The following statement is butterly

ludicrous it is also true the world's

most important advanced
technology is nearly all produced
in a single facility what's more that
facility is located in one of the
most geopolitically fraught areas
on earth an area in which many
analysts believe that war is
inevitable within the decade the
future of artificial intelligence
hangs in the balance the taiwan
semiconductor manufacturing
company or tsmc makes all of the
world's most advanced ai chips this
includes nvidia's gpus google's tpus
amd's gpus the ai chips for
microsoft amazon tesla cerebrus
sova and every other credible
competitor modern artificial
intelligence simply would not not
 be possible without these highly
specialized chips little wonder then
that time magazine recently
described tsmc as quote the world's
most important company that
you've probably never heard of
nvidia ceo jensen hang put it more
colorfully saying quote basically
there is air and tsmc tsmc's chip
fabrication facilities or fabs the
buildings where chips are
physically built is located on the
western coast of taiwan a mere 110
miles from mainland china in this
map taiwan is shown an orange
and china is shown in green today
china and taiwan are nearer to the
brink of war than they have been in
decades many policy makers in
washington predict that china will
invade taiwan within the next 5
years a china taiwan conflict would
be devastating for many reasons
aside from the heavy human toll
one underappreciated consequence
is that it would paralyze the global
ai ecosystem put simply the entire
field of artificial intelligence faces
an astonishingly precarious single
point of failure in taiwan amid all
of the fervor around ai today this
fact is not widely enough
appreciated if you are working on
or are interested in ai you need to
be paying attention how did we get
here and what can we do about it
let's start with a brief whirlwind
overview of the chip industry
semiconductors or chips are the
most complex object in the world
that humanity knows how to mass
produce making semiconductors
requires the world's purest metals
the world's most expensive
machinery legions of highly
specialized engineers and atom
level manufacturing precision it is
important to distinguish between
two different types of chip
companies first fabulous chip
makers which design but do not
manufacture their own chips and
second foundaries which
manufacture chips designed by
other companies almost every
well-known chip company today is
fabulous from nvidia to amd to
qualcomm these companies do not
produce their own chips instead
they design chips and then they
rely on foundaries like tsmc to
actually manufacture those chips
for them there are only three
 companies in the world today that
are capable of manufacturing chips
anywhere near the leading edge of
semiconductor technology tsmc
samsung and intel of those three
only one can reliably produce the
world's most advanced ai chips
including chips like nvidia's h100
gpus that one company is tsmc as
of this morning tsmc's market
market capitalization was $470
billion making it the 13th largest
company in the world larger than
exxon mobile jp morgan chase or
walmart how has tsmc become
such a dominant force the short
answer is that powerful economies
of scale exist in the world of chip
fabrication leading inexorably to
win or take all dynamics making
advanced semiconductors requires
 tremendous upfront and ongoing
capital expenditure in 2021 tsmc
announced that it would invest
$100 billion over the next three
years to continue expanding its
fabrication capabilities no other
company in the world can justify
that level of investment tsmc can
because of the sheer volume of
chips that it produces far more than
any other company in the world a
related dynamic that helps explain
tsmc's unsalable position is what
has come to be known as the ts tmc
grand alliance tsmc has invested
heavily over decades to develop
deep partnerships with dozens of
companies across the
semiconductor supply chain from
software providers like cadence to
equipment manufacturers like asml
to chip designers like nvidia in turn
these companies have developed
their own products in accordance
with tsmc's road map leading to
powerful lockin in summary a
ation of economies of scale
network effects and unrivaled
specialization have made tsmc
irreplaceable and have made the
entire world deeply precariously
dependent upon it this brings us to
the present delicate geopolitical
moment last october the biden
administration took the dramatic
step of banning the export of all
high-end ai chips to any entity in
china the rationale behind these
measures was clear to leverage us
control of the global
semiconductor supply chain as a
choke point to handicap china's ai
 capabilities the us government is
currently formulating expansions
to this policy at the same time the
us is taking steps to reduce its
reliance on chip fabrication
facilities located in east asia in late
2022 tsmc announced that it would
invest $40 billion to build two new
state-of-the-art fabs in the united
states in arizona the first of these
two fabs is slated to begin
production in 2025 bringing
advanced chip production to us oil
will help mitigate the ai industry's
absolute dependence on taiwan
based fabs but the arizona fabs will
not solve everything their
production capacity will be modest
representing less than 5% of tsmc's
total global output and the most
advanced semiconductor
 production capabilities and
technologies will remain in taiwan
so where might things go from
here let's briefly consider a few
possibilities on this three-
dimensional chessboard let's start
with the optimistic scenario
taiwan's central role in the global
semiconductor industry is often
referred to as its silicon shield the
basic theory is this because china
depends so heavily on taiwan for
the chips that it needs to keep its
own economy running china will
stop short of invading taiwan and
putting tsmc's production at risk
and because the rest of the world is
likewise so dependent on tsmc the
united states and other powers will
go to great lengths to protect the
island and defend its sovereignty
 under this theory while china may
continue to build out its military
and engage in cross straight saber
rattling it will stop short of kinetic
action against taiwan but the
silicon she shield is just a theory
not a guarantee what would happen
if china were to move decisively to
retake taiwan tsmc's fabs would
almost certainly be rendered
inoperative it is conceivable that
the taiwanese or even the us
military would preemptively
destroy the fabs in order to prevent
the ccp from taking control of this
valuable strategic resource even if
the physical buildings were to
remain undamaged after a chinese
invasion it is unrealistic that the
ccp would be able to continue
operating the fabs to produce
cutting edge chips keeping leading
edge fabs running requires ongoing
deep partnership with
organizations across the global
semiconductor ecosystem as well
as a steady inflow of materials
equipment and services these
would be denied to an invading
power let me say this one more
time if or when china invades
taiwan tsmc's fabs will in all
likelihood go offline this will mean
that no more nvidia h100s or any
other cutting edi chips will be able
to be produced anywhere in the
world what would this mean for
the world of ai after tsmc the
company best position to step up
and produce cuttingedge ai chips is
samsung samsung is currently the
only company in the world other
 than tsmc that is capable of
producing 3 nanometer chips
today's cuttingedge technology but
samsung's production capabilities
are far inferior to tsmc's today in a
best case scenario it would take
samsung years to scale up to tsmc's
current ai chip yields and volumes
this brings us to america's former
chip champion intel it was hardly a
decade ago that intel's chip
manufacturing capabilities were
the envy of the world but in recent
years intel has fallen behind the
company struggled mightily in its
transition to both 10 nanometer and
7 nanometer node technologies
even resorting to outsourcing some
of its leading edge production to
tsmc under ceo pat ginger intel
aspires to regain its chipm
supremacy with an ambitious plan
to leap frog tsmc and begin
producing 2 nanometer chips in
2024 whether this ambitious plan
will actually prove achievable
however remains to be seen before
we despair too much let us note a
couple encouraging points first
keep in mind that a considerable
stock of ai chips already exists in
the world and even in a worst case
scenario these chips would remain
in use second while the most
advanced ai chips like google's
tpus or nvidia's h100s can only be
manufactured in taiwan there are
many fabs around the world from
the us to europe to israel that are
cap capable of producing lagging
edge logic chips at scale though
they are far less powerful than
 today's leading ai chips these
previous generation chips could be
used in a pinch to support some ai
computing workloads ultimately
though it would be devastating for
humanity to lose its ability to
produce the chips that power
today's cutting edge artificial
intelligence progress in ai would be
profoundly disrupted let us hope
the diplomacy prevents .

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