After a year spent studying Shakespeare, Chang began to worry about his career prospects. “There were Chinese-American laundry people, there were Chinese-American restaurant people,” he recalled. “The only really serious… middle class profession that a Chinese American could pursue in the early fifties was technical.”

Chang spent his days tinkering with Sylvania’s production processes and his evenings studying Shockley’s Electrons and Holes in Semiconductors, the bible of early semiconductor electronics.

The Soviet Union churned out coal and steel in vast quantities but lagged in nearly every type of advanced manufacturing. The USSR excelled in quantity but not in quality or purity, both of which were crucial to high-volume chipmaking. Moreover, the Western allies prohibited the transfer of many advanced technologies, including semiconductor components, to Communist countries via an organization called COCOM.

Most of Silicon Valley was happy to work with Korean companies, undercutting Japanese competitors and helping make South Korea one of the world’s leading centers of memory chipmaking. The logic was simple, as Jerry Sanders explained: “my enemy’s enemy is my friend.”

Japan’s seeming dominance had been built on an unsustainable foundation of government-backed overinvestment. Cheap capital had underwritten the construction of new semiconductor fabs, but also encouraged chipmakers to think less about profit and more about output.

The Taiwanese government provided 48 percent of the startup capital for TSMC, stipulating only that Chang find a foreign chip firm to provide advanced production technology.The rest of the capital was raised from wealthy Taiwanese who were “asked” by the government to invest.

When one businessman declined to invest after three meetings with Chang, Taiwan’s prime minister called the stingy executive and reminded him, “The government has been very good to you for the last twenty years. You better do something for the government now.” A check for Chang’s chip foundry arrived soon after.

Bardeen told his wife that despite claims of equality he found Chinese society regimented and hierarchical.

Beijing called for more semiconductor research, but government decrees alone couldn’t produce scientific inventions or viable industries. The government’s insistence that chips were strategically important caused China’s officials to try to control chipmaking, embroiling the sector in bureaucracy.

The x86 architecture dominated PCs not because it was the best, but because IBM’s first personal computer happened to use it.

Samsung had its own line of smartphones and other consumer electronics, so it was competing with many of its customers. Those firms worried that ideas shared with Samsung’s chip foundry might end up in other Samsung products. TSMC and GlobalFoundries had no such conflicts of interest.

“If you don’t behave, we’re going to buy you,” ASML’s CEO Peter Wennink told one supplier.

As Intel approached its fiftieth anniversary in 2018, decay had set in. The company’s market share was shrinking. The bureaucracy was stultifying. Innovation happened elsewhere.

The son of one of China’s earliest Communist Party leaders, Xi had studied engineering in college before ascending the ranks of Chinese politics thanks to his chameleonlike knack for appearing to be whatever a given audience thought it wanted.

The only certainty was Xi’s talent as a politician. His own views were hidden behind pursed lips and a feigned smile.

China’s leaders have the world’s most effective system of internet control, employing many thousands of censors to police online chatter. China’s firewall made a huge swath of the internet inaccessible to its citizens.

“The internet has turned the world into a global village,” Xi declared, sidestepping the fact that many of the world’s most popular websites, like Google and Facebook, were banned in China.

No country has been more successful than China at harnessing the digital world for authoritarian purposes.

Though Xi had jailed his rivals and become China’s most powerful leader since Mao Zedong, his control over China was far from absolute. He could lock up dissidents and censor even the most veiled criticism online. But many facets of Xi’s economic agenda, from industrial restructuring to financial market reform, remained stillborn, obstructed by Communist Party bureaucrats and local government officials who preferred the status quo.Officials often dragged their feet when faced with instructions from Beijing that they disliked.

Huahong and Grace, two other Chinese foundries, won little market share, in large part because the state-owned firms and municipal governments that controlled them meddled incessantly in business decisions.

The joint ventures that did emerge were generally addicted to government subsidies and rarely produced meaningful new technology.

China’s internet firms make almost all their money inside of China’s domestic market, where they’re protected by regulation and censorship. Tencent, Alibaba, Pinduoduo, and Meituan would be minnows were it not for their home market dominance. When Chinese tech firms have gone abroad, they’ve often struggled to compete.

In 2003, for example, Huawei acknowledged that 2 percent of the code in one of its routers was copied directly from Cisco, an American competitor.

The case of Wuhan Hongxin (HSMC) shows the risk of shoveling money into semiconductors without asking enough questions. According to a Chinese media report that’s since been removed from the internet, HSMC was founded by a group of scam artists who carried fake business cards that read “TSMC—Vice President” and spread rumors that their relatives were top Communist Party officials. They duped the Wuhan local government into investing in their company, then used the funds to hire as CEO TSMC’s former head of R&D. With him on board, they acquired a deep-ultraviolet lithography machine from ASML, then used this feat to raise more funds from investors.

Tsinghua Unigroup recently ran out of cash after its global acquisition spree and defaulted on some of its bonds. Even Tsinghua CEO Zhao Weiguo’s top-level political connections weren’t enough to save the firm.

In an industry with such a multinational supply chain, technological independence was always a pipe dream, even for the United States, which remains the world’s biggest semiconductor player.

Perhaps in a decade China can succeed in building its own EUV scanner. If so, the program will cost tens of billions of dollars, but—in a revelation that is bound to be discouraging—when it’s ready it will no longer be cutting edge.

China’s not actually pursuing an all-domestic supply chain. Beijing recognizes this is simply impossible. China would like a non-U.S. supply chain, but because of America’s heft in the chip industry and the extraterritorial power of its export regulations, a non-American supply chain is also unrealistic.

China now spends more money each year importing chips than it spends on oil.

Around a quarter of the chip industry’s revenue comes from phones.

Apple makes precisely none of these chips. It buys most off-the-shelf: memory chips from Japan’s Kioxia, radio frequency chips from California’s Skyworks, audio chips from Cirrus Logic, based in Austin, Texas.

Today’s semiconductor supply chain requires components from many cities and countries, but almost every chip made still has a Silicon Valley connection or is produced with tools designed and built in California.

America’s vast reserve of scientific expertise, nurtured by government research funding and strengthened by the ability to poach the best scientists from other countries, has provided the core knowledge driving technological advances forward. The country’s network of venture capital firms and its stock markets have provided the startup capital new firms need to grow—and have ruthlessly forced out failing companies. Meanwhile, the world’s largest consumer market in the U.S. has driven the growth that’s funded decades of R&D on new types of chips.

Other countries have found it impossible to keep up on their own but have succeeded when they’ve deeply integrated themselves into Silicon Valley’s supply chains. Europe has isolated islands of semiconductor expertise, notably in producing the machine tools needed to make chips and in designing chip architectures. Asian governments, in Taiwan, South Korea, and Japan, have elbowed their way into the chip industry by subsidizing firms, funding training programs, keeping their exchange rates undervalued, and imposing tariffs on imported chips.

our dependence on Taiwan, which fabricates the chips that produce a third of the new computing power we use each year.Taiwan’s TSMC builds almost all the world’s most advanced processor chips.

Political leaders in the U.S., Europe, and Japan hadn’t thought much about semiconductors in decades. Like the rest of us, they thought “tech” meant search engines or social media, not silicon wafers.

A typical chip might be designed with blueprints from the Japanese-owned, UK-based company called Arm, by a team of engineers in California and Israel, using design software from the United States. When a design is complete, it’s sent to a facility in Taiwan, which buys ultra-pure silicon wafers and specialized gases from Japan. The design is carved into silicon using some of the world’s most precise machinery, which can etch, deposit, and measure layers of materials a few atoms thick. These tools are produced primarily by five companies, one Dutch, one Japanese, and three Californian, without which advanced chips are basically impossible to make. Then the chip is packaged and tested, often in Southeast Asia, before being sent to China for assembly into a phone or computer.

Chips from Taiwan provide 37 percent of the world’s new computing power each year. Two Korean companies produce 44 percent of the world’s memory chips. The Dutch company ASML builds 100 percent of the world’s extreme ultraviolet lithography machines, without which cutting-edge chips are simply impossible to make.

However, the concentration of advanced chip manufacturing in Taiwan, South Korea, and elsewhere in East Asia isn’t an accident. A series of deliberate decisions by government officials and corporate executives created the far-flung supply chains we rely on today.

The first big order for Noyce’s chips came from NASA, which in the 1960s had a vast budget to send astronauts to the moon.

Chip sales to the Apollo program transformed Fairchild from a small startup into a firm with one thousand employees. Sales ballooned from $500,000 in 1958 to $21 million two years later.

By the end of 1964, Texas Instruments had supplied one hundred thousand integrated circuits to the Minuteman program. By 1965, 20 percent of all integrated circuits sold that year went to the Minuteman program.

After a year spent studying Shakespeare, Chang began to worry about his career prospects. “There were Chinese-American laundry people, there were Chinese-American restaurant people,” he recalled. “The only really serious… middle class profession that a Chinese American could pursue in the early fifties was technical.” Mechanical engineering seemed safer than English literature, Chang decided, so he transferred to MIT.

Chang spent his days tinkering with Sylvania’s production processes and his evenings studying Shockley’s Electrons and Holes in Semiconductors, the bible of early semiconductor electronics.

After fleeing Hungary’s Communist government in 1956 and arriving in New York as a refugee, Grove had worked his way into a PhD program at Berkeley.

The computers that guided the Apollo spacecraft and the Minuteman II missile provided the initial liftoff for America’s integrated circuit industry.

The reason was obvious. Alongside new scientific discoveries and new manufacturing processes, this ability to make a financial killing was the fundamental force driving forward Moore’s Law. As one of Fairchild’s employees put it in the exit questionnaire he filled out when leaving the company: “I… WANT… TO… GET… RICH.”

After one class, Trutko asked the Nobel Prize winner to sign a copy of his magnum opus Electrons and Holes in Semiconductors. “To Anatole,” Shockley signed, before barking at the young scientist with complaints that the Soviet Union refused to pay royalties for the textbook’s Russian translation.

Just like the Pentagon, the Kremlin realized that transistors and integrated circuits would transform manufacturing, computing, and military power. Beginning in the late 1950s, the USSR established new semiconductor facilities across the country and assigned its smartest scientists to build this new industry.

As with another sphere where the Soviets had caught up to the United States—nuclear weapons—the USSR had a secret weapon: a spy ring.

Khrushchev was enamored of grand projects, especially those that he could claim credit for, so he enthusiastically endorsed the idea of building a Soviet city for semiconductors.

Unlike their Soviet counterparts, they could draw on the expertise of other companies making advanced optics, chemicals, purified materials, and other production machinery. If no American companies could help, Fairchild and TI could turn to Germany, France, or Britain, each of which had advanced industries of their own.

The Soviet Union churned out coal and steel in vast quantities but lagged in nearly every type of advanced manufacturing. The USSR excelled in quantity but not in quality or purity, both of which were crucial to high-volume chipmaking. Moreover, the Western allies prohibited the transfer of many advanced technologies, including semiconductor components, to Communist countries via an organization called COCOM.

Every step of the process of making chips involved specialized knowledge that was rarely shared outside of a specific company. This type of know-how was often not even written down. Soviet spies were among the best in the business, but the semiconductor production process required more details and knowledge than even the most capable agent could steal.

No other technology moved so quickly—so there was no other sector in which stealing last year’s design was such a hopeless strategy.

Career advancement required becoming a better bureaucrat, not devising new products or identifying new markets. Civilian products were always an afterthought amid an overwhelming focus on military production.

Japan, by contrast, was deliberately integrated into America’s semiconductor industry, a process supported by Japanese business elites and the U.S. government.

“Our plan is to lead the public with new products rather than ask them what kind of products they want,” Morita declared. “The public does not know what is possible, but we do.”

The Texans thought Sony was a “rogue operation,” something they meant as a compliment.

Some colleagues at Fairchild were apprehensive. “The Red Chinese are down your nose,” one warned, eying the thousands of People’s Liberation Army soldiers stationed on Hong Kong’s northern border. “You’re going to get run over.” But the radio factory Noyce had invested in illustrated the opportunity. “The Chinese labor, the girls working there, were exceeding everything that was ever known,”

In 1963, its first year of operation, the Hong Kong facility assembled 120 million devices. Production quality was excellent, because low labor costs meant Fairchild could hire trained engineers to run assembly lines, which would have been prohibitively expensive in California.

Fairchild was the first semiconductor firm to offshore assembly in Asia, but Texas Instruments, Motorola, and others quickly followed. Within a decade, almost all U.S. chipmakers had foreign assembly facilities.

Sporck saw them as a capitalist’s dream. “We had union problems in Silicon Valley,” Sporck noted. “We never had any union problems in the Orient.”

Taiwan wasn’t alone in thinking that semiconductor supply chains could provide economic growth and bolster political stability. In 1973, Singapore’s leader Lee Kuan Yew told U.S. president Richard Nixon he was counting on exports to “sop up unemployment” in Singapore.

“We are really the revolutionaries in the world today,” Gordon Moore declared in 1973, “not the kids with the long hair and beards who were wrecking the schools a few years ago.”

invest heavily in new technologies: a new generation of guided missiles that used integrated circuits, not vacuum tubes; a constellation of satellites that could beam location coordinates to any point on earth; and—most important—a new program to jump-start the next generation of chips, to ensure that the U.S. kept its technological edge.

In the early 1960s, it had been possible to claim the Pentagon had created Silicon Valley. In the decade since, the tables had turned. The U.S. military lost the war in Vietnam, but the chip industry won the peace that followed, binding the rest of Asia, from Singapore to Taiwan to Japan, more closely to the U.S. via rapidly expanding investment links and supply chains.

After founding his own chip firm, AMD, in 1969, he spent much of the next three decades in a legal brawl with Intel over intellectual property disputes. “I can’t walk away from a fight,” he admitted to a journalist.

“The chip industry was an incredibly competitive industry,” remembered Charlie Sporck, the executive who’d led the offshoring of chip assembly throughout Asia. “Knock ’em down, fight ’em, kill ’em,” Sporck explained, hitting his fists together to illustrate his point.

Sneaking into rivals’ facilities was illegal but keeping tabs on competitors was normal practice in Silicon Valley.

By the end of the 1980s, Japan was supplying 70 percent of the world’s lithography equipment.

In 1986, with the threat of tariffs looming, Washington and Tokyo cut a deal. Japan’s government agreed to put quotas on its exports of DRAM chips, limiting the number that were sold to the U.S.

American executives were too focused on “this year’s profit,” in contrast to Japanese management, which was “long range.”

In the U.S., The Japan That Can Say No sparked fury.

America’s supply chain statecraft had worked brilliantly in fending off Communists, but by the 1980s, the primary beneficiary looked to have been Japan.

As Japanese firms grabbed market share, CEOs of America’s biggest chip firms spent more and more time in Washington, lobbying Congress and the Pentagon.

Survival was still a struggle. At one point, in 1981, the company’s cash balances fell so low it could cover only two weeks of payroll. Micron scraped through that crisis, but amid another downturn a few years later it had to lay off half of its employees and cut salaries for the remainder.

“Memory chips is a brutal, brutal business,” recalled an early employee who survived a series of painful DRAM market downturns.

Grove described his management philosophy in his bestselling book Only the Paranoid Survive: “Fear of competition, fear of bankruptcy, fear of being wrong and fear of losing can all be powerful motivators.”

Lee Byung-Chul could make a profit selling almost anything.

He would turn Samsung into a semiconductor superpower thanks to two influential allies: America’s chip industry and the South Korean state.

Doing so would require many millions of dollars in capital expenditure, yet there was no guarantee it would work. Even for Lee, this was a big bet. He hesitated for months. Failure could bring down his entire business empire. South Korea’s government, however, signaled it was willing to provide financial support.

In February 1983, after a nervous, sleepless night, Lee picked up the phone, called the head of Samsung’s electronics division, and proclaimed: “Samsung will make semiconductors.” He bet the company’s future on semiconductors, and was ready to spend at least $100 million, he declared.

Most of Silicon Valley was happy to work with Korean companies, undercutting Japanese competitors and helping make South Korea one of the world’s leading centers of memory chipmaking. The logic was simple, as Jerry Sanders explained: “my enemy’s enemy is my friend.”

The companies like Intel and Micron that survived did so less thanks to their engineering skills—though these were important—than their ability to capitalize on technical aptitude to make money in a hypercompetitive, unforgiving industry.

In the early 1980s, the KGB reportedly employed around one thousand people to steal foreign technology.

Stealing chip designs was only useful if they could be produced at scale in the USSR. This was difficult to do during the early Cold War but almost impossible by the 1980s.

In 1985, the CIA conducted a study of Soviet microprocessors and found that the USSR produced replicas of Intel and Motorola chips like clockwork. They were always half a decade behind.

The Kremlin wanted to revitalize its microelectronics industry but didn’t know how to do so. In 1987, Soviet leader Mikhail Gorbachev visited Zelenograd and called for “more discipline” in the city’s work.

One issue was political meddling. In the late 1980s, Yuri Osokin was removed from his job at the Riga semiconductor plant.

A second issue was overreliance on military customers.

The Soviet Union barely had a consumer market, so it produced only a fraction of the chips built in the West. One Soviet source estimated that Japan alone spent eight times as much on capital investment in microelectronics as the USSR.

A final challenge was that the Soviets lacked an international supply chain.

The Soviet Union’s effort to reinvigorate its chipmakers failed completely. Neither the Soviets nor their socialist allies could ever catch up, despite vast espionage campaigns and huge sums poured into research facilities like those in Zelenograd.

Japan’s seeming dominance had been built on an unsustainable foundation of government-backed overinvestment. Cheap capital had underwritten the construction of new semiconductor fabs, but also encouraged chipmakers to think less about profit and more about output.

In 1998, South Korean firms had overtaken Japan as the world’s largest producers of DRAM, while Japan’s market share fell from 90 percent in the late 1980s to 20 percent by 1998.

The Russian chip industry faced humiliation of its own, with one fab reduced in the 1990s to producing tiny chips for McDonald’s Happy Meal toys. The Cold War was over; Silicon Valley had won.

The Taiwanese government provided 48 percent of the startup capital for TSMC, stipulating only that Chang find a foreign chip firm to provide advanced production technology.The rest of the capital was raised from wealthy Taiwanese who were “asked” by the government to invest.

When one businessman declined to invest after three meetings with Chang, Taiwan’s prime minister called the stingy executive and reminded him, “The government has been very good to you for the last twenty years. You better do something for the government now.” A check for Chang’s chip foundry arrived soon after.

A crucial ingredient in TSMC’s early success was deep ties with the U.S. chip industry. Most of its customers were U.S. chip designers, and many top employees had worked in Silicon Valley. Morris Chang hired Don Brooks, another former Texas Instruments executive, to work as TSMC’s president from 1991 to 1997.

The founding of TSMC gave all chip designers a reliable partner. Chang promised never to design chips, only to build them. TSMC didn’t compete with its customers; it succeeded if they did.

In Shenzhen, Ren Zhengfei bought cheap telecommunications equipment in Hong Kong and sold it for a higher price across China.

The year after China produced its first integrated circuit, Mao plunged the country into the Cultural Revolution.

Bardeen told his wife that despite claims of equality he found Chinese society regimented and hierarchical. The political minders who watched over China’s semiconductor scientists certainly had no parallel in Silicon Valley.

“Made in China” obsession was hardwired into the Communist Party’s worldview, but the country was hopelessly behind in semiconductor technology—something that neither Mao’s mass mobilization nor Deng’s diktat could easily change.

Beijing called for more semiconductor research, but government decrees alone couldn’t produce scientific inventions or viable industries. The government’s insistence that chips were strategically important caused China’s officials to try to control chipmaking, embroiling the sector in bureaucracy.

The DRAM market was like a game of chicken, one Samsung executive explained. In good times, the world’s DRAM companies would pour money into new factories, pushing the market toward overcapacity, driving down prices. Carrying on spending was ruinously expensive, but stopping investments, even for a single year, risked ceding market share to rivals. No one wanted to blink first. Samsung had the capital to keep investing after its rivals were forced to cut back. Its memory chip market share grew inexorably.

China’s leaders knew the real money was in the components that powered electronics, above all in semiconductors.

Grace Semiconductor, another chip firm founded in Shanghai, in 2000, involved a similar mix of foreign investment, state subsidies, and failed technology transfer. Grace was a venture between Jiang Mianheng, son of Chinese president Jiang Zemin, and Winston Wang, scion of a Taiwanese plastics dynasty.

The x86 architecture dominated PCs not because it was the best, but because IBM’s first personal computer happened to use it.

Samsung had its own line of smartphones and other consumer electronics, so it was competing with many of its customers. Those firms worried that ideas shared with Samsung’s chip foundry might end up in other Samsung products. TSMC and GlobalFoundries had no such conflicts of interest.

So the text etched onto the back of each iPhone—“Designed by Apple in California. Assembled in China”—is highly misleading. The iPhone’s most irreplaceable components are indeed designed in California and assembled in China. But they can only be made in Taiwan.

“If you don’t behave, we’re going to buy you,” ASML’s CEO Peter Wennink told one supplier.

Building cutting-edge processors was too expensive for everyone except the world’s biggest chipmakers. Even the deep pockets of the Persian Gulf royals who owned GlobalFoundries weren’t deep enough. The number of companies capable of fabricating leading-edge logic chips fell from four to three.

As Intel approached its fiftieth anniversary in 2018, decay had set in. The company’s market share was shrinking. The bureaucracy was stultifying. Innovation happened elsewhere.

As the decade ended, only two companies could manufacture the most cutting-edge processors, TSMC and Samsung.

The son of one of China’s earliest Communist Party leaders, Xi had studied engineering in college before ascending the ranks of Chinese politics thanks to his chameleonlike knack for appearing to be whatever a given audience thought it wanted.

The only certainty was Xi’s talent as a politician. His own views were hidden behind pursed lips and a feigned smile.

China’s leaders have the world’s most effective system of internet control, employing many thousands of censors to police online chatter. China’s firewall made a huge swath of the internet inaccessible to its citizens.

“The internet has turned the world into a global village,” Xi declared, sidestepping the fact that many of the world’s most popular websites, like Google and Facebook, were banned in China.

“We must march out, deepen international internet exchange and collaboration, and vigorously participate in the construction of ‘One Belt, One Road,’ ” he declared on a different occasion, referring to his plan to enmesh the world in Chinese-built infrastructure that included not only roads and bridges but network equipment and censorship tools.

No country has been more successful than China at harnessing the digital world for authoritarian purposes.

When Japan, Taiwan, and South Korea wanted to break into the complex and high-value portions of the chip industry, they poured capital into their semiconductor companies, organizing government investment but also pressing private banks to lend. Second, they tried to lure home their scientists and engineers who’d been trained at U.S. universities and worked in Silicon Valley. Third, they forged partnerships with foreign firms but required them to transfer technology or train local workers. Fourth, they played foreigners off each other, taking advantage of competition between Silicon Valley firms—and, later, between Americans and Japanese—to get the best deal for themselves.

Though Xi had jailed his rivals and become China’s most powerful leader since Mao Zedong, his control over China was far from absolute. He could lock up dissidents and censor even the most veiled criticism online. But many facets of Xi’s economic agenda, from industrial restructuring to financial market reform, remained stillborn, obstructed by Communist Party bureaucrats and local government officials who preferred the status quo.Officials often dragged their feet when faced with instructions from Beijing that they disliked.

China’s problem isn’t only in chip fabrication. In nearly every step of the process of producing semiconductors, China is staggeringly dependent on foreign technology, almost all of which is controlled by China’s geopolitical rivals—Taiwan, Japan, South Korea, or the United States.

Across the entire semiconductor supply chain, aggregating the impact of chip design, intellectual property, tools, fabrication, and other steps, Chinese firms have a 6 percent market share, compared to America’s 39 percent, South Korea’s 16 percent, or Taiwan’s 12 percent, according to the Georgetown researchers. Almost every chip produced in China can also be fabricated elsewhere.

Every Chinese leader since the founding of the People’s Republic wanted a semiconductor industry, of course.

SMIC, meanwhile, was the comparative success story in China’s fabrication industry. Huahong and Grace, two other Chinese foundries, won little market share, in large part because the state-owned firms and municipal governments that controlled them meddled incessantly in business decisions.

One former CEO of a Chinese foundry explained that every governor wanted a chip fab in his province and offered a mix of subsidies and veiled threats to ensure a facility was built. So China’s foundries ended up with an inefficient collection of small facilities spread across the country.The joint ventures that did emerge were generally addicted to government subsidies and rarely produced meaningful new technology.

China was disadvantaged, however, by the government’s desire not to build connections with Silicon Valley, but to break free of it.

yet leaders in Beijing, who thought more about security than efficiency, saw interdependence as a threat.

Chip firms simply can’t ignore the world’s largest market for semiconductors. Chipmakers jealously guard their critical technologies, of course. But almost every chip firm has non-core technology, in subsectors that they don’t lead, that they’d be happy to share for a price.

China’s internet firms make almost all their money inside of China’s domestic market, where they’re protected by regulation and censorship. Tencent, Alibaba, Pinduoduo, and Meituan would be minnows were it not for their home market dominance. When Chinese tech firms have gone abroad, they’ve often struggled to compete.

In 2003, for example, Huawei acknowledged that 2 percent of the code in one of its routers was copied directly from Cisco, an American competitor.

The Taiwanese naturally understood why the Chinese preferred not to abide by intellectual property rules, of course. When Texas Instruments first arrived in Taiwan in the 1960s, Minister K. T. Li had sneered that “intellectual property rights are how imperialists bully backward countries.” Yet Taiwan had concluded it was better to respect intellectual property norms, especially as its companies began developing their own technologies and had their own patents to defend.

U.S. companies like Applied Materials, Lam Research, and KLA are part of a small oligopoly of companies that produce irreplaceable machinery, like the tools that deposit microscopically thin layers of materials on silicon wafers or recognize nanometer-scale defects. Without this machinery—much of it still built in the U.S.—it’s impossible to produce advanced semiconductors.This gave the U.S. a powerful new tool to put out of business any chipmaker, anywhere in the world.

So after Jinhua paid invoices to the U.S. firms that supplied its crucial chipmaking tools, the U.S. banned their export. Within months, production at Jinhua ground to a halt. China’s most advanced DRAM firm was destroyed.

The case of Wuhan Hongxin (HSMC) shows the risk of shoveling money into semiconductors without asking enough questions. According to a Chinese media report that’s since been removed from the internet, HSMC was founded by a group of scam artists who carried fake business cards that read “TSMC—Vice President” and spread rumors that their relatives were top Communist Party officials. They duped the Wuhan local government into investing in their company, then used the funds to hire as CEO TSMC’s former head of R&D. With him on board, they acquired a deep-ultraviolet lithography machine from ASML, then used this feat to raise more funds from investors.

It isn’t only provincial experiments that have failed. Tsinghua Unigroup recently ran out of cash after its global acquisition spree and defaulted on some of its bonds. Even Tsinghua CEO Zhao Weiguo’s top-level political connections weren’t enough to save the firm.

In an industry with such a multinational supply chain, technological independence was always a pipe dream, even for the United States, which remains the world’s biggest semiconductor player.

Perhaps in a decade China can succeed in building its own EUV scanner. If so, the program will cost tens of billions of dollars, but—in a revelation that is bound to be discouraging—when it’s ready it will no longer be cutting edge.

despite the rhetoric, China’s not actually pursuing an all-domestic supply chain. Beijing recognizes this is simply impossible. China would like a non-U.S. supply chain, but because of America’s heft in the chip industry and the extraterritorial power of its export regulations, a non-American supply chain is also unrealistic.

Russia’s ongoing difficulties with fabricating and acquiring chips explains why the country’s drones shot down over Ukraine are full of foreign microelectronics. It also explains why Russia’s military continues to rely extensively on non-precision-guided munitions. A recent analysis of Russia’s war in Syria found that up to 95 percent of munitions dropped were unguided.

Nor was it a coincidence that Morris Chang was seeking work in Texas rather than, say, Tianjin. For an ambitious child of an upper-class family, staying in China risked harassment or even death.