The US government's future willingness to escalate export controls is driven by the belief that future military power and intelligence capabilities will depend on computing, making semiconductor control a national security imperative.

The story of allied cooperation on export controls is never as simple as 'US twists arm, allies respond'—there are lots of interesting domestic, commercial, and political dynamics at play in each country, making cooperation easier than media narratives suggest.

The Soviet Union could not produce advanced computing power during the Cold War despite having smart physicists, a large defense budget, and an economy oriented toward military technology production, creating a production gap rather than a knowledge gap that puzzled historians of Soviet technological capabilities.

The chip design software market is an oligopoly with three companies controlling chip design tools, and these three companies have an oligopolistic position where you simply cannot design an advanced chip without buying software from each of these three companies.

China spends as much money importing semiconductors as it spends importing oil, with semiconductors being the most important product China imports, because China cannot make advanced chips domestically, creating both an economic and strategic vulnerability.

The unique barrier to entry for semiconductors compared to other technologies is that the technological frontier moves so rapidly and grows exponentially that catch-up requires hitting a moving and accelerating target, making it fundamentally different from other industries where you can reverse-engineer a design.

The historical trend in semiconductors is not that countries are catching up to Taiwan, but that all other countries have fallen behind Taiwan - Japan, the US, and others are falling behind the technological frontier rather than catching up.

The goal of the CHIPS Act is not complete self-sufficiency in chip production but rather to increase the share of advanced processors produced outside Taiwan from the current 10% to potentially 15-20%, and to reduce Taiwan's current 90% share of advanced processor production to 50% within 10 years.

Data centers will become the weapons factories of the future because that's where AI systems are trained to operate more effectively, with drones learning to fly, sensors learning to sense, and computer vision systems learning to recognize military vs civilian targets all happening in data centers.

Most companies prefer to go to TSMC for manufacturing and will go to Samsung only for better pricing or when they want to avoid concentration risk, making TSMC the industry standard.

The US government is also restricting the transfer of certain tools to Chinese chip firms, focusing on software tools that design chips and machine tools that manufacture chips, because all software tools are produced by US firms and all critical machine tools are produced in the US, Japan, or the Netherlands.

The first semiconductors were invented for missile-guidance systems in the late 1950s and early 1960s, with the Pentagon being the only entity willing to pay for miniaturization of computing power to fit into missile nose cones, and this military demand set off technological shifts that created modern computing.

An iPhone contains approximately 15 billion transistors carved into silicon, with each transistor smaller than the size of a coronavirus, making semiconductor manufacturing the most complex and sophisticated manufacturing humans have ever undertaken.

If there is a disruption in Taiwan's semiconductor production, it will be impossible to produce almost any smartphones anywhere in the world the next year because the chips will be unavailable, affecting not only smartphones but also PCs, data centers, and all sorts of goods including cars with 1,000 semiconductors each.

Extreme ultraviolet lithography machines are the most complex machines needed to manufacture advanced chips, took 30 years to develop, cost $150 million apiece, require multiple 747s to move, and are monopolized by a single company that is the only company in the world that knows how to produce them.

The chip industry emerged out of the Cold War military industrial complex and has been shaped by political choices in the US and other countries, with the industry internationalizing across countries that are close US allies or partners, as a deliberate Cold War construction combining policies by elites in East Asia and the US government.

The US military was beginning to adopt a semiconductor-dependent military strategy called the third offset strategy, which relied on artificial intelligence and autonomous military systems, just as it seemed China was going to substantially narrow the gap between American and Chinese technological capabilities.

Creating a version of an extreme ultraviolet lithography machine is very difficult, no one has done it, and no one is even trying to do it, so controls on the software tools and machine tools would have a meaningful impact in slowing down China's semiconductor capabilities.

Five years ago every foreign chip firm (US, Japanese, Korean, Taiwanese) was investing money in mainland China, but today that investment has basically completely stopped, representing decoupling in action in the semiconductor industry.

The $39 billion in direct incentives in the CHIPS Act is not a huge sum given that one new facility can cost $20-25 billion, and to fully replicate Taiwan's capacity would cost hundreds of billions of dollars, far beyond what Congress is willing to spend.