JOE BIDEN JOINS THE CHIP WARS President Joe Biden will head to New York on Thursday to promote job growth from the CHIPS and Science Act — a $280 billion plan symbolizing America's new commitment to industrial policy. Some call it the industrial moonshot. Biden will be visiting an IBM campus in Poughkeepsie in the Hudson Valley, which stands to be among the biggest winners from the new legislation. Arvind Krishna , IBM's CEO and chair, told Global Insider that "Poughkeepsie will directly benefit from the recently passed CHIPS Act" — particularly in quantum computing. Poughkeepsie is home to IBM's Quantum Computation Center, the world's biggest cluster of quantum computers, while the company's semiconductor design and manufacturing takes place in nearby Yorktown Heights and Albany. The administration plans to announce soon restrictions on Chinese access to American semiconductor technology. The restrictions will elaborate on guidance already provided to American chip designers by the Commerce Department earlier this year. In parallel, Assistant Secretary of State for Economic and Business Affairs Ramin Toloui is in the Netherlands, Germany and Belgium this week "to discuss strengthening and diversifying supply chains, especially in semiconductors," per a State Department statement. It's no coincidence: Netherlands is home to ASML, a lithography company that is the critical bridge between American chip designers (often the world's best) and Taiwan, the global chip production capital. UNDERSTANDING THE CHIP WARS Global Insider has just finished reading Chip War, by Chris Miller, published Oct. 4. It's not a stretch to say it's the most interesting book your host had read all year. Miller provides a litany of memorable anecdotes about executive genius and extravagance that I won't spoil here. He explains how chip supremacy took America from Vietnam humiliation to Gulf War victory, but also why the Congress has never understood cutting edge tech, and why the Pentagon hasn't shaped the sector for decades. The book is so detailed Miller doesn't even get to Huawei until Chapter 46, but that's a good thing. His most valuable insights are helping readers understand the complexity of chip supply chains and investments: from why the Soviet semiconductor sector failed and how that's still impacting Russia's war efforts today, through to the ways American fears about China's chip sector mirror fears about Japan's surging chip sector in the 1970s and 1980s. The top takeaway is that there are big advantages to tackling China's chip efforts head on, but it will take a lot more than platitudes and individual executive orders and private investments. Biden's challenge in a sentence: dealing with China being both the American chip industry's biggest customer and its biggest threat. Of most interest to Members of Congress: Tips on how and where to tighten Chinese access to American chip technology (p.286), and the most likely tech impacts of Chinese interference and invasion tactics in Taiwan (pp. 335-343), including massive disruption to AI and 5G rollout globally. OTHER HIGHLIGHTS Taiwan's Silicon Shield: Taiwan didn't build its semiconductor industry by accident — it's spent 55 years designing it around that risk that the U.S. might not care about defending Taiwan, but that Washington and Silicon Valley cannot afford to disrupt chip supplies. So it made those supplies dependent on Taiwan's chip sector continuing to function. While many bemoan the loss of American chip manufacturing capacity, Miller sees upside: lower-cost production in Taiwan especially meant so-called "fabless" American tech giants like Qualcomm and Nvidia could grow by avoiding the cost hurdle of producing their own chips. Using supply chain statecraft to block China: Washington's battle is to avoid screwing up important supply chain components in allied countries such as Taiwan and South Korea, while onshoring some advanced chip production, and choking off China's advances. The big customer conundrum: It's a risk to choke one's biggest customers, but it's possible, if the U.S. government so chooses, as it did with Huawei's access to 5G technology. China's Sputnik moment: The U.S. may need to choose between letting China slowly copy and innovate from stolen U.S. tech, or choking it, which would force China to catch up independently, as the U.S. caught up with Russia in the space race. Did you know? One of the most complex pieces of advanced chip production — from Dutch powerhouse ASML — has 457,000 individual parts: It would take China years or decades to fully replicate that, even if it flat-out stole the IP behind it. How Intel has traveled from its revolution origin story, to a hugely profitable company that was an innovation death zone, to its new hope as an American chip manufacturing savior. How an Idaho potato farmer saved the American chip sector, and a games company, Nvidia, became the global leader in AI chip design. Transgender battles aren't new: IBM's firing of Lynn Conway — after undergoing gender transition in 1968 — led to a standardizing revolution in Silicon Valley chip production. Were you involved in chip policymaking in previous administrations? I'd love to hear your perspective: rheath@politico.com THE TRUSSTERF**K FILES SHRIVELING MANDATE: Embattled British PM Liz Truss now risks being pushed out of office just weeks into the job... Ministers and aides openly speak of a death spiral starting to grip the government. Noa Hoffman, a reporter at The Sun, Britain's most powerful newspaper, is in no doubt about what's happening. " This Tory conference is so amazingly messy I still can't believe it's real. Ministers going completely rogue, MPs barely here but still throwing shade left, right & center, Tory members downing champagne while half laughing/half crying 'we're all f***ed'. It's WILD." LIZ TRUSS VS. AUSTRALIA: Political shots have been fired by the Australian minister in charge of shepherding the country into republic status. He's furious that the Truss government advised King Charles to withdraw from the COP27 climate conference. The point of tension: Charles is head of state of both the U.K. and Australia (and 13 other countries), but he's taken Truss's advice to the exclusion of others. "The British PM stopped our head of state attending the COP 27 conference to speak about the importance of stronger action to combat climate change. We need a head of state that represents the aspirations of the Australian people, not the wishes of the British government." — Matt Thistlethwaite, Australia's minister for the Republic of Australia. NORTH KOREA — MISSILE FALLOUT: After North Korea's latest ballistic missile bullying for Japanese resident to take shelter Tuesday, U.S. and four South Korean warplanes dropped a pair of targeted bombs on an uninhabited island in the Yellow Sea. U.S. President Biden spoke with Japanese Prime Minister Fumio Kishida "to reinforce our ironclad commitment to Japan's defense. China angle: The timing of the missile tests indicates Pyongyang is not pleased with the support it has received lately from Beijing, Randy Schriver, a former top Pentagon official focused on Asia, told National Security Daily: "They use provocation in place of diplomacy," he said, seeking attention ahead of the 20th Communist Party congress starting Oct. 16.
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