China Will Never Beat Taiwan, Here’s Why

jobs was and i quote genuinely shocked infuriated because apple was paying samsung for chips of course that meant apple had to tell samsung everything about the iphone why do need chips like this or that so it was june 2010 yes jobs wakes up one morning goes to work turns on the tv to watch samsung present its brand new galaxy phone to the world and it looked just like an iphone remember this was the start of the iphone days there was nothing like it until that day all of it down to the box it came in jobs was obsessed with the unboxing experience all of it looked like a direct copy the software the rounded edges the rubber band effect menus when they were pulled down when you have to give all the intimate details of your product to another company it's always in the back of your head what if they copy this this is why apple and all the other major tech companies only buy their most important chips from taiwan semiconductor intel and samsung the only other companies that can make cutting edge chips they also design their own chips taiwan explicitly does not will not started out from the beginning not to compete with its own customers this is a strategy of neutrality like switzerland during world war two

detroit would push cars out of factories with the intention of lowering prices lowering prices would increase demand for cars japan did the opposite they only built a car when someone had bought a car letting demand pull cars out of factories spot a defect stop the line put a rivet in the wrong place stop the line made a mistake stop the line cars didn't pile up in huge lots outside the factory defects were stamped out early less rework an employee could absolutely not hit a button to halt the production line in ford's plant because they noticed a little bit of stitching was off toyota had a cord running straight down the line that stopped the production line any employee could and was encouraged to pull it put yourself in the two minds of employees in these plants at ford doing my job do it well good keep the line moving oh what's that it's fine they'll catch it at the end and we'll figure it out when they have a solution at toyota do my job do it well oh that doesn't look right hey john this weld it's already cracking pull the cord fix the problem fix it just in time to prevent it from becoming a major problem everything was done just in time that's what the system is called and what almost every industry uses now

if you could choose one area on the globe to build the industry that powers the modern world you would not choose this island tall mountains running down one side pushed to the sky by the ever shifting plates underneath that make up the ring of fire waiting for the inevitable earthquakes that sprout from it to rattle your factories factories and gear that require impossible precision down to the atom you would not place it here where water is surprisingly scarce your factories will need the same amount of water as san francisco every day and you certainly would not choose to place it just 100 miles away from your eternal enemy frequently and aggressively vocal about their intent to invade you warning shots missiles have already passed overhead or splashed into the ocean just miles off your coast yet in one small area of this one unremarkable island sit the factories that breathe life into the wires connecting every piece of the planet this is the story of how taiwan engineered its survival turning weakness into unmatchable strength that no one has been able to copy exactly because they do not have the pressures and the reality of taiwan's physical world bearing down upon them

before tsmc if you wanted to make a chip but didn't own a factory a fab you had to go to a company like texas instruments samsung intel and ask to use their leftover machine time you were paying your competitor to make your product if their own chips suddenly became more popular it would kick you off the line to prioritize their own production you had to hand over your designs to a company that might decide to borrow your best ideas no one had done this before taiwan semiconductor was the very first in history to say we will be the world's best at manufacturing chips so you can be the best at design we will not design a single chip we will only make what designs you bring to us if they never designed a chip they would never sell a chip which meant apple could pour billions into chip design hand the design to taiwan and never worry taiwan was going to borrow it it is the quintessential division of labor just like adam smith hints at in the very first sentence of wealth of nations

this is the target they're all trying to hit and this is intel's environment very stable if this is intel's environment very stable then this is samsung's and if this is samsung's in south korea then this is taiwan after practicing for millions of hours in those environments over the next million shots when the target is stationary who do you think hits more targets what about when the original target is replaced by a smaller one the next generation chip and the next generation chip and the next one and the next one aim small miss small if you can keep a cutting edge chip process stable during a typhoon a drought and of magnitude six earthquakes simultaneously you have an engineering discipline that competitors in stable climates simply cannot match

the united nations was designed to be the world police it was the first real international body with muscle decisions were legally binding it could sanction authorized force could use its own troops the only thing standing between the un declaring something and it happening was the security council united states soviet union the uk france and china were given the five permanent seats on the security council when the un was formed in 1945 any member of the security council could veto anything one veto from any of those five and whatever the proposal was doesn't matter if every other country in the world voted for it it died end of discussion four years after the un formed china's civil war ended the party that lost the civil war that was forced to flee to taiwan that was the official un recognized government of china here it is cinderella arriving at ball that un security council seat china was given when the un was formed according to the rules of the un followed the fleeing chinese government to taiwan this small unremarkable island with a population of a few million the government having just arrived that had been ignored for most of history suddenly had veto power over the entire world and they would maintain that veto power for twenty two more years until it all spectacularly collapsed in a single day

so today taiwan is now switzerland not for its mountains and guns in secrecy companies all over the world from every country united states china japan uk india brazil norway russia they all rely on this little area on this tiny little island countries may wish production would stop so their enemies wouldn't get chips but then they wouldn't get chips you work together and that makes the situation better positive sum one side loses one side wins zero sum both sides could lose everything in a conflict that wipes out taiwan's factories negative sum these dynamics this complex game around it how embedded it is in our everyday life i'm not sure there's a more complex situation that has ever developed on this planet this island really should not be this important

who actually represents china it was discovered was a legitimate but procedural loophole kind of question that could be asked by the general assembly rule 27 in article 18 matters of representation are decided by the general assembly where every country has one vote and there is no veto power in other words who actually represents china was a question member nations could put to a vote and determine without the security council killing the outcome so they did abstain yes yes nay no 76 yay votes 53 no votes 17 abstentions the people's republic of china who wasn't in the un at all how could they be taiwan was the official government according to the un suddenly was in and had a security council seat uh-oh the clock is about to strike midnight for cinderella kung thruau was worded and what you will find is that taiwan wasn't just removed from the security council or the un its representatives were declared unlawful rebels to the government in beijing wording that china has pointed to ever since as proof that the un already settled taiwan question they argue that if the seat was unlawfully occupied then taiwan has no legal existence under international law your mortal enemy takes your security council seat kicks you out of the un entirely and two cleverly worded paragraphs put you into permanent international limbo in one afternoon