Good discussion.

Only one quibble:

“Are we going to spend all this money pushing lagging-edge technologies, or are we going to actually try and invest in things that matter?”

Very much a false dichotomy. Just because lagging-edge technologies are more easily replicated, and their production more easily on- or near-shored, does not mean that a less-sophisticated adversary can’t cripple you for years by building a commanding position in one of them and then pulling the plug in retaliation for your kneecapping their attempts to climb the value chain.

Pulling the plug on battery supplies, commodity chips on 45 nm architectures, rare earth magnets... these could be very dangerous indeed to the US and EU in, for example, 2028.

The US should and must pay attention to how to near-shore lagging processes like these, which would be wildly uneconomical to do at home, towards friendly countries like Mexico, the Dominican Republic, and Colombia. Or PR, for that matter.

Expand full comment

Fair enough in their way, these comments are peculiarly USA focused and mention Taiwan only 3 times, mostly en passant. Much more thought is needed. For both USA and China it is Taiwan chippery that worries and appears to have a generational advantage but also remains the pawn in the global game. It is true that much could be done simply through the investment capabilities of both or either China or the USA, but as mentioned this is globally risky, takes time, becomes obvious and thus causes a chain of causal regress that can lead to even bigger problems. But no doubt really big expenditure can over-ride medium term problems of expertise and know-how and existing comercial niiche, so Taiwan can be dipslaced.

But, it is not at all clear that this is a good strategy. Thre are a great range of alternatives for the USA, starting with the more obvious development of a real transparent and learning-based partmership with Taiwan. Taiwan is now at a stage more generally of being able to take some forward risk in spreading its expertise into ancillary areas, using assets from chippery to move into either downnsteam or upstream areas. Partnershp arrangemets could involve simply USA funding swapping for Taiwan rights, knowledge, expertise and key personnel, as well as globa goodwill. This may be unstable, China could do the same and actually be more attrctive desite the mass of rhetoric. Don't forget, however much Taiwan claims to be moving to decouple on trade re China, and however much USA threatens or puts pressure on Taiwan and all of Europe to reduce trade with China , the reality scorches all of this - at present major USA trade is either old-fashioned neighbourhood advanatge ( good old boys Canada and Mexico), or slightly more advanced market complementarities between the obvious cases - so China is foremost as exporter to USA, third in line behind the neighbourhood in imports from the USA. That is, America more coupled by trade with China than is Germany or France, for very good economic and historical reasons. Beware rhetoric for it embeds itself whilst you sleep.

So bringing in some reality could see a future whre there is a period in which the USA and Taiwan begin a partnership in which both gain - the complementarities are quite strong, the problem being scale, which would have to be cleanly handled. This could well be followed by a joint nations plan initiated by USA and Taiwan in partnership, where chips or the oustanding microproducts then developing are offered in a core partnersip with leading nations, such as UK, China, India and Germany, again highly publicised and transparent with full coverage for intelelctual property of all kinds - again, despite the nonsense rhetoric, India has China as the economy's major source of imports and third export destination; Germany looks similar, the least trade coupled being UK.

In terms of the technological and trading network character of basic microelectronics it does look as if there are many more options when you are willing to look beyond slow-growing USA.

Ian Inkster

Expand full comment