry.
04:29So, Taiwan is producing, what, something like 80% of the high-end chips,
04:35but then the machines are built by a single European manufacturer.
04:40So, what does that mean for this?
04:42Well, this means that chips are not like, these are complex, complex intermediate goods.
04:52Chips are intermediate goods that are produced.
04:55First of all, the largest value added is neither in Taiwan nor in Europe, it's in the U.S.
05:01That's design, and that's the bulk of it, actually.
05:05But it's not as concentrated in two companies as two additional points in the production chain,
05:12which is lithography and then fabrication.
05:17So, we talk about ASML and TSMC because, in a way, they have this monopoly,
05:23but that doesn't mean they have the biggest value added.
05:25The biggest value added is in the U.S.
05:28And then, how does China fit into all of this?
05:32Well, China has been investing around 100 billion U.S. dollars, equivalent U.S. dollar,
05:39in two chip funds for the moment,
05:41basically putting a lot of money to try to integrate their value chain vertically.
05:49Sometimes, sometimes with the head of Taiwanese companies,
05:52TSMC has two factories in the mainland, but never producing the highest-end chips.
06:00So, that's what they're trying to, I mean, they're trying to reduce that dependence.
06:05Our indispensability becomes China's dependence.
06:08That's the crux of this geopolitical situation,
06:13that China wants to reduce its dependence while we want to keep our indispensability
06:19because that means, among many things, Taiwan's survival.
06:24This is so-called the silicon shield for Taiwan.
06:27Knowing that Taiwan is still indispensable in this regard
06:32makes this fragile geopolitical situation somewhat stable.
06:37See, this interdependency was what really interested me
06:41as someone who is in the policy and diplomacy world.
06:43I remember back in the Cold War,
06:45because a lot of people are likening the situation we are now
06:49with the microchips to a new Cold War, right?
06:52The acceleration of AI technologies
06:54and other exponential technologies are kind of forcing the situation.
07:00So, back in the day, we had MAD,
07:03mutual mass or mutual assured destruction.
07:06So, the countries had produced so many nuclear weapons
07:10that they couldn't fight each other
07:11because if they did, if they used nuclear weapons,
07:14they would all kill each other.
07:16Are we in the situation where interdependency
07:18in the nexus of China, Taiwan, US and Europe,
07:24is that maybe a good thing to keep the balance of powers?
07:28Well, on the one hand,
07:30we have kept this interdependence for quite some time.
07:34There was an event, which is very important to remember,
07:38September 2021.
07:40That was a moment which, for some,
07:43was the beginning of this huge inflation wave
07:46that we have suffered from in the US and Europe.
07:50This was a moment where chips became unaccessible
07:54because Taiwan was going through a drought
07:56and they couldn't just export these chips.
07:58So, people started thinking, wait a moment.
08:01I mean, this is not about China.
08:02This is about an island that is, by the way,
08:04as you know, pretty prone to earthquakes, droughts.
08:10So, can we depend on a single island
08:12for the production of everything on Earth,
08:14including AI, for that matter?
08:16And that is why I think that the push
08:21coming from the Biden administration,
08:23but for TSMC to produce elsewhere,
08:27became unsurmountable.
08:29So, TSMC is now building the third fab in Japan.
08:35I think second, third in the US, maybe third already.
08:38So, you know, it's...
08:39And people think, okay, when...
08:40Your question,
08:42is this going to be increased,
08:46reduce the interdependence,
08:48I increase the risk of an event in Taiwan
08:51because the silicon shield is being, you know, fragmented or...
08:58And it's hard to tell, but this is happening.
09:01On the other hand,
09:02I actually think that for global stability,
09:04it is important to have more than one source of production
09:09of high-end chips.
09:10I just want to remind the audience
09:12that these high-end chips have become even more important
09:15with, of course, the AI revolution.
09:19And that's why I think, you know,
09:21yes, we're reducing interdependence.
09:24China is also...
09:26Apparently, this is Huawei's announcement
09:28of producing 7 nanometer already.
09:31There was also news of 5 nanometer,
09:33whether that's the case or not, it's hard to tell.
09:35But the point is, you also are, you know,
09:38there's erosion on China's side
09:40because they are moving up.
09:41There's erosion on Taiwan's side
09:44because they're producing in the US and Japan.
09:46So what will happen is, of course,
09:48a big question mark to Taiwan.
09:50Yeah.
09:53Do you think the US is the only country
09:55trying to kind of own short chips?
09:58And we're talking about manufacturing of high-end chips,
10:01not every chip.
10:02Yeah.
10:03So we're in Europe,
10:04and I wish I could say something different.
10:07We have an EU Chips Act.
10:10But no, I'm sorry.
10:11So far, our EU Chips Act
10:13is not being used for high-end manufacturing.
10:16We argue it's too expensive.
10:18The latest plan by DSMC,
10:22the investment announcement
10:23was 65 billion US dollars,
10:26out of which around 10% were subsidies from the US.
10:29But bear in mind,
10:30the rest is basically foreign investment
10:34from Taiwan into the US.
10:35I mean, let's not forget
10:37that there should be a market out there.
10:40Otherwise, Taiwan would not be doing this.
10:42Why isn't Taiwan coming here?
10:44Yes, Germany.
10:45So we have Intel.
10:46We have DSMC now.
10:47but my sense is still legacy chips
10:50or close to that.
10:51We're not really pushing yet
10:53for the highest-end chips,
10:55which we would need for our own AI revolution.
10:58So, yes, I hear many Europeans saying,
11:01this is too expensive,
11:03let's focus on design,
11:05let's focus on...
11:07But, you know,
11:08if we get to scarcity of chips
11:10because of excessive demand
11:13from the AI revolution,
11:14always high-end chips,
11:15Europe will fall behind
11:16because we won't have access to these chips.
11:18So I actually think
11:20that we should rethink our strategy
11:22and try to have some
11:25at least critical mass
11:28produced in Europe
11:29at the highest end.
11:30You know, it's interesting
11:31because the most recent
11:33democracy summit in Copenhagen,
11:35several of the European prime ministers
11:38and diplomats
11:40spoke about how...
11:43Exactly what you were saying.
11:44We can't afford...
11:45I mean, it's very expensive
11:46to actually, you know,
11:49take over the manufacturing
11:51of the chips at every level,
11:53every part of the supply chain
11:54or the production chain.
11:57So the question I have for you is
11:58if European policymakers
12:01come back and say,
12:02well, it's too expensive.
12:03We know that it's not feasible
12:06to take over
12:07to completely onshore the process.
12:09What is the answer to that?
12:10Can we afford not to?
12:11So my answer would be
12:13to have the Airbus of European chips.
12:17I would put it that way
12:19to make it simple.
12:21And what I mean to say
12:22is that, yes, it's...
12:23First of all,
12:24what we're doing
12:24is at the national level.
12:26And I think that makes no sense
12:28because of the huge amount
12:30of capex needed
12:31to build these fabs.
12:35But if we could agree
12:36on a country building
12:38and then others doing photonics
12:41or lithography or design,
12:43I mean, trying to coordinate
12:46a supply chain
12:48that won't be fully European,
12:49that wouldn't make sense either.
12:52But at least that has a core
12:54of production
12:55and key functions in Europe,
12:58I think we would be much better off.
13:00It should be at the EU level
13:01because it's just...
13:03It would create a lot of...
13:05and it's already creating
13:06a lot of competition
13:07for subsidies.
13:08You see, I offer X,
13:10the other one offers Y.
13:11It becomes much more expensive
13:13for Europe unless we unite.
13:15The Chips Act makes sense
13:16in that regard,
13:17but the money isn't really there.
13:18It's at the national level.
13:19So we would need
13:21to coordinate this better.
13:22I give the example of Airbus
13:24as something that really
13:26has a supply chain within Europe.
13:28So for me,
13:29that should be the goal.
13:30And where can the United States
13:32help with that, for example,
13:33and fill those gaps?
13:36Well, we're...
13:37Okay, let me be very blunt
13:39for a change.
13:41Well, we help the US, yeah?
13:44Somehow.
13:44I mean, ASML does help the US
13:46with its export control.
13:48Same with Japan.
13:50So, you know,
13:51these three countries
13:51are suffering the consequences
13:53in a way, yeah?
13:53Of being bold
13:55and imposing export controls
13:58on key manufacturing,
14:00on lithography machines,
14:02for example, UAV.
14:03So if we're doing that,
14:05I think it would be good
14:06if the US were to be sure
14:09that we can have access
14:10to the key design
14:13needed for us
14:14to create that Airbus ecosystem.
14:18The US is helping Japan.
14:19Let me tell you.
14:21It's very clear
14:22that the US is pushing
14:25a new ecosystem,
14:26which is Japan, Taiwan,
14:28and the US.
14:29Japan is receiving
14:31huge amounts
14:32of foreign data investment,
14:33not only from Taiwan,
14:34but even from Microsoft
14:35to have data centers
14:39which can basically feed
14:41this AI revolution
14:44in this area of Asia,
14:47Taiwan, Japan, in particular.
14:49And I think Europe
14:50needs to jump on that boat.
14:52And it needs to make sure
14:55that it is not an isolated supply chain.
14:59So yes,
15:00we create our supply chain,
15:01but we need to be hooked
15:03to that new area
15:05of production of AI chips
15:07so that we don't fall,
15:09you know,
15:10below, again,
15:12below a benchmark
15:13that makes our new industry competitive
15:17because otherwise
15:17all of this money
15:18will be misspent.
15:20Yeah.
15:22So we have just
15:23a couple of minutes left.
15:24I wanted to make it
15:27very useful for our audience.
15:29What are some
15:29of the biggest takeaways
15:31that you can think of
15:32that you could want
15:32to leave the audience
15:33with today?
15:34Well,
15:35I'm not a tech person.
15:37I'm just a humble economist.
15:38I come here,
15:39I'm like,
15:39wow,
15:40this is Europe,
15:40you know?
15:41I'm like,
15:41we have tech here,
15:42it seems.
15:43so we shouldn't be shy.
15:47I mean,
15:47like,
15:47what the heck?
15:49Sorry to say,
15:49I mean,
15:49like,
15:50if we can do this
15:51and we are still,
15:54you know,
15:54at the frontier
15:55in aerospace
15:56and many others,
15:57why can't we
15:57just jump on this?
15:59I mean,
16:00so my sense is
16:03we should be bold
16:05about what is needed
16:06for the AI revolution.
16:07Chips are needed.
16:08This is clear.
16:09You can see that
16:10living in Taiwan.
16:11I mean,
16:11the huge amount
16:12of investment
16:13that that little island
16:14is putting on the table.
16:15So we're not
16:16a little island.
16:18We're a single market.
16:19You know,
16:20why are we not
16:21taking this opportunity?
16:23So let's go for it.
16:24I can't see any reason
16:25why we shouldn't.
16:26Yeah.
16:26Well,
16:27thank you,
16:27Alicia,
16:28and thank you to all of you
16:29for being with us today.
16:30I appreciate it.
16:32And how about
16:33a round of applause
16:34for our expert.
16:36Thank you.
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