As a child in the 1980s, you had a rich choice of debilitating worries. Some lay awake dreading nuclear war, others acid rain. For nerds like me, though, it was the terror of microchip supply disruption.
The fault lay with Roger Moore and his final outing as James Bond in A View to a Kill: a 1985 caper that bottled a paranoia nobody back then had thought of and fermented it into high camp and, it now appears, prescience.
The film presents two distinct, chip-centric causes for sleepless nights. The first is that an atomic weapon detonated in space could disable the chips in everything, as Bond puts it, from “the modern toaster to the most sophisticated computers”.
Grim, but a low-odds turn of events. A more tangible threat — and the film’s main plot — is that if the world’s dominant producers of chips were somehow knocked out, a cartel of orchestrator-survivors would claim formidable power.
This obvious systemic fragility alarmed me for years, conjuring the possibility that the supply of everything important to an 1980s child, from the modern toaster to the most sophisticated games console, was vulnerable to grand, malevolent schemes.
The fear dulled with the emergence of a world that presented consumers with a seemingly inexhaustible flow of cheap chips. But it never quite disappeared, particularly as the industry narrowed into a global duopoly on CPU (processor) chips and triopoly on DRAM (memory) chips.
So, after months of watching global chip shortages worsen through combinations of unexpected demand shocks (pandemic-bruised consumers snapping up iPads) and freak accidents (the fire at the Renesas factory in Japan), it was chilling last week when an update by sober credit analysts at rating agency S&P read like a Bond script.
The three-point executive summary confirmed that massive pandemic-driven demand and factory outages were still leading to chip shortages; that it was now not just affecting car manufacturers but any business (makers of phones, laptops and so on) that relies on semiconductors; and that there would be winners and losers from the crisis. Critically, the S&P report could not accurately forecast when an end to this would come.
But behind all this lies a drama more epic than even Bond scriptwriters could have envisaged. Unforeseen problems such as earthquakes and fires mean that supply shortages are not new. But they are, say analysts at bank Nomura, qualitatively different: not only because the supply chains are more complex, but because of what Nomura calls “the manifestation of geopolitical risk”. It is unsettling.
Analysis of a sector that once dryly considered nanometre-etching capacities and foundry investment has strayed into hypotheticals such as “what if China attacked Taiwan for its semiconductor plants?”. The president of a leading cyber security company darkly describes Japanese chip-related clients as locked in an unceasing struggle against industrial and military espionage “from a single national source”.
The narrative behind the geopolitical risk — China’s pursuit of “semiconductor sovereignty” and the likely resistance its industrial programme will encounter — is becoming clear. Some will argue that, after years of what has often been fairly incoherent US-China trade skirmishing, semiconductors provide the arena in which the more concentrated battle can be fought.
Perhaps this was always somewhere in the microchip’s future. At an April 12 business summit on semiconductor resilience, US President Joe Biden quoted a bipartisan letter from senators and House members warning that the Chinese Communist party was “aggressively planning to reorient and dominate the semiconductor supply chain”.
The president, whose predecessor stepped up technology sanctions against Chinese companies, reassured his audience that the US would respond with its own “aggressive” investment. That could well accelerate the escalation.
As Gavekal Dragonomics analyst Dan Wang notes, a significant consequence of US sanctions is that entrepreneurial Chinese tech companies have abandoned their historic resistance to “Beijing’s techno-nationalist agenda” and now see their commercial interests as aligned with the government goal of self-reliance.
It may, as with A View to a Kill, all end with peace, stability and the leading actors kissing. But in 2021, 36 years after the global chip crisis first entered my nightmares, it doesn’t seem likely.
Leo Lewis is the FT’s Asia business editor
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