Chris Miller writes:

Long before it reached your home, even before its tiny components were pieced together in an assembly plant, your phone was already one of the most complex gadgets in the world. It is the product of a delicate supply chain whose every link is forged by competing business and political interests.

That chain is starting to rattle and even break, as the global tech industry works to become less dependent on China. Earlier this month, Taiwan Semiconductor Manufacturing Company (TSMC) held an event celebrating the expansion of its first major facility in the United States, a semiconductor plant in Phoenix, Arizona. When the facility starts operating in early 2024, it will use the world’s most precise manufacturing tools to etch billions of microscopic circuits onto the silicon chips that provide all of the world’s computing power.

President Joe Biden attended the event and declared that TSMC’s investment proved that “American manufacturing is back, folks.” Morris Chang, TSMC’s founder, said in a speech that “globalization is almost dead and free trade is almost dead.”

The moment certainly was a turning point—both for technology manufacturing and for the fraught relationships among the United States, China, and Taiwan—but neither Biden nor Chang had things exactly right. The idea that the arrival of TSMC’s factory in Arizona represents a new era of self-sufficiency or the end of globalization is a fantasy. Chang, a Taiwanese American tech tycoon, sits atop a chip industry that can function only by sourcing ultra-precise tools and materials from half a dozen advanced economies. His company’s new Arizona facility is reportedly the largest foreign investment project in the state’s history. Deglobalization this is not.

In fact, the CEOs in attendance at the ribbon cutting, including Apple’s Tim Cook and AMD’s Lisa Su, each of whom buys chips from TSMC, have no plans to make their far-flung supply chains any less complex. Instead, they’re taking costly steps to reduce the share of their component production and assembly that takes place in China or Taiwan, to insure themselves against the growing risk that tensions between the U.S. and China finally snap. Any military escalation in the Taiwan Strait would not only be a grave geopolitical crisis—it would also tear apart the world’s semiconductor and electronics supply chains and pose a critical threat to America’s biggest tech firms. [Continue reading…]