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Why China worries more about bytes than barrels

An artist’s impression of a computer chip with a Chinese flag. Getty

Armchair strategists like to pontificate about China’s “Malacca Dilemma”, says Chris Miller in his book Chip War. In a crisis, the theory goes, China might not be able to get vital oil through the Strait of Malacca, the main shipping channel between the Pacific and Indian oceans. “Beijing, however, is more worried about a blockade measured in bytes rather than barrels.” It spends more money each year importing computer chips than it does on oil.

Pretty much all new tech, from washing machines to missile systems, requires these chips, and a tiny number of companies – and countries – control production. Chips from Taiwan provide 37% of the world’s new computing power each year. Two Korean firms produce 44% of the world’s memory chips. The Netherlands builds all the models of a specialised machine essential to chip production. The Opec oil cartel’s 40% market share “looks unimpressive by comparison”.

To get round this “chip choke”, China is devoting its best minds and billions of dollars to developing its own semiconductor technology. America is already squaring up: in 2020, it barred Huawei from using US chips, which made the Chinese tech company’s global expansion grind to a halt. But even more important is the fate of Taiwan, the leader in advanced chipmaking. “To a frightening degree,” the balance of global economic and military power is now dependent “on a small island that Beijing considers a renegade province and America has committed to defend by force”.