WEBVTT - Why are so many semiconductor chips made in Taiwan? 0:00:04.400 --> 0:00:07.800 Welcome to tech Stuff, a production from I Heart Radio. 0:00:12.119 --> 0:00:15.000 Hey there, and welcome to tech Stuff. I'm your host, 0:00:15.120 --> 0:00:18.320 Jonathan Strickland. I'm an executive producer with I Heart Radio. 0:00:18.400 --> 0:00:22.120 And how the tech are you? You know? One thing 0:00:22.239 --> 0:00:25.440 I have talked about a lot over the last couple 0:00:25.440 --> 0:00:32.159 of years has been the semiconductor chip shortage, which is 0:00:32.240 --> 0:00:38.680 impacting everything from PC manufacturing to the automotive industry too, 0:00:39.000 --> 0:00:43.360 you know, printer toner cartridges. And I frequently mentioned that 0:00:44.040 --> 0:00:48.440 many of the semiconductor fabrication facilities are in Taiwan. But 0:00:48.520 --> 0:00:51.920 then that got me to thinking, why are they in Taiwan? 0:00:52.120 --> 0:00:55.560 How did that happen? This was a big gap in 0:00:55.640 --> 0:00:57.800 my knowledge, so I thought I would look into it 0:00:57.920 --> 0:01:01.480 and then do an episode on it. And I am 0:01:01.480 --> 0:01:04.880 a big believer in context. I don't think you can 0:01:04.920 --> 0:01:08.319 just say our story begins in nineteen seventy four, because 0:01:08.360 --> 0:01:13.440 without an understanding of history and politics and social movements, 0:01:13.760 --> 0:01:17.680 you can't really grasp how Taiwan got to where it 0:01:17.760 --> 0:01:22.520 is and the different forces that are you know, present 0:01:22.920 --> 0:01:27.479 in Taiwan's economy in general and the semiconductor industry in particular. 0:01:27.560 --> 0:01:32.160 So we're going to do a super fast, high high 0:01:32.240 --> 0:01:37.440 level overview of Taiwan's history, because, as it turns out, history, politics, 0:01:37.440 --> 0:01:40.160 and economics i'll play a huge part in how and 0:01:40.240 --> 0:01:45.120 why Taiwan became and remains a critical component of the 0:01:45.160 --> 0:01:51.120 microchips supply chain. Also, keep in mind, again super high level, 0:01:51.160 --> 0:01:54.840 the history of Asia is far too complex for me 0:01:54.920 --> 0:01:57.160 to cover in depth. I mean I would have to 0:01:57.400 --> 0:02:01.840 dedicate an entire podcast and do you know, years of 0:02:01.880 --> 0:02:06.160 episodes to really even scratch the surface. But let's talk 0:02:06.200 --> 0:02:10.160 about Taiwan. First of all, Taiwan is an island. It's 0:02:10.200 --> 0:02:15.040 off the southeastern coast of mainland China. It's across from 0:02:15.200 --> 0:02:21.520 a province called Fu Chian. Also, my apologies for my pronunciation. Um, 0:02:21.600 --> 0:02:24.480 it's bad even in English. It's going to be terrible 0:02:24.960 --> 0:02:30.720 for Taiwanese and Chinese and other foreign names. As my 0:02:30.880 --> 0:02:35.720 relatives would say. I'm just laying that out here now 0:02:35.800 --> 0:02:39.400 because it's gonna happen. So, Taiwan is about a hundred 0:02:39.400 --> 0:02:42.480 miles or a hundred sixty kilometers off the coast of 0:02:42.600 --> 0:02:46.480 mainland China. The city of Taipei, on the northern tip 0:02:46.600 --> 0:02:50.519 of Taiwan is sort of the political center of the island. 0:02:50.560 --> 0:02:52.960 Even though it's on the northern tip. It's also the 0:02:53.000 --> 0:02:57.760 economic powerhouse of the island. But the fabrication plants or 0:02:57.919 --> 0:03:00.960 fabs or as you will sometimes here or sometimes you'll 0:03:01.000 --> 0:03:05.200 hear them called foundries, they're all the same thing. The foundry, 0:03:05.440 --> 0:03:09.120 fab fabrication plant. It just means in this case, a 0:03:09.200 --> 0:03:14.360 company that makes integrated circuits and semiconductors. All of these 0:03:14.840 --> 0:03:18.480 are are for the most part, are located in sin Chew. 0:03:19.240 --> 0:03:23.200 Again my apologies for pronunciation. Anyway, that's a city to 0:03:23.320 --> 0:03:30.560 the southwest of Taipei. It actually faces across from mainland China. Now, 0:03:30.600 --> 0:03:35.320 for at least ten thousand years, you had indigenous people 0:03:35.360 --> 0:03:38.760 living on Taiwan who were self governing, had different tribes 0:03:38.800 --> 0:03:41.320 of them, and you know, they had their own languages, 0:03:41.360 --> 0:03:44.640 they had their own conflicts with one another, etcetera. Beginning 0:03:44.680 --> 0:03:48.440 around a thousand years ago, people from what would become 0:03:48.520 --> 0:03:53.600 the Fuchian Province of China came to Taiwan um and 0:03:53.680 --> 0:03:56.680 like I said that that provinces in the southeast of China, 0:03:56.680 --> 0:04:01.640 it's essentially across the sea from Taiwan, and they would 0:04:01.720 --> 0:04:05.880 become known as the Hoklow and that migration would continue 0:04:06.960 --> 0:04:09.720 into the seventeenth century, so over the course of like 0:04:09.760 --> 0:04:13.000 six hundred years they were migrating. There was a second 0:04:13.000 --> 0:04:16.960 group from China known as the Hakka Uh and they 0:04:16.960 --> 0:04:19.120 began migrating to Taiwan as well. So you had these 0:04:19.160 --> 0:04:23.760 two different groups of mainland China uh folks who were 0:04:24.000 --> 0:04:27.720 migrating to Taiwan. The Hakka group were a group of 0:04:27.720 --> 0:04:32.120 people who frequently faced discrimination on the mainland. I've often 0:04:32.480 --> 0:04:36.760 seen them compared to other groups of folks who often 0:04:36.760 --> 0:04:42.320 were displaced in various regions, such as Jewish populations would 0:04:42.320 --> 0:04:47.320 frequently undergo this as well as Roma populations. Now, the 0:04:47.360 --> 0:04:51.000 Hoklo people's were greater in number, and they essentially claimed 0:04:51.040 --> 0:04:55.000 the coastal regions, the more favorable regions, and they forced 0:04:55.400 --> 0:04:59.599 the Hakka people's closer toward the interior. The aboriginals, the 0:04:59.600 --> 0:05:03.880 indigeno as people were even pushed further in. Today, the 0:05:03.880 --> 0:05:09.159 Hoklo and Hakka are considered the Taiwanese population. So the 0:05:09.560 --> 0:05:13.200 you have the aboriginals or indigenous people, and then you 0:05:13.240 --> 0:05:16.960 have the Taiwanese people. Those were the people who migrated 0:05:17.000 --> 0:05:20.480 from China, you know, between a thousand and you know, 0:05:20.880 --> 0:05:24.719 six hundred years ago, and they represent those people, the 0:05:24.720 --> 0:05:27.120 ones who migrated. They represent more than eight percent of 0:05:27.160 --> 0:05:30.960 Taiwan's population today. In fact, the Hoklore is the largest 0:05:31.200 --> 0:05:34.120 slice of that pie. I think it's something like between 0:05:34.200 --> 0:05:39.560 sixty and sixty of the population. But then after these 0:05:39.600 --> 0:05:44.800 migrations where people from mainland China began to settle in Taiwan, 0:05:45.360 --> 0:05:48.560 you had the era of colonization, and the Dutch and 0:05:48.680 --> 0:05:53.120 Spanish both established a presence on Taiwan. The Dutch actually 0:05:53.360 --> 0:05:57.479 pushed the Spanish out. The Dutch presence was really an 0:05:57.480 --> 0:06:00.479 outpost of the East India Company, one of the most 0:06:00.480 --> 0:06:04.240 powerful entities in the six hundreds, not to be confused 0:06:04.760 --> 0:06:09.279 with the British East India Company, another very powerful corporation 0:06:09.320 --> 0:06:11.560 at that time. The Dutch one was kind of an 0:06:11.560 --> 0:06:14.680 early example of a company dominating in supply chains, like 0:06:14.720 --> 0:06:17.520 in shipbuilding and things like that. So, you know, it 0:06:17.600 --> 0:06:19.559 kind of seems like history is a way of repeating itself, 0:06:19.560 --> 0:06:24.920 because Taiwan would again become an important link in supply 0:06:25.040 --> 0:06:30.159 chains later on. In sixteen sixty two, Ming Dynasty loyalists 0:06:30.240 --> 0:06:34.400 from China fled to Taiwan as the Ming dynasty was 0:06:34.480 --> 0:06:40.000 collapsing in the Shing dynasty began to establish itself. The 0:06:40.120 --> 0:06:44.320 Chinese pushed the Dutch from Taiwan and asserted control over 0:06:44.320 --> 0:06:48.000 the island. So you have the Taiwanese uh which were 0:06:48.040 --> 0:06:51.080 the earlier migrants from China, and now you have the 0:06:51.200 --> 0:06:56.320 Ming dynasty loyalists establishing themselves in China. In sixteen eighty three, 0:06:56.600 --> 0:07:01.760 the Shing forces displaced the Ming forces, but Taiwan remained 0:07:01.839 --> 0:07:06.120 under Chinese control for two hundred years. Now, Asia in 0:07:06.160 --> 0:07:09.680 the eighteen hundreds was a pretty chaotic place, filled with 0:07:10.000 --> 0:07:13.520 lots of intrigue. You had major powers all at play 0:07:13.600 --> 0:07:15.880 in the area, many of which were going through their 0:07:15.880 --> 0:07:21.960 own internal revolutions. So you had China obviously an empire UH. 0:07:22.240 --> 0:07:26.480 You had Russia, which at the time was a monarchy. Japan, 0:07:26.760 --> 0:07:30.960 which in the nineteenth century cast off its military government 0:07:31.000 --> 0:07:34.720 which was called a shogunate, and in name, at least 0:07:35.120 --> 0:07:37.360 it returned to being an empire, though really it would 0:07:37.400 --> 0:07:41.080 mark an era in which Japanese would rapidly modernize. You 0:07:41.120 --> 0:07:44.880 also had Korea, which had defended itself against Japanese invasions 0:07:44.880 --> 0:07:47.960 in the seventeenth century. By the eighteen hundreds, Korea had 0:07:48.000 --> 0:07:53.320 become very much an isolationist nation resisting all outside influence 0:07:53.320 --> 0:07:56.280 and modernization. Now, the reason I mentioned all this is 0:07:56.320 --> 0:07:59.880 that these different political alignments would shape the region over 0:07:59.920 --> 0:08:03.840 the following century. Both Japan and China tried to gain 0:08:03.920 --> 0:08:08.559 influence over Korea. That precipitated into an all out war 0:08:08.680 --> 0:08:12.320 between China and Japan, and the Japanese forces, which had 0:08:12.400 --> 0:08:16.320 more effectively modernized and were better organized than the Chinese forces, 0:08:17.480 --> 0:08:20.960 one pretty much every single battle that they had with 0:08:21.000 --> 0:08:26.640 the Chinese. So in eight China signs the treaty with Japan, 0:08:26.760 --> 0:08:32.120 and as part of that treaty, China seeds Taiwan to Japan. 0:08:32.520 --> 0:08:36.440 So the Japanese take control of Taiwan. So again we 0:08:36.480 --> 0:08:41.520 went from the indigenous peoples to the early Chinese migrants, 0:08:41.920 --> 0:08:47.320 to the Dutch, to the Ming loyalists, to the Shing loyalists, 0:08:47.440 --> 0:08:54.199 to Japanese occupation. Uh a really intense amount of change 0:08:54.280 --> 0:08:57.680 for this one island. While Taiwan was under Japanese control, 0:08:57.760 --> 0:09:00.960 something else huge was happening in China. Towards the end 0:09:00.960 --> 0:09:04.920 of the nineteenth century. The Shing dynasty was falling apart 0:09:05.000 --> 0:09:07.880 for lots of reasons, kind of like the Ming dynasty 0:09:07.920 --> 0:09:11.840 had done. Centuries earlier, there were a lot of internal conflicts. 0:09:11.880 --> 0:09:16.040 There were pressures from countries like Russia, Britain, Japan, Germany, France, 0:09:16.080 --> 0:09:18.560 and the United States. And to get into all the 0:09:18.600 --> 0:09:20.880 details would require a mini series of its own. But 0:09:20.960 --> 0:09:26.040 all this tension, combined with a growing distrust and imperialism 0:09:26.040 --> 0:09:29.440 within China itself, led to the Chinese Revolution. This was 0:09:29.480 --> 0:09:34.239 around nineteen eleven and nineteen twelve, so China would ultimately 0:09:34.320 --> 0:09:38.080 shift at least a name into a republic. The Shing 0:09:38.160 --> 0:09:41.640 dynasty was overthrown and the Republic of China or r 0:09:41.679 --> 0:09:45.760 o C was born UM, and even that story is 0:09:45.840 --> 0:09:50.960 super complicated. Part of that process also saw a nationalist 0:09:51.080 --> 0:09:56.640 party called k MT taking formation UM, which was initially 0:09:56.720 --> 0:09:59.400 suppressed by the first r o C president. Turns out 0:09:59.440 --> 0:10:02.240 the first presid that was actually more of a dictator. 0:10:02.280 --> 0:10:05.040 He even tried to turn China back into a monarchy, 0:10:05.120 --> 0:10:08.320 which failed, But I digress. So we then get to 0:10:08.360 --> 0:10:12.000 a truly chaotic era in China's history in which various 0:10:12.000 --> 0:10:17.240 provinces rebelled against the dictator slash president, and many regions 0:10:17.480 --> 0:10:20.559 ended up being led by military commanders who became known 0:10:20.600 --> 0:10:25.360 as warlords UH. The KMT party, which again was a 0:10:25.480 --> 0:10:29.559 very China centric party. It was very much based in 0:10:29.800 --> 0:10:35.560 nationalist philosophies, this idea of you know, China is China, 0:10:35.960 --> 0:10:40.120 and we need to unify and we need to expunge 0:10:40.600 --> 0:10:45.280 all the foreign influence that has been trying to to 0:10:45.920 --> 0:10:49.240 control China up to this point. But you had another 0:10:49.280 --> 0:10:54.280 political party come to power, the Chinese Communist Party or CCP. 0:10:55.440 --> 0:10:57.600 These two parties would actually work together in kind of 0:10:57.600 --> 0:11:01.360 an unsteady alliance for a couple of different brief eras 0:11:02.040 --> 0:11:06.760 the Soviet Communists were influencing and encouraging the CCP. So 0:11:07.080 --> 0:11:11.240 the alliance between the ultra nationalistic KMT and the Soviet 0:11:11.320 --> 0:11:14.679 backed c c P was always uneasy, but a common 0:11:14.800 --> 0:11:19.960 enemy Japan kept the two parties united at least temporarily, 0:11:20.000 --> 0:11:23.160 and the war with Japan would overlap with World War Two. 0:11:23.440 --> 0:11:28.240 So Japan once again won numerous conflicts against China and 0:11:28.320 --> 0:11:32.079 sapped much of the Republic of China's resources in the process. 0:11:32.559 --> 0:11:36.880 Uh the KMT was plagued with corruption and infighting, and 0:11:36.960 --> 0:11:42.080 meanwhile the Communist Party, the CCP, was growing more unified 0:11:42.200 --> 0:11:45.680 and more confident. Then we get to nineteen forty five 0:11:46.080 --> 0:11:49.679 and the end of World War Two and Japan surrenders, 0:11:50.080 --> 0:11:55.319 and as part of that, it seeds Taiwan back to China. Now, 0:11:55.360 --> 0:11:58.040 the last time China controlled Taiwan, it was the Shing 0:11:58.200 --> 0:12:01.240 dynasty that was in control. Now it was the Republic 0:12:01.280 --> 0:12:05.560 of China, which for all practical purposes really meant the KMT, 0:12:06.000 --> 0:12:10.920 that political party of nationalist China philosophy. But the c 0:12:11.120 --> 0:12:13.959 c P was rising in power and the k m 0:12:14.120 --> 0:12:18.040 T was in turmoil, and once again China entered into 0:12:18.120 --> 0:12:21.800 a civil war, and the c c P made massive 0:12:21.880 --> 0:12:26.000 strides against the KMT within China. So in nineteen forty nine, 0:12:26.559 --> 0:12:31.960 the Republic of China government fled to Taiwan and the 0:12:32.040 --> 0:12:38.320 Communist UH, the Chinese Communist Party, takes control of mainland China. 0:12:39.120 --> 0:12:41.959 So in nineteen forty nine we entered into the era 0:12:42.120 --> 0:12:46.080 of two China's up. Interestingly, the United States did not 0:12:46.320 --> 0:12:51.480 recognize mainland China's government as quote unquote China until nineteen 0:12:51.559 --> 0:12:54.320 seventy nine. I would say that's largely because of the 0:12:54.360 --> 0:12:58.520 Cold War, the fear of Soviet influence UH. And even 0:12:58.520 --> 0:13:03.280 though the Republic of China was essentially confined to Taiwan 0:13:03.360 --> 0:13:08.319 and the surrounding area. The that was what was recognized 0:13:08.360 --> 0:13:12.640 as quote unquote China. In nineteen seventy nine, that switched 0:13:13.080 --> 0:13:17.560 and now the United States still only recognizes China, it 0:13:17.640 --> 0:13:22.680 doesn't recognize Taiwan as being a separate country. So now 0:13:22.720 --> 0:13:26.800 it just recognizes the the mainland China government as the 0:13:26.920 --> 0:13:32.560 actual China in U s I S. So, yeah, we 0:13:32.640 --> 0:13:35.400 have to China's there's there's the mainland under the control 0:13:35.400 --> 0:13:38.360 of the Chinese Communist Party, and there is Taiwan, which 0:13:38.880 --> 0:13:42.080 is under the control of the Republic of China. And 0:13:42.200 --> 0:13:45.760 for decades, for practical purposes, that was just the KMT. 0:13:46.880 --> 0:13:51.439 More than a million Chinese fled to Taiwan in ninety 0:13:51.559 --> 0:13:55.439 nine as well, and the Republic of China in Taiwan 0:13:55.840 --> 0:14:00.959 would issue some emergency decrees in ninety forty nine as 0:14:01.040 --> 0:14:05.760 in order to try and maintain order in Taiwan uh 0:14:05.800 --> 0:14:09.040 and they were pretty restrictive, like one of them banned 0:14:09.080 --> 0:14:12.240 the formation of new political parties, so it kind of 0:14:12.840 --> 0:14:17.719 secured KMT as the party in power indefinitely. There were 0:14:17.760 --> 0:14:21.480 a couple of other smaller, mostly ineffective political parties that 0:14:21.520 --> 0:14:25.920 were active at the time, but KMT was was absolutely dominant, 0:14:26.760 --> 0:14:32.400 so they were effectively synonymous with the government of Taiwan. 0:14:33.120 --> 0:14:36.040 They also got rid of stuff like term limits, so 0:14:36.200 --> 0:14:39.320 it was really like just making sure that they had 0:14:39.360 --> 0:14:42.760 this on lockdown. The Republic of China would pursue a 0:14:42.800 --> 0:14:46.960 brutal anti communist campaign in Taiwan for decades. It was 0:14:47.000 --> 0:14:50.840 actually known as the White Terror that extended all the 0:14:50.880 --> 0:14:54.440 way into the nineteen nineties. In fact, that the Republic 0:14:54.480 --> 0:14:57.600 of China would declare martial law in Taiwan, which would 0:14:57.640 --> 0:15:02.160 last from nineteen nine to nineteen eight seven. So Taiwan's 0:15:02.160 --> 0:15:05.920 emergence as a player in the semiconductor space actually happened 0:15:06.280 --> 0:15:09.000 while all this was still a thing. So you might 0:15:09.040 --> 0:15:11.800 wonder why is he even talking about this, because these 0:15:11.840 --> 0:15:17.080 were policies that were actually active when Taiwan began to 0:15:17.200 --> 0:15:21.240 establish its semiconductor industry. Okay, we've got some more history 0:15:21.240 --> 0:15:23.440 to get through, and then I swear we're gonna talk 0:15:23.440 --> 0:15:34.480 about semi conductors. But first let's take a quick break. Okay, 0:15:34.520 --> 0:15:39.160 we're back mainland China. It gave the People's Republic of China, 0:15:39.480 --> 0:15:43.240 ruled by the Communist Party, maintains that Taiwan is still 0:15:43.320 --> 0:15:46.600 part of China. Uh. The k m T s platform 0:15:46.640 --> 0:15:51.160 in in Taiwan that that one maintains that Taiwan is 0:15:51.320 --> 0:15:54.680 separate from mainland China, but it views the Unified China 0:15:54.760 --> 0:15:59.920 idea as critical for trade and political relationships with the mainland. Uh. 0:16:00.360 --> 0:16:03.200 If I'm being honest, there's some subtleties here that I 0:16:03.280 --> 0:16:06.600 don't fully understand because it almost seems like the KMT 0:16:06.760 --> 0:16:09.000 is saying we also believe in the unified China, just 0:16:09.120 --> 0:16:12.320 you know, we're separate from them, and I it almost 0:16:12.360 --> 0:16:15.280 seems like double thing to me. But I'm sure that 0:16:15.520 --> 0:16:19.160 it's you know, fully logical, and I just don't grasp 0:16:19.200 --> 0:16:23.720 it because I haven't really been immersed in research enough 0:16:23.760 --> 0:16:27.160 to be able to understand it. Anyway, the tensions between 0:16:27.160 --> 0:16:30.560 Taiwan and China are key to understanding Taiwan's place in 0:16:30.600 --> 0:16:35.240 the semiconductor industry today and how like people are starting 0:16:35.240 --> 0:16:41.000 to wake up to the potential dangers of this uh, 0:16:41.200 --> 0:16:45.720 this tension between China and Taiwan. So since the mid forties, 0:16:45.800 --> 0:16:49.240 the Republic of China has maintained control of Taiwan. The 0:16:49.440 --> 0:16:52.880 KMT dominated the Republic of China for most of that period, 0:16:53.160 --> 0:16:56.880 but more recently that has changed. In two thousand, a 0:16:57.040 --> 0:17:02.480 candidate for the Democratic Progressive Party or DPP, defeated the 0:17:02.600 --> 0:17:08.720 KMT candidate for President of Taiwan. The DPP platform centered 0:17:09.000 --> 0:17:14.520 largely on the concept of a Taiwanese republic with independent sovereignty. 0:17:14.560 --> 0:17:17.840 So this is more of a party that says we 0:17:17.920 --> 0:17:21.479 are our own nation, we should be considered as such. 0:17:21.880 --> 0:17:24.880 And you can say that the DPP in general favors 0:17:24.920 --> 0:17:28.159 closer ties with the United States and independence from China, 0:17:28.760 --> 0:17:33.680 while the KMT has tendencies of maintaining closer relationships with China. 0:17:34.200 --> 0:17:37.359 Uh A lot of the members of KMT are people 0:17:37.400 --> 0:17:41.840 who migrated from China to Taiwan, so they want to 0:17:41.920 --> 0:17:47.080 maintain those those ties, both economic and political. Now I 0:17:47.119 --> 0:17:50.439 mentioned that the population of Taiwan is ethnically more than 0:17:50.560 --> 0:17:54.520 eight percent Taiwanese. Again, those are the people who migrated 0:17:54.560 --> 0:17:58.440 from China hundreds of years ago, most of those being 0:17:58.480 --> 0:18:05.240 Hucklo or Fushian Chinese settlers. About two percent of the 0:18:05.280 --> 0:18:09.480 population are indigenous peoples whose history on the island stretches 0:18:09.520 --> 0:18:12.840 back thousands of years, and about fourteen percent of the 0:18:12.840 --> 0:18:19.520 population are mainland Chinese who relocated to Taiwan or a 0:18:19.720 --> 0:18:24.080 descended directly from you know, a generation that located relocated 0:18:24.080 --> 0:18:28.840 from China to Taiwan. Since two thousand, the power has 0:18:28.840 --> 0:18:31.520 shifted a couple of times between the KMT and the 0:18:31.640 --> 0:18:35.680 d p P, and currently the DPP controls a majority 0:18:35.760 --> 0:18:38.679 of the government of Taiwan. The island has had a 0:18:38.680 --> 0:18:42.359 few eras of industrialization, mostly that got started during the 0:18:42.400 --> 0:18:47.240 era of Japanese occupation, and so there was some industrialization 0:18:47.359 --> 0:18:50.199 that was occurring in Taiwan around World War One and 0:18:50.240 --> 0:18:54.119 World War Two. Under the Republic of China in the 0:18:54.200 --> 0:18:59.639 nineteen fifties and sixties, Taiwan experienced an incredibly rapid industrialization 0:18:59.800 --> 0:19:03.320 very it mostly in areas like textiles and light manufacturing, 0:19:04.000 --> 0:19:05.840 but it was happening at a pace that was well 0:19:05.880 --> 0:19:09.480 beyond what we saw develop in other countries like the 0:19:09.880 --> 0:19:13.479 United Kingdom. One of the practices that led to this, 0:19:14.359 --> 0:19:17.880 both in Taiwan and on mainland China, was a new 0:19:17.920 --> 0:19:21.959 policy that encouraged students to study abroad in fields like 0:19:22.240 --> 0:19:26.280 engineering before returning home to apply what they had learned 0:19:26.440 --> 0:19:30.000 and build out industry in their home country. Now hold 0:19:30.040 --> 0:19:32.119 that thought. We're going to shift gears for a second 0:19:32.160 --> 0:19:37.120 to talk about integrated circuits. Okay, before nineteen fifty nine, 0:19:37.640 --> 0:19:42.000 circuits consisted of electronic components that were connected to each 0:19:42.080 --> 0:19:45.760 other with physical wires to create a circuit. Uh, the 0:19:45.840 --> 0:19:49.440 invention of the transistor meant that circuits could be much 0:19:49.520 --> 0:19:53.119 smaller than they had been. The transistor was able to 0:19:53.200 --> 0:19:57.040 replace a component like the vacuum tube, and that's what 0:19:57.119 --> 0:19:59.600 allowed for the invention of things like the transistor radio, 0:19:59.760 --> 0:20:01.920 which was a device small enough to carry in your hand, 0:20:01.960 --> 0:20:05.520 whereas the radios of old those were like big table 0:20:05.560 --> 0:20:10.440 top or sometimes consoles, like a piece of furniture all 0:20:10.480 --> 0:20:15.520 on themselves. But transistors brought in the era of miniaturization. However, 0:20:16.000 --> 0:20:18.200 circuits were still kind of bulky. You know, you still 0:20:18.200 --> 0:20:21.840 had to use wires. You couldn't get too small because 0:20:22.520 --> 0:20:26.440 it became too difficult to connect the individual electronic components 0:20:26.440 --> 0:20:30.040 to two wires and you just reached a point of 0:20:30.040 --> 0:20:35.000 diminishing returns. But then Robert Noyce, who was working at Fairchild, 0:20:35.320 --> 0:20:39.639 and Jack Kilby who was working at Texas Instruments, each 0:20:39.760 --> 0:20:43.119 independently came up with a similar idea. What if you 0:20:43.160 --> 0:20:46.960 were to build out a circuit on a single silicon 0:20:47.280 --> 0:20:51.000 chip and you could etch connectors to every component, and 0:20:51.080 --> 0:20:54.359 you could build directly onto the chip and all the 0:20:54.359 --> 0:20:57.560 components would be integrated on that chip. It would be 0:20:57.600 --> 0:21:01.399 an integrated circuit or I see that could reduce the 0:21:01.400 --> 0:21:04.600 size of circuits even more than the shift from vacuum 0:21:04.600 --> 0:21:08.359 tubes to transistors did. Noise would ultimately get the patent 0:21:08.400 --> 0:21:11.000 for that invention from the patent office. They both filed 0:21:11.040 --> 0:21:14.399 for a patent. Noise just you know one. He just 0:21:14.440 --> 0:21:18.000 got it first, but both of them are credited in 0:21:18.040 --> 0:21:20.679 at least in most places, as being the inventor of 0:21:20.720 --> 0:21:24.560 the integrated circuit. Now, it's one thing to design an 0:21:24.560 --> 0:21:28.320 integrated circuit, it's another thing to produce them at scale. 0:21:28.960 --> 0:21:31.399 Production is a tough challenge, and it's made even tougher 0:21:31.440 --> 0:21:35.360 by the fact that as designs evolve and components shrink 0:21:35.520 --> 0:21:39.040 in size, you actually have to overhaul your entire manufacturing 0:21:39.080 --> 0:21:42.879 process in order to meet that design right Like, you 0:21:42.920 --> 0:21:48.600 can't just keep using the same process. It isn't designed 0:21:48.600 --> 0:21:52.320 to make things smaller. You have to actually reconfigure everything. 0:21:52.440 --> 0:21:55.760 So for that reason, it really didn't take very long 0:21:55.840 --> 0:21:58.520 after the invention of the integrated circuit for a lot 0:21:58.520 --> 0:22:02.520 of companies to see a problem. The cost of creating 0:22:02.520 --> 0:22:06.880 fabrication facilities was considerable, and the cost of overhauling them 0:22:07.280 --> 0:22:10.600 meant you couldn't just right off as a one time thing. 0:22:10.640 --> 0:22:14.560 You couldn't say, well, will invest fifteen million dollars to 0:22:14.600 --> 0:22:17.480 build out a facility and then we're done. No, it'd 0:22:17.480 --> 0:22:19.480 be we'll have to invest fifteen million dollars in a 0:22:19.520 --> 0:22:24.000 facility and then in a year we will have to 0:22:24.040 --> 0:22:27.919 spend another five million to update the facility. Now this 0:22:28.040 --> 0:22:31.959 opened up an opportunity a company could specialize in the 0:22:32.000 --> 0:22:37.320 manufacture of integrated circuits that had been designed by other companies. 0:22:37.960 --> 0:22:40.480 So you would have some companies just working in R 0:22:40.560 --> 0:22:42.960 and D and they would build out new designs for 0:22:43.000 --> 0:22:46.719 semiconductor chips, but they wouldn't be ready, they wouldn't be 0:22:46.760 --> 0:22:51.200 capable of manufacturing those on a scale that would allow 0:22:51.240 --> 0:22:53.800 them to you know, use them as products. So then 0:22:53.880 --> 0:22:58.760 they would partner with a fabrication company. They would become 0:22:58.760 --> 0:23:01.440 a customer of the fabrication company. In the fabrication company 0:23:01.480 --> 0:23:05.840 would just focus on building out integrated circuits at scale. 0:23:06.240 --> 0:23:08.960 That scale thing is important because if you are able 0:23:09.000 --> 0:23:11.399 to operate at scale, you can bring down the cost 0:23:11.760 --> 0:23:16.320 of the individual components that you need in order to 0:23:16.840 --> 0:23:19.800 actually make the thing. As the costs come down, if 0:23:19.800 --> 0:23:22.600 the price stays the same, then you you make profit. 0:23:23.359 --> 0:23:27.639 All right. So let's get back to Taiwan in in 0:23:28.000 --> 0:23:31.720 Sincho City, and again my apologies for all the terrible pronunciations. 0:23:32.480 --> 0:23:37.240 The Industrial Technology Research Institute or I t r I 0:23:37.280 --> 0:23:41.240 was founded. It's a nonprofit organization. And you might say, 0:23:41.480 --> 0:23:44.159 by whom who was it that founded the I t 0:23:44.440 --> 0:23:48.600 r I. I am not entirely sure. My research just 0:23:48.680 --> 0:23:51.400 gave me that date and the fact that it was founded. 0:23:51.720 --> 0:23:54.480 I looked in lots of places and unfortunately a ton 0:23:54.520 --> 0:23:57.720 of them have nearly identical wording, which tells me that 0:23:57.760 --> 0:24:01.360 they're all drawing from the same source. So I don't 0:24:01.400 --> 0:24:03.640 have more information on that. I'm sure people out there 0:24:03.720 --> 0:24:05.639 know who are listening to this. They can let me 0:24:05.760 --> 0:24:11.040 know tech stuff hsw on Twitter because I'm curious anyway. 0:24:11.320 --> 0:24:13.600 I t r I is a technology R and D 0:24:13.800 --> 0:24:17.080 institution that would play a key role in launching the 0:24:17.119 --> 0:24:21.000 semiconductor industry in Taiwan. And then we get a story 0:24:21.480 --> 0:24:23.840 that goes like this, at a group of seven people, 0:24:24.119 --> 0:24:28.200 among them Taiwan's Minister of Economic affairs, and another one 0:24:28.320 --> 0:24:32.520 was a Chinese born executive who worked at Radio Corporation 0:24:32.520 --> 0:24:36.480 of America or r c A. I've done multiple episodes 0:24:36.480 --> 0:24:39.160 about r c A, so you can listen to those 0:24:39.200 --> 0:24:43.600 to learn about how influential and important that company was. Uh. 0:24:43.880 --> 0:24:47.200 They met for breakfast at a stall in Taipei again 0:24:47.240 --> 0:24:49.479 along with like five other people. This was in nineteen 0:24:49.560 --> 0:24:52.920 seventy four, and they were talking about how Taiwan could 0:24:52.920 --> 0:24:57.119 be part of the semiconductor manufacturing industry. Now, the story 0:24:57.200 --> 0:25:01.480 says that the r c A executive or Taiwanese officials 0:25:01.760 --> 0:25:05.920 to invest in building out fabrication facilities for integrated circuits, 0:25:06.000 --> 0:25:10.280 and the officials were eager to bolster Taiwan's economy. This 0:25:10.359 --> 0:25:12.720 is nineteen seventy four. That means this is following in 0:25:12.720 --> 0:25:16.400 the wake of the nineteen seventy three oil crisis, which 0:25:16.400 --> 0:25:19.480 in itself was the result of a massive political disagreement, 0:25:19.840 --> 0:25:22.880 which is putting it lightly. That happened on a global scale, 0:25:23.560 --> 0:25:26.320 and even countries that weren't directly connected to the oil 0:25:26.359 --> 0:25:29.800 crisis got affected by it through you know, the fact 0:25:29.880 --> 0:25:34.119 that countries that were affected, uh, you know, the international 0:25:34.119 --> 0:25:36.960 commerce meant that this was a ripple effect across the 0:25:37.080 --> 0:25:40.480 entire world, so Taiwan was hit by that. Now the 0:25:40.520 --> 0:25:44.600 case was made that Taiwan could build up fabrication facilities 0:25:44.840 --> 0:25:48.680 and other companies could rely upon those facilities to build 0:25:48.720 --> 0:25:52.879 their designed circuits. The integrated circuit was less than twenty 0:25:52.960 --> 0:25:55.480 years old at this point, and already they were getting 0:25:55.480 --> 0:25:59.280 complicated enough that small fabrication facilities were beginning to get 0:25:59.359 --> 0:26:02.920 left behind. And this is really where Moore's law comes 0:26:02.960 --> 0:26:07.880 into play. So Moore's law is really an observation rather 0:26:08.000 --> 0:26:12.239 than a law. Gordon Moore observed a trend driven by 0:26:12.280 --> 0:26:15.679 economic demand in which companies were doubling the number of 0:26:15.720 --> 0:26:19.840 discrete components on integrated circuits every two years or so. 0:26:20.119 --> 0:26:23.080 Today we tend to think of this as computers get 0:26:23.200 --> 0:26:28.040 twice as powerful every two years, So the computers of 0:26:28.080 --> 0:26:30.439 today are twice as powerful as the computers of two 0:26:30.520 --> 0:26:34.760 years ago. But the original observation was that economic factors 0:26:34.800 --> 0:26:40.760 primarily drove companies so that they would put our cram 0:26:41.040 --> 0:26:43.760 twice as many components on a on a one inch 0:26:44.600 --> 0:26:48.600 wafer of silicon. Every two years they would double. So 0:26:49.520 --> 0:26:52.080 if you have you know in year one, if you 0:26:52.119 --> 0:26:54.960 have a transistor with a thousand components, then by year 0:26:55.040 --> 0:26:58.840 three year building circuits that have two thousand components, and 0:26:58.880 --> 0:27:02.560 then by or five you're talking about four thousand components 0:27:02.560 --> 0:27:05.240 and so on, and that gets really big, really fast. 0:27:06.040 --> 0:27:08.760