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The semiconductor industry has a complex history underlined by genius innovation and business acuity. This was chronicled in our latest book club read, Chip War: The Fight for the World’s Most Critical Technology authored by Chris Miller. In exploring the geopolitical landscape and the motivations driving chip founders’ triumphs and failures, we summarized some key takeaways that can be applied in other industries and within your own company.
But first – a bit of history, and its connection to the present…
In 1947 at Bell Labs, inventions by William Shockley, Walter Brattain and John Bardeen, led to a transistor switch on which electrical currents could switch “on” and “off.” In the decades ahead, billions of these microscopic transistors would sit on pieces of silicon chips to create semiconductors – the “brain” of modern electronics. Eight of Shockley’s lab employees left to form Fairchild Semiconductor; they later were considered founders of Silicon Valley, all starting companies foundational to technological growth in the US and around the world.
In 2025, a famous theory by Gordan Moore, co-founder of Fairchild Semiconductor and Intel, will turn 60 years old. “Moore’s Law” projects that transistors would roughly double per square inch every two years. Today’s tech leaders are divided: Nvidia’s Jensen Heung said the theory died in 2022, while Intel’s Pat Gelsinger declared it lives on. This uncertainty signals an industry problem. Without this exponential increase in computing power, the semiconductor industry must innovate around silicon’s limitations and tap into new markets, like quantum. For the public, stagnancy will become increasingly visible; in some communities, data centers will continue to multiply. Driving the demand is of course, the AI revolution.
With every year that passes, semiconductor chips become ever more ingrained in the technological advances that transform our lives and captivate our attention. Chip industry players continue to announce US investments in connection to the 2022 CHIPS and Science Act, underscoring that today, more than ever, it’s critical to understand the historical backdrop that led to the US’s current standing in the market.
The designers of core semiconductor technology do not see imitation as flattery. Imitation in the context of the semiconductor market is wildly foolish, as chips become outdated every few years in accordance with Moore’s Law.
Soviet leader Nikita Khrushchev envied the United States’ innovative Silicon Valley. In 1958, he initiated development of a futuristic city called Zelenograd, Russian for “green city,” where the country’s best engineers and scientists could compete with the US and Japan for a slice of market share in microelectronics. Soviet spies disguised themselves within US firms like Texas Instruments to steal chips that they could analyze and copy in Zelenograd. By the early 1980s, the US grew tired of this tech espionage. The Reagan administration tightened customs checks on advanced technology, reportedly seizing $600 million worth of goods. Despite the USSR’s best efforts to replicate the US’ success, they consistently lagged five years behind.
Lesson: A “copy it” strategy will never result in a winning position. Conversely, it could instead solidify your competitors’ lead. When an industry is in a rapid growth phase, innovation will lead to success. Outpacing your competitors in design will land partnerships and deals that set you up for decades of success.
Creating a global supply chain in semiconductor manufacturing came naturally for most chips’ players, with costs being a driving factor, as each generation of new equipment became harder to maintain. The decoupling of design and production with the rise of offshore fabrication foundries (fabs) like Taiwan Semiconductor Manufacturing Company (TSMC) significantly decreased the barrier to entry for new startups. Starting a chip design company had never been cheaper, and out of a San Jose Denny’s restaurant came Nvidia in 1993.
Nvidia made the future – and entire ecosystem – of graphics its focus, designing world-class graphics processing units (GPUs). Huang discovered the high-speed parallel processing in GPUs could be used for artificial intelligence (AI). Nvidia GPUs are critical in today’s top data centers, accelerating complex AI and high-performance computing (HPC) workloads. In 2024, after only three decades in business, Nvidia is America’s third-largest company, with Apple and Microsoft in the top two positions.
TSMC continues to succeed as the primary manufacturer of Nvidia chips and is estimated to make 90% of the world’s most advanced chips. Had a shift to outsourcing manufacturing not been made on an industry-wide scale, startups would not have stood a chance, and the leading players would have continued to bleed money from manufacturing inefficiencies.
Lesson: Many times, it’s enough to just focus on the core business areas that drive your mission. Having a complex system internally may use up resources that could be better spent in other areas.
Throughout the industry’s history, the country with the latest and greatest semiconductor technology has meant defensive and economic supremacy. In various points of Chip War, semiconductors are referred to as “the new oil” on which global economies now run. In the last three decades, the decoupling of design and manufacturing created a richer, more complex, global ecosystem, but has led to a potentially catastrophic vulnerability. The United States’ share of semiconductor manufacturing dropped to 12% in 2020, and amid geo-political tensions with China, US government leaders recognized the dire need to reinforce the domestic semiconductor supply chain, especially by re-shoring manufacturing. Out of these concerns came the Biden Administration’s 2022 CHIPS and Science Act, offering $52.7 billion in direct funding for chip R&D and foundry expansion on US soil.
US chip manufacturing growth is already in motion. TSMC has built its first Arizona fab in 2021, with another in 2022 and a third project just announced in April 2024. Intel, meanwhile, announced more than $100 billion in investments for expansion in Arizona, New Mexico, Oregon and Ohio. In February 2024, US-based GlobalFoundries was awarded $1.5 billion from the CHIPS Act to expand its Malta, NY fab and build another on its campus. It’s likely this momentum will be maintained as the AI revolution will continue to drive demand growth for semiconductors.
Lesson: Cost-cutting and maximizing efficiencies are an important part of business, but proximity matters. Integral aspects of your operations must be accessible to you at critical times, or the entire ecosystem unravels.
Throughout semiconductor history, the innovations in design and manufacturing, supply chain management and strategic partnerships set a precedent for emerging industries. Leaders stayed scrappy, were risk adverse yet adventurous, and strove for continued growth in accordance with Moore’s Law. These are all lessons readers across business sectors can walk away with and apply.
Chips made possible many of tech history’s key moments, like the moon landing and personal computers, but are also foundational to the things we comms professionals can’t live without today. To keep up with the ever-changing news cycle, we rely on our smartwatches, social media platforms, and mobile coffee apps to feed our caffeine addictions – just to name a few examples. As our reliance on semiconductors is further cemented by each decade that passes, the Chip War will persist, and remain as critical as ever.
Expanding further on this topic, we encourage you to listen to Brands2Life’s podcast episode, featuring Brands2Life co-founder Giles Fraser and Rory Cellan-Jones, former tech correspondent at the BBC. Listen here: Taking on the world one semiconductor at a time: a conversation with Pragmatic’s David Moore.
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