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Semiconductor manufacturing.

Annie Gugliotta.

The semiconductor battle is heating up

Global semiconductor supply chains have some big resistance points that threaten to make microchips a macro-geopolitical flashpoint. On Tuesday, US President Joe Biden will visit Taiwanese chipmaker TSMC’s facility in Arizona, where he'll spotlight the White House’s efforts to ramp up US chip manufacturing amid the US-China chip race.

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In technology, as in geopolitics, a little resistance can make all the difference. Consider semiconductors, the nearly invisible microchips essential for running everything from our computers to our cars to our cruise missiles. They work by doing something deceptively simple: They use carefully calibrated resistance to slow the flow of electricity through a circuit in ways that make computing possible. The smaller they get the more powerful our devices become.

The trouble is, global semiconductor supply chains have some big resistance points of their own, choke points that threaten to make microchips a macro-geopolitical flashpoint.

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Paige Fusco

Will a “silicon shield” help protect Taiwan?

Tensions between Taiwan and China rose to new highs this summer after US House Speaker Nancy Pelosi’s controversial visit to the island prompted a week-long series of Chinese military maneuvers that were even more threatening than usual. China has pledged to retake what it sees as a breakaway territory — through invasion if necessary — and viewed the trip by a top US official as an affront to its sovereignty.

As China asserts its claims to Taiwan more aggressively, the island’s population has grown increasingly averse to reunification. Yet there are powerful reasons for China not to invade Taiwan — not least the fear that America, the island’s longtime ally, would come to its defense. US ties to Taiwan have grown even closer in recent years as it has come to dominate the global production of semiconductors, tiny silicon connectors that serve as the brains of modern electronics.

We asked Xiaomeng Lu, a director in Eurasia Group’s geo-technology practice, to explain how chips fit into Chinese and US calculations toward Taiwan.

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GZERO Media

What We're Watching: Truckers wanted & not-so-cheap chips

Where are all the truck drivers?

The global truck driver shortage has been disrupting already-out-of-whack supply chains, particularly in the US, the European Union, and Britain – further complicating their post-pandemic economic recoveries. Last year, the American Truckers Association said it was around 80,000 drivers short, while in Europe, a deficit of 40,000 truckers has contributed to long waits and empty shelves. What’s going on? The pandemic has upended the way we work. Trucking is an arduous and ungratifying gig: Drivers often spend days or weeks far away from home, and they don’t get paid for hours spent waiting for goods to be loaded and unloaded. The road can be grueling, the compensation is underwhelming, and the benefits are often … nonexistent. In the US, trucking salaries have plunged in recent decades. Median wages for truck drivers in 1980 were about $110,000 annually (adjusted for inflation); in 2020, they were just $47,130. Unsurprisingly, many truckers are opting for jobs with better conditions and pay, so trucking firms in Europe and the US are struggling to lure drivers back to work and recruit new staff. It’s particularly grim in the UK, where supply side frictions have been exacerbated by Brexit. In the US, meanwhile, companies like Walmart are fighting back by offering massive salary hikes to attract truck drivers. Will it get the wheels turning?

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The geopolitics of the chips that make your tech work

Why may a drought in Taiwan perhaps screw up your next computer purchase?

For one thing, the island is one of the world's top producers of semiconductors, which bind the electrical circuits in the tech we use in our daily lives. Cell phones, laptops, modern cars, and even airplanes all rely on these tiny computer chips. For another, Taiwan is now suffering its worst climate change-related dry spell in almost 70 years. This is a problem because Taiwanese chip factories consume huge amounts of water.

The wider issue, though, is a pandemic-fueled worldwide chip shortage that began way before it stopped raining in Taiwan, has wreaked havoc on entire sectors like the US auto industry, and is shaking up the increasingly contentious geopolitics of global supply chains.

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