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When, in 2001, George W. Bush looked Vladimir Putin in the eye, he found him “very straightforward and trustworthy.” Nearly two decades later, the former president amended his account, saying that Russian oil riches had “changed” Putin. Another possibility does not seem to have occurred to Bush. Perhaps, in 2001, he looked into the eyes of someone consummately well-trained at dissimulation.
One might make a strong case that deep insight into Putin’s character requires profound knowledge of the social system from which he emerged, that is, the totalitarian police-state that was the USSR. In Gaila Ackerman and Stéphane Courtois’s 2022 Le Livre noir de Vladimir Poutine (which translated is “The Black Book of Vladimir Putin”), we find a considerable quantity of such insight.
This book, a collection of essays from scholarly experts on Russia and the former Soviet Union, comes at an especially important moment, as many on the religious right have become enamored of Putin’s supposedly Christian leadership of Russia. The Black Book of Vladimir Putin hews close to the facts and shows that any pretense to reality cannot deny that Putin’s regime is brutal, deceitful, corrupt, and unworthy of even mild admiration.
This book comes at an especially important moment, as many on the religious right have become enamored with Putin’s supposedly Christian leadership of Russia.
Putin: Homo Sovieticus
One of the two co-editors, Stéphane Courtois, is perhaps the world’s foremost historian of the Bolshevik revolution and Soviet communism. He is the main editor of the international bestseller, the title of which is played on in this current book, The Black Book of Communism. He is also the author of perhaps the finest biography of Lenin produced to date.
One of the central contributions Courtois has made to our understanding of Soviet society is the breathtaking scale of its moral corruption and the human costs that were a consequence of that condition. The Black Book details the gruesome quantitative data representing athe tens of millions of innocent human beings the Soviet machine-plowed into the ground.
This scholarly expertise makes Courtois an extraordinary analyst of Putin. The several chapters in this book that he authors or co-authors with co-editor Galia Ackerman are full of brilliant insights into the complicated business of understanding Putin, based on studying the forces that produced him. In Courtois’s view, the Russian strongman must be understood as an example of “Homo sovieticus,” a political personality irrevocably formed by his decade-and-a-half career, begun as a young man, in the stupendously brutal and amoral bureaucracy of the KGB.
The Soviet regime is formally gone, but the legacy of its formidable security apparatus lives on. There was never a “decommunization” process in the wake of the USSR’s collapse. The vast majority of those who had participated in its structures and atrocities escaped punishment, and many of them created political careers in the post-communist era. One sees this with clarity in people like Putin who were deeply marked by their socialization within that apparatus. One of the Ackerman/Courtois chapters is aptly titled “The KGB returns to power,” and another “Vladimir Putin’s headlong rush to the past.”
In Courtois’s view, the Russian strongman must be understood as an example of “Homo sovieticus,” a political personality irrevocably formed by his decade-and-a-half career, begun as a young man, in the stupendously brutal and amoral bureaucracy of the KGB.
Putin’s post-Soviet political career accelerated markedly in the wake of his response, during his first stint as prime minister, to the bombings of several Russian apartment buildings in September 1999. The bombings were attributed by the Russian regime to the same Chechen Islamist forces that had invaded Dagestan in August, but the latter never claimed responsibility. An independent investigatory commission was created, but the Russian regime refused to cooperate with it. Several of its members were subsequently assassinated. Alexander Litvinenko, an agent with the Russian Federal Security Service (FSB), the post-Soviet incarnation of the KGB (which was suspected by some critics of the government’s statement on the bombings as the real agents behind them), defected to the UK and wrote a book detailing the FSB’s responsibility. He was subsequently fatally poisoned with radioactive polonium-210 administered in a cup of tea. British intelligence sources determined that Putin’s fingerprints were almost certainly all over Litvinenko’s assassination.
Months after the bombings and a subsequent land invasion of Chechen territory, Putin rode the wave of horror and nationalist emotion to the Russian presidency for the first time. This was the series of events that provided the crucial backdrop for Putin’s rise to political power.
Putin’s Neo-Imperialism
The Black Book of Vladimir Putin works through much of the history of Putin’s aggression toward former Soviet republics. Putin has worked assiduously and ruthlessly to bring them into subordinate relations with Russia. Such efforts have included the overt subversion of political process in those countries, the crushing of political movements inside them hostile to his administration, and outright war, occupation, and annexation. Ukraine is merely the latest example of the neo-imperialism of the Putin regime, which is closely modeled on the expansionism of the Stalin years. Putin’s use of a friendly dictatorial regime in Belarus to arrange the delivery of tactical nuclear weapons to a country with an almost 700-mile border with Ukraine is but the latest example of Putin’s merciless and militaristic politics with respect to his neighbors.
In addition to Courtois’s formidable contributions, the volume offers many useful chapters on Putin’s imperialist ambition. Two chapters by Andrei Kozovoi, a historian of Russia at the University of Lille, expand on his insights into the secret police history and mentality of Putin. Mairbek Vatchagaev, a Chechen historian who was a member of the Chechen republic that fell during the Second Chechen War, provides an insider’s account of Putin’s successful effort to install Ramzan Khadyrov, a hardline despot sympathetic to the Russian regime, as political chief in Chechnya. The entire history of Putin’s action in the region is reasonably understood as an effort to reassemble the political monolith that was the former Soviet Union, the fracturing of which Putin described as “a major humanitarian tragedy” and the “greatest geopolitical catastrophe” of the twentieth century.
The Orthodox Church: Putin’s Ally
Antoine Arjakovsky, a French-born historian of Crimean ancestry, contributes a revealing chapter on the role of the Russian Orthodox Church in providing crucial cultural support to the Putin regime. Patriarch Kirill gets much attention here. Many know of the scandal of the disappearing $30,000 watch on Kirill’s wrist, but Arjakovsky gives many more troubling examples of the moral compromise of a church hierarchy that has been solidly propagandizing for the Putin regime for years now. Kirill’s aggressive support of the war in Ukraine, and his framing of it in “metaphysical” terms, is deeply morally troubling. This is especially so given a leader in Moscow who flippantly speaks of nuclear exchange with the West, in an apocalyptic language of religious martyrdom that previously was heard only from Islamist suicide bombers. Kirill’s aggressive mobilization of the “Moscow as Third Rome” ideology provides more ground for the church’s warm relationship with the Putin regime.
Arjakovsky also discusses the Mitrokhine archive, which consists of notes compiled by Vassily Mitrokhine, a former KGB archivist who defected to the United Kingdom. These documents provide information on the re-creation of the Moscow Patriarchate under Stalin in 1943 and on the dictator’s efforts to exert control over the church. It was the NKVD, and later the KGB, that controlled the nominations to leadership positions in the church hierarchy and formulated plans to use the church’s relations with international religious and peace organizations for Soviet espionage.
This book offers a healthy corrective for the portion of the American right that’s become frustrated with liberalism and has turned to Putin’s Russia as a viable alternative—many of whom believe truly amazing things about Putin and the society over which he rules. The idea that Russia is a profoundly authentic Christian state is roundly debunked by straightforward social facts. What kind of Christian social utopia has the massive violent crime, murder, suicide, alcoholism, abortion, and divorce rates of Russia? None of this is consistent with a society in which Orthodox Christian culture and belief are deeply entrenched and practiced. On the contrary, it is all quite consistent with the low levels of real practical religiosity in Russia reported in reliable survey data. Research on how Russians behave in religious terms shows that they are in fact not entirely unlike Americans. That is, survey responses show high levels of religious belief, and much lower numbers of church attendance at services. Indeed, Americans have significantly higher levels of regular church attendance. This is evidence that those eager to emulate Russia are hard pressed to explain, when they can even be bothered to acknowledge its existence.
Limits of Liberal Critiques of Putin
Many, though not all, of the contributors to the book are evidently liberal democrats in their politics, and this has significant consequences on a few topics. Complicated aspects of the cultural and political debates between liberals, national conservatives, and religious traditionalists simply disappear under this lens. The fierce cultural struggle over, for example, the sexual political revolution of modernity is often caricatured in these pages as the illegitimate reactionary effort to destroy the pure and wholly positive sexual freedom of the ever-expanding LGBTQI+ community. Co-editor Ackerman, for example, in the chapter “A pseudo-conservative society that walks backwards,” presents as obvious atrocities the Putin regime’s support for the biological family, natalist policies, the reestablishment of sex-segregated primary and secondary education, and the reintroduction of school uniforms. She also cheers the efforts of George Soros’s Open Society to move the Russian cultural thermometer closer to the temperature of the Western democracies. But one scarcely needs to be pro-Putin to find that some of the things his regime advocates are not wholly inconsistent with reasonable cultural conservatism, as articulated by many sources outside Putin’s Russia.
One scarcely needs to be pro-Putin to find that some of the things his regime advocates are not wholly inconsistent with reasonable cultural conservatism, as articulated by many sources outside Putin’s Russia.
Another example that shows up in several of the chapters is the facile way in which Russian nationalist and conservative philosophers with large and complicated bodies of writing behind them, such as Alexander Dugin and Ivan Ilyin, are flatly characterized as “fascists” and “Nazis” without any systematic effort to show how the entire body of their work would justify such a classification. Dugin’s idiotic online pronouncements on the Ukrainian War (“The Ukrainians should be killed, killed, killed. No more discussions.”) are mobilized by several different chapter authors as a definitive reason to dismiss everything he has ever thought or written. But both Dugin and Ilyin have produced some work nuanced enough to require a more intellectually serious critique than this crude effort to demonize. So while the book’s collection of data offers a strong repudiation of Putin’s regime, its dismissals of Russia’s social conservatism on liberal grounds are less persuasive.
Dealing with Putin
Even with its shortcomings, how can Courtois’s and Ackerman’s volume guide America’s response to the most pressing matter regarding Russia today, the war in Ukraine? As modern wars often are, the Russia–Ukraine affair is complicated, especially in its international implications. There is evidence of strong bipartisan American disapproval of Russia in the wake of the Ukrainian invasion. However, distinctions along partisan lines emerge over the practical question of what the United States should do. On the American right, this dispute is particularly rancorous. In the most recent Claremont Review of Books, Mark Helprin and Michael Anton argue the positions from the right on, respectively, the necessity to vigorously defend Ukraine and the wisdom of American refusal to get strongly entangled in the conflict.
It goes without saying that crucial to any responsible position in this debate is understanding the character of Vladimir Putin and the nature of his regime. The Ackerman–Courtois volume will not definitively put an end to these debates, but it does dispel any illusions that Putin’s leadership is anything more morally sophisticated than an effort to resurrect the spirit of Soviet Russia.
As I wrote in a recent article published in the Wall Street Journal, there is no rule of law under authoritarian rule. No matter if we are talking about emperors of old or the party-state systems of the past century (otherwise known as communist authoritarianism), the enduring characteristics are the same: a tiny minority or even one individual holds the highest levels of power, monopolizing the authority and resources of the nation. Any laws created in such systems are merely tools to protect these monopolies for the benefit of the rulers, at the expense of the ruled.
Talking about the rule of law in a place like China (more specifically, CCP-occupied China) is thus as absurd as talking about traffic regulations in the wilderness. The so-called law is the law of kings, wielded at whim. Unlike in democratic systems where the law stands above all people and ensures social justice and independence of government branches, under authoritarianism, those with power are the law.
As I did in the Wall Street Journal article, I would like to draw on the case of human rights attorney Gao Zhisheng to illustrate how the regime uses its legal system to destroy its opponents. But Public Discourse’s longer format allows me in this essay to more fully explain the manner in which the CCP manipulates the legal system, and to demonstrate why simply having laws on paper is not enough to protect individual rights.
Talking about the rule of law in a place like China (more specifically, CCP-occupied China) is thus as absurd as talking about traffic regulations in the wilderness.
Gao Zhisheng and the CCP
Born in 1964, Gao Zhisheng became part of an upswelling of interest in the law in the early 2000s. This group comprised activists and attorneys who saw the law as a mechanism to reform government corruption and potentially bring political change. This became known as the Rights Defense Movement. For a time, determined and high-minded individuals like Gao operated somewhat freely and won some low-profile social justice cases in court. But this period was temporary and ended with the internet age, which enabled unprecedented CCP surveillance. When Gao began taking on cases involving the persecution of Falun Gong practitioners—a hot-button issue for the CCP—the regime clamped down.
By 2005, not long after he received his public laurels, Gao’s law office was shuttered, and his legal license later revoked. In 2006 he was arrested and sentenced to three years in prison plus five years with no political rights, but was let out on parole after a few months. If his parole was meant as a lure to instill silence, Gao refused the bait and continued to speak out about human rights issues. Displeased with his refusal to toe the line, the Party struck back. In 2007, he was abducted and held in the basement of a military facility where he was tortured for over fifty days within an inch of his life. The horrific suffering he experienced defies the imagination.
For a decade, Gao was caught in this hellish cycle of incarceration, torture, house arrest, and disappearance. Then, on August 13, 2017, after a memoir he’d written in secret under house arrest was published abroad, he was taken from his home with no warning or legal basis. His family notified the police of a disappeared person and demanded that they conduct a search. But despite multiple pleas for action, and multiple demands for a response from public security, the family was pushed aside or ignored. No explanation was offered, and no action was taken.
No Accountability
It has now been five and a half years since Gao’s disappearance, five and a half years for his family to suffer without news, without word of his health, well-being, or whereabouts. With the police and public security unresponsive, what avenues are available to Gao’s family in the law?
Many of the People’s Republic of China’s legal codes are fairly clear and straightforward, and in many cases bear a resemblance to Western laws. The legal procedures for a missing person case are similar: the case is filed, and injured parties can bring lawsuits and appeal. But could Gao’s family bring a lawsuit against public security for negligence, and demand that the court force the public security to give an explanation? If they disagreed with the ruling given, could they proceed with an appeal, as described under the law as codified in the constitution? Could Gao Zhisheng himself, if at home, file his own case in court and defend himself, as is expressed in the law?
Unfortunately for Gao and countless others, the fact that these steps are available per the text of the PRC’s legal code means nothing in practice under CCP-controlled China. First, and foremost, government bodies in China are not independent, and must act according to the Party’s bidding. The CCP acts as a shadow government, pulling the strings while the government—made up of unelected officials and their hires—does the bidding of the Party.
Hence, public security, a government branch with police functions, must administer the CCP’s orders. In Gao’s case, it seems that public security was ordered to abduct him. This means that calling the police and demanding an answer from public security is equivalent to calling the fox to send back the hens. The CCP, by its own law, cannot be sued. Furthermore, the possibility of suing a government agency or official is almost nil since the Party controls the judiciary and the courts. Even if a case were to make it into the court system, the CCP would probably order the court to extend the case under piles of procedural steps so that, years later, the verdict would essentially be: “the public security searched but didn’t find anything, and therefore can’t be found guilty of inaction.”
The CCP acts as a shadow government, pulling the strings while the government—made up of unelected officials and their hires—does the bidding of the Party.
Even if the family were able to appeal such a ruling, the precedents for the CCP fabricating evidence on a grand and blatant scale practically guarantee that the family’s case has no chance for victory in court.
Should Gao Zhisheng ever write up a case file himself, what would be a likely outcome? If he were at home, he would be surrounded by thugs preventing him from leaving and submitting his file at court. Well, what if his family were able to somehow get past the thugs and deliver his documents on his behalf? As the lead plaintiff in his own case, if he were blocked from leaving home, the “legal” outcome from the court would probably be that, due to lack of appearance at court, “the plaintiff has forfeited his case.”
Dead End Law
Though I raise Gao’s case in the hypothetical, the precedents are very real. When I was in prison, my wife Weijing was under house arrest at our home in Shandong when I was awarded a prize from the Megsaysay Foundation. She made it to Beijing, planning to take a plane to accept the award on my behalf. But she was illegally stopped inside the airport, and her passport destroyed, following which she was forcefully taken back to our home in Shandong. So she hired a lawyer to sue the Border Protection. The court took the case files and even sent Weijing a date for her case to be heard in court. But when she tried to leave our home in Shandong to attend the trial, the thugs surrounding our home wouldn’t let her leave.
This is another example of the CCP’s infuriating system of bureaucratic paradoxes designed to at once give the semblance of lawfulness while making a lawful outcome entirely impossible. For regular people, the law is simply a dead end—words on paper whose only purpose is to provide a front, a façade, a detour leading away from the truth.
What other options do people in China have for bringing complaints or seeking redress for injustices? The petition system, in which citizens seek to place complaints directly in the hands of officials, has been shown for decades to be nothing more than a scam, another way for citizens to waste their time and precious hope—not to mention funds for travel to the capital—on empty dreams. In Western nations, the media are often a tool to exposure corruption, push for justice, and address grievance. But in CCP-occupied territory, the media are the mouthpiece of the party. There is no news, only propaganda. Cases such as Gao’s would not be broadcast on the CCP’s platforms. If information about Gao or other activists is leaked online, it will be quickly deleted and filtered out. This is, for most activists, another dead end.
Any action, any citizen, any institution or idea that the CCP deems contrary or in opposition to its leadership will be crushed.
But for those who refuse to relent, and refuse to give in to the Party’s obscene power, there are ways of getting information about the CCP’s crimes out of CCP-occupied territories, and there are ways of contacting foreign media. But invariably the CCP will send public security to your door along with the accusation of “picking quarrels and provoking trouble.” They slap a so-called “pocket crime” on your chest, which means they accuse you of something completely random as though they just picked it from their pocket. Then they drag you away. And there’s always the favorite accusations of “collaborating with a foreign enemy power,” “disclosing national secrets,” or “inciting subversion of state power.” In any case, the CCP will use the same means it has used against Gao Zhisheng to subdue anyone who refuses to be enslaved by it.
Again, there is no rule of law under authoritarianism. Even though on paper there are good laws, they are almost always overruled by the CCP’s “evil” laws and regulations. The good laws are completely out of reach for regular people seeking justice and positive outcomes. Article 35 of the constitution states: “Citizens of the People’s Republic of China have freedoms of speech, press, assembly, association, and protest.” Article 37 states: “Any citizen, without the sign-off from the people’s procuratorate, or the ruling of the court, and under the administration of the public security, cannot be arrested, cannot be illegally detained, or under other circumstances have their freedom of movement taken and their persons illegally searched.”
These articles are well written. But does the CCP actually abide by a single word of it? Can regular people actually use any part of it? The CCP nullifies these provisions with this single statement: “It is necessary to maintain the leadership of the CCP.” In other words, any action, any citizen, any institution or idea that the CCP deems contrary or in opposition to its leadership will be crushed.
Does what I have described make you want to completely change the system?
As long as there is authoritarianism in China, there will not be democratic constitutionalism and the rule of law. Without the guarantees in democratic constitutionalism, the rule of law, and limits to power, freedom for Chinese citizens will be but a pipe dream. Hence, only ending authoritarianism, establishing the balance of power, and respecting the rule of law will stop the government from being a tool of the CCP’s desires and evil aims. Only in this way can we end cases like Gao Zhisheng’s and guarantee social justice, equality, and human rights for all in China.
The most important economic news of 2022 was neither the war in Ukraine, with the energy price hikes that came with it, nor high inflation. The key event of 2022 was the intensification of the battle for control of the global semiconductor industry. This dispute experienced its most critical moment on October 7—although this was not the only significant event of the year—when the U.S. Department of Commerce announced new regulations to restrict China’s access to the most advanced processors and supercomputers, as well as the equipment and software needed for the manufacture of the latest generation of semiconductors.
These regulations, a really radical shift in U.S. trade policy, above all show the strategic importance of semiconductors. But they also reveal a now undeniable rupture between the two great world economic powers. Moreover, they show how the future of the world economy is being shaped.
Let us start by identifying the issue. By semiconductor industry we mean the entire chain of design, manufacture, and installation of integrated circuits, called chips or microchips. These microchips are the basis for countless products such as the processors in computers and cell phones, the microcontrollers in cars, the television remote control, and many digital storage devices. It is almost impossible to think of the economy in 2023 without microchips. This article is written on a computer brimming with microchips, posted on the internet thanks to microchips, and read on a device (another computer, a tablet, a cell phone) crammed with, you guessed it, microchips. Even if you are reading this on paper, the printer you used is powered by them.
Semiconductors reveal a now undeniable rupture between the two great world economic powers. Moreover, they show how the future of the world economy is being shaped.
But it is not just consumer goods that live on microchips: much of contemporary research, from biology to physics, depends crucially on the semiconductor industry. In my academic work, I am engaged in field called computational economics, which uses fairly advanced integrated circuits to measure the economic impacts of climate change.
In fact, doing without oil would be much simpler than doing without microchips. One can drive an electric car recharged with solar panels or nuclear energy, fly in airplanes that use biofuels and replace many of the products of the petrochemical industry with biotechnological alternatives. The problem with electric cars (or hydrogen cars, if one is concerned about the mineral limitations of batteries), biofuels or organic plastics is their cost, directly or indirectly (creating the necessary infrastructure, for example, for green hydrogen). But if it is feasible to reduce the oil consumption of a modern society by 95 percent, it is simply too expensive, and that is why it is so difficult to move toward the needed decarbonization of our economies. However, getting rid of microchips is not possible without giving up what we consider “modern life” (in fact, even today’s production of oil and its products depends on chips and microchips from top to bottom). To go back to vacuum tubes is to go back to the 1950s.
But it is no longer just that our economies depend on microchips: state military power is a direct function of them. Since the Vietnam War, the United States has committed to using microchips to multiply its military force. The success, a thousand times repeated, of the HIMARs in Ukraine is an unequivocal consequence of electronics: from the design of missiles to their in-flight control, or the gathering of intelligence to select targets. In comparison, Russia’s poor military performance has much to do with its technological backwardness. Were it not for its nuclear weapons, Russia would be a third-tier power today and would have lost the war in Ukraine months ago, probably after the intervention of NATO area forces.
The Rise of Semiconductors
The semiconductor industry was one of the earliest and most radical examples of globalization since the pioneering Fairchild Semiconductor opened its Hong Kong plant in 1963. Look at your cell phone. The chances are the basic technology has been developed in the United States, the architecture of the processors that run it is designed in the United Kingdom, the photolithography machines that make it possible to manufacture these processors were built in the Netherlands, the processor has been produced in South Korea, and the final assembly of the cell phone was carried out in China.
For many decades, this international division of labor benefited everyone. Without the low labor costs of East Asia, the first generations of chips would never have been cheap enough for mass adoption, which helped generate the enormous economies of scale that transformed the industry. At the same time, the semiconductor industry helped these East Asian economies begin their growth process. Without the specialization of different nations, we would never have been able to coordinate the myriad talents needed to build an advanced processor, perhaps the most sophisticated creation of mankind, which needed participation of more than seventy countries and more than one thousand different manufacturing processes.
The story of the extraordinary success began in the mid-1960s but culminated more or less in the spring of 2016. Two related forces converged in that spring. The first force followed from the organization of semiconductors’ exponential complexity. Gordon Moore, one of Intel’s co-founders, predicted in 1965 that the number of transistors on an integrated circuit would double every year. (He later reduced this prediction to every two years.) The exponential growth has been spectacular. One way to think about “Moore’s Law” is that microchips have advanced as much between February 2021 and today, February 2023, as they have from their invention in 1958 to February 2021. To put the point in a more obvious way: the cell phone in anyone’s pocket has vastly more capacity than the world-class supercomputer on which I ran part of my PhD thesis results in the fall of 2000.
Without the specialization of different nations, we would never have been able to coordinate the myriad talents needed to build an advanced processor, perhaps the most sophisticated creation of mankind.
Leaders in Microchip Production
Moore’s Law assumes that, at present, the latest generation of microchips have some 80 billion transistors, which are devilishly complex and incredibly expensive to develop and manufacture. The combination of complexity and cost has led to a dramatic reduction of companies in the sector: there is neither market nor capital for more. Making semiconductors of 3 nanometers or less, the industrial frontier in February 2023, is only within the reach of three companies worldwide: TSMC of Taiwan (the largest “foundry” in the world, which manufactures, for example, the processors of the Apple and AMD), Samsung of South Korea, and Intel of the United States.
But even this short list has a “catch.” Only TSMC knows how to produce 7 nanometer or smaller semiconductors on a massive scale. Samsung can produce them, but on a smaller scale than TSMC. For example, the rumors in the industry are that NVIDIA had problems with its graphics processing units (we will come back to them in a few paragraphs) because Samsung could not produce enough circuits, even in the less complex 8 nanometer process. The situation reached such a point that the president of South Korea released from prison Lee Jae-yong, the de facto head of Samsung, at the end of August 2022, to bring order to his company’s semiconductor manufacturing (which seems to have worked well).
Intel is suffering innumerable delays with its latest processors. There is a non-trivial possibility that Intel will fall off the list when the new generation of GAAFET transistors arrives (from all directions)—and which Samsung already employs in part as of June 2022. Intel has announced a 2-nanometer GAAFET for 2024, but will it be able to produce it in quantity and on time? The latest news is not very optimistic about it, and the delay in the arrival of Meteor Lake 14th generation, or even its possible cancellation, is very worrying for the prospects of American business.
In short and to skip all the technicalities: the most advanced, and in a sense the most vital product in the world economy, is only produced without problems or delays and on a sufficient scale in Taiwan. And the second best alternative, Samsung products, are produced in South Korea.
In theory, this would not pose a major problem. There is another basic element in the manufacture of advanced microchips: photolithography machines that “print” the circuit pattern on a silicon wafer. The most modern machines, which employ a technology called extreme ultraviolet lithography, have been developed to produce the circuit pattern on a silicon wafer (here is a simple explanation of how to generate this light). Only one company in the world, the Dutch ASML, produces them, largely because they have the best laser technology since they bought California-based Cymer. ASML has fantastic profits, and the existence of a competitor would mean lower prices for integrated circuits. But economists think that the welfare costs of such a worldwide monopoly are likely to be very low because of the existence of potential competitors constantly “chasing” the Dutch company. That ASML dominates this market does not take a second’s sleep away from us. That TSMC dominates the market for more advanced microchips does.
Geopolitical Tensions
The key difference between ASML and TSMC is, obviously, where each is located. ASML is located in the Netherlands, a century-old democracy in one of the most stable areas of the planet and with a centuries-long tradition of being reliable trading partners (Dutch pirates disappeared long ago and only exist today in movies). Except for Switzerland, it is difficult to think of a country with less geostrategic risks than the Netherlands. Taiwan is also a democracy, at the moment very vigorous, but it is at the center of the most fundamental geopolitical rift of our times: the Chinese Communist Party’s desire to “reunify” the island with mainland China (the risk of devastating earthquakes and tsunamis in Taiwan is not trivial either, but we shall leave that for another day). And, as was said before, the second best alternative, Samsung’s products, are manufactured on the Korean peninsula, which is no temple of tranquility either, considering its northern neighbor.
The second force putting the brakes on the international division of labor in the semiconductor industry was China’s policy shift with the coming to power of Xi Jinping in 2012. Xi, whose worldview is very different from that of his immediate predecessors, was concerned about two things. The first is that the international division of labor in the semiconductor industry did not leave China in a very favorable situation. According to a recent study, the United States produces 39 percent of the world’s value in this industry, South Korea 16 percent, Japan 14 percent, Taiwan 12 percent, Europe 11 percent (thanks mainly to the two companies already mentioned: ARM in the United Kingdom and ASML in the Netherlands) and China 6 percent. The potential gains for China, perhaps the world’s leading consumer of integrated circuits (exact figures are hard to come by, given that many of these circuits are used in products that are then re-exported and re-imported numerous times), for making progress in this industry are tremendous. Furthermore, China appears to be losing ground in this field, with its company SMICs. Given China’s existing human capital base, with excellent polytechnic universities, the country has the capacity to leap from 10 nanometer processes to 7 nanometer processes. And with thousands of PhDs from the best technology programs in the United States, it is logical and normal to aspire to play at the top of the league.
Without a leading semiconductor industry of its own, China will not have the military capability to challenge the United States for world military leadership and, for example, be able to “reconquer” Taiwan.
The second observation, much less benign than the first, is that, without a leading semiconductor industry of its own, China will not have the military capability to challenge the United States for world military leadership and, for example, be able to “reconquer” Taiwan. Returning to a previous point: the war in Ukraine makes it clear that thousands of outdated battle tanks are useless.
Similarly, without the best in-house processors it is difficult to exploit all the advantages promised by artificial intelligence, including its military applications such as programming advanced drones. As the great Alan Kay once said, people who are really serious about their software should make their own hardware. China has great deep learning researchers, but it is far behind in the graphics processing units, necessary to train deep learning models, a market clearly dominated by NVIDIA. Contrary to what is often claimed, at the end of the day China lags far behind the United States in artificial intelligence, and its brutal “surveillance state” requires a huge number of workers performing manual supervisory tasks.
To close this military technology gap, China began a policy of “civil-military fusion” at the end of the 1990s. But it was Xi who made this policy a top priority of his government, in terms of both funding and resources (legal and illegal) devoted to it. This has meant that we find ourselves in a situation very different from previous disputes in the semiconductor industry.
Japan in the 1980s, for example, employed very aggressive techniques to gain market share in this industry. Some techniques were legal and ethical (investing large amounts in research and development), others legal but unethical (“stealing” engineers from U.S. companies to employ them in positions that did not violate the letter of non-disclosure agreements with their former employers, but did violate the spirit). And some were neither legal nor ethical (illegitimate acquisition of intellectual property through bribes). But, despite some nationalistic rumblings in Japan, the United States did not consider such behaviors to cross any red lines. Japan was (and is) a staunch U.S. ally; American companies also often bent the rules, and the benefits of the trade relationship for both sides were so high that it was not worth disrupting that for such little matters. At best, we could have readjustments at the margin, such as disputes over Japan’s possible dumping. Beyond having to suffer through a bad movie, none of this had major consequences.
We now find ourselves with a dictatorship, China, eager to achieve global geopolitical leadership by using any means at its disposal. During the spring of 2016, the United States concluded that suddenly the semiconductor industry was its strategic priority. Energy is already much less relevant from Washington’s perspective: remember that the United States is already a net energy exporter and that it could live, if it wanted to, without importing a drop of oil from the rest of the world. The battle is now semiconductors.
How this semiconductor battle began in 2016 and how it has escalated to the new regulations on October 7, 2022, will be left for my second article, as a fascinating story that blends my major personal interests—economics, technology, and politics—and which merits a leisurely telling.
This article is adapted from a version originally published in February 2023 at El Confidencial, a leading Spanish digital newspaper. We are grateful to Professor Jesús Fernández-Villaverde for his permission to publish it in English here, and to Thomas Howes for his translation.
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