These days, it is difficult to open a newspaper, switch on social media, or listen to a foreign policy debate without encountering references to the emerging geopolitical battle over semiconductors. Semiconductors, colloquially referred to as “chips,” have quickly moved from the periphery to center-stage of global high politics.
A new book by Pranay Kotasthane and Abhiram Manchi, When the Chips Are Down: A Deep Dive into a Global Crisis, is a guide to those who want to understand the importance of semiconductors at this geopolitical crossroads. The book provides a history of the technology but also offers a forward-looking analysis of how the world will balance national security interests and with rapid technological change. Kotasthane spoke about the main findings of the book on last week’s episode of Grand Tamasha, a weekly podcast on Indian politics and policy co-produced by HT and the Carnegie Endowment for International Peace.
Kotasthane is Chair of High-Tech Geopolitics at the Takshashila Institution in Bengaluru. Before joining the institute, he worked as a chip design engineer in two Fortune 500 semiconductor companies. On the show, Kotasthane spoke about the intense battle underway between the United States and China over semiconductor dominance. “Chips are one area where China’s technology stack is quite weak,” remarked Kotasthane. “The United States probably chose this domain as the domain to counter China’s dominance because it is dominant…The [first] rule of strategy is that you attack an adversary in a domain where they are weak.”
But geopolitics is not the only driver of the emerging chips race, according to Kotasthane. Geoeconomics too plays a leading role. During the COVID-19 pandemic, firms that regularly placed orders for massive quantities of chips—such as automobile manufacturers—pulled back due to the lockdown and the economic slowdown. But when demand picked up after the pandemic, these automobile firms could not access chips from the key semiconductor players, said Kotasthane. Soon, automobile firms realized that they needed to do something so that this does not happen again. Kotasthane warned, however, that there are limits to so-called decoupling. “Because this industry has evolved in such a way where there’s comparative advantage-based specialization, no one country does everything,” he remarked. Many countries have a few companies which play an important role in one small segment of this supply chain.
Reflecting on the future, including India’s policy options, Kotasthane suggested that countries whose strategies are solely based on denying rivals access to high-technology goods face an uphill battle. “I fear that a lot of focus is on denial and that denial is very difficult to achieve. You are motivating your adversary to develop alternative ways of getting ahead. Maybe you can keep your adversary behind by a few years, but it will not achieve some big geopolitical goal,” he cautioned.
