Microchips have become increasingly vital to a wide array of industries and everyday products, serving as the backbone of the modern economy. Their importance has been underscored by recent trends in artificial intelligence, as well as global supply chain vulnerabilities that have emerged in the wake of recent geopolitical tensions.
As outlined in a recent discussion, microchips are integral to numerous applications, from automotive manufacturing to consumer electronics. Chris Miller, a professor of international history at Tufts University and author of “Chip War,” notes that the significance of microchips has escalated over the years. “A couple of decades ago, you could make a car with hardly any microchips,” he said. “Today, a typical new car will have 1,000 inside.” These chips not only manage basic functions but are crucial for connectivity and the sophistication of electric vehicles.
The COVID-19 pandemic saw a dramatic rise in demand for microchips, which disrupted auto manufacturers and led to significant delays and price increases in the automotive sector. Miller highlights the broader implications of this reliance on semiconductors: “The entire economy today runs on semiconductors. And insofar as basically everything today is internet-based... we can’t function without them.”
The intersection of microchips and artificial intelligence has further compounded their value; AI microchips now offer enhanced capabilities, facilitating advanced machine learning, data analysis, and natural language processing. Nvidia, dominant in the AI chip market, saw its market capitalisation soar to approximately $3.5 trillion, an increase from $144 billion in 2019, making it the second-most valuable company globally. This surge in AI investment is echoed by other major players in the industry: OpenAI raised $6.6 billion recently, while Apple reportedly invests around $1 billion annually into generative AI technology.
Supply chains, however, remain precarious. Major manufacturers such as Nvidia and AMD depend heavily on Taiwan Semiconductor Manufacturing Co. for chip production. This concentration raises concerns over potential disruptions, particularly in light of heightened tensions between China and Taiwan. According to Miller, “There’s extraordinary concentration, which works fine so long as there’s peace and stability in the Taiwan Strait.” Any geopolitical conflict or cyberattack could have severe repercussions for global supply chains, as indicated by Rob Handfield, a professor of supply chain management at North Carolina State University.
In recognition of these vulnerabilities, the U.S. government has taken steps to bolster domestic chip manufacturing. The CHIPS and Science Act, passed in 2022, aims to stimulate the U.S. economy and mitigate bottlenecks in chip supply. Handfield comments, “As a result of the CHIPS act, you’ve seen significant investment in chip manufacturing. For instance, Intel has invested in a huge facility in Columbus, Ohio.” Additionally, the Biden administration has supported TSMC with up to $6.6 billion in grants to establish factories in Arizona. The recent performance of an Arizona TSMC plant, which produced 4% more chips than its Taiwanese counterparts, signals a potential shift in the balance of chip manufacturing capabilities.
As Arizona earns the nickname “Silicon Desert,” it has become a focal point for emerging technology and investment in microchip production. Marketplace contributor Heather Long remarked that this region might soon represent “ground zero for the new economy,” illustrating the ongoing evolution of the tech landscape in the United States amid rising global competition and technological advancements.
Source: Noah Wire Services