Karl Denninger points out that the supply crunch in semiconductors directly and immediately affects whether or not our society can survive in its present form. All forms of emphasis are in the original.
The United States used to be responsible for about 40% of chip capacity in 1990 but today is responsible for about 12%.
What happens if a critical part of that fab capacity is either blown up or embargoed?
You literally can’t make anything electronic and given the enormous percentage of the whole it would take years, perhaps even a decade or more, to just replace US demand for said chips. Until that could be done you’d get nothing.
Realize what “nothing” means in this context:
- No cell phones.
- No towers to provide service to cellphones, including the extra one in your desk drawer.
- No “green power” of any sort, since the generation of same is DC and requires power semiconductors in size to be usable.
- All “modern” electronically-controlled electrical generation (fossil-fuel, nuclear or otherwise) shuts down immediately until and unless said chips and spares are available. Only the older-style, mechanically and manually controlled plants can run without this, and we’ve forced most of them to close, never mind that those who knew how to run them, a highly-skilled process, were all laid off and are gone with many of the plants themselves in such a state of disrepair or even torn down that they could not be restarted anyway.
- Ditto for all “modern” electronically-controlled refineries, chemical plants and similar. Oh, that’s most of them for the same reason; the “old way” wasn’t green enough and they’ve been torn down or are hunks of rust and cannot be restarted, nor does the skilled labor base required to run them still exist.
- No “green cars” of any sort, or any car at all for that matter. All modern vehicles are “drive by wire” and without said chips literally cannot be built. While you could build mechanical carburetors they can’t legally be sold and cannot work with modern emissions controls including the basic ones like a catalytic converter as they can’t control fuel:air mixture tightly enough.
- No washing machines, dryers or dishwashers. You think not? Find me any of the above with mechanical timers. Forget it.
- Even your electric stove won’t work. The old push-button multi-tap controls and burner elements are no longer made or sold. All today are electronic.
- Modern gas water heaters are electronic ignition, not standing-pilot, and without electronics won’t work. The others were made illegal because they weren’t “green enough.”
- Your gas furnace and air conditioner almost-certainly has a VFD-driven blower motor. No chips, no heat or A/C. The older-style PSC motors were less-efficient and basically forced out of the market by government mandate.
- Most natural gas, petroleum and other refining, handling and pipeline transport stops immediately if there is a failure and no parts. Why? Because all the motors used today are VFD-driven which, you got it, require power electronics. No chips, no controller.
- All modern Class 8 trucks (18 wheelers, the ones that deliver everything you use) will not start or run without these chips. A single sensor that fails and cannot be replaced forces the engine to either derate to the point of being able only to creep to the next possible place to fix it or shuts it down entirely. If there are no parts, even an inexpensive $50 part, that’s the end of that vehicle’s utility until the parts are available. If that sensor can’t be made due to unavailable chips for two years sucks to be you.
I can keep going but do I need to?
In short basically, well, everything we use and enjoy today stops. We could quite-literally be back to worse than the 1700s because in the 1700s all the houses had fireplaces and wood stoves along with candles for light where today most residences and essentially all commercial facilities are uninhabitable without modern power, water and sanitation systems. Don’t even contemplate the food, potable water and sanitation problem.
There’s more at the link.
This is why any adventurism by China towards Taiwan is so critical to the USA. Taiwan controls 40-50% of all computer chip design and production in the world, depending on whose statistics you believe. If China takes that over, it will have all the chips it needs and can hold them over the heads of other nations as a direct and immediate threat. “Oppose us, and you won’t be able to get the chips you need.” It’s as simple as that. On the other hand, if Taiwan is able to destroy its chip manufacturing plants before the Chinese can take over, then China will be in the same boat as the rest of the world – and that boat will be up the creek, without a paddle. Either way, the USA and the free world will lose.
As Mr. Denninger points out, we got into this by design, through letting our big corporations offshore their manufacturing and design facilities. It would take a decade or more to move everything back here, and that won’t happen because we simply aren’t willing to pay the much higher costs for computer chips that would be required to pay for the move. We’re trapped in a web of our own devising.
I don’t think there’s any solution to this. We’ll just have to hope and pray that the powers that be don’t play brinkmanship any harder than they’re doing already. If they do, then we’re neck-deep in the dwang. Those who pontificate about emergency preparations aren’t any help, either, because there aren’t any preparations that can suffice for this. Individuals and families who are prepared to go back to a 19th-century way of life may make it (provided their neighbors don’t try to steal what they’ve put in place), but the society in which we live won’t. Our nation literally can’t survive in its present form without what computer chips do for us.
Living in North Texas, as I do, is a nightmarish thought without air-conditioning in summer to make our homes bearable. As for winter, we’d probably be able to dress warmly enough to survive it here, but in the snowbound states further north, with no artificial heat or light . . . I wouldn’t like to be there. It wouldn’t be pretty.
I'd say that we should immediately begin making semiconductors and medicines…but nobody listens. We should increase oil production and stockpile strategic materials at a much greater rate…but then again. Even Canada can't be trusted as a trading partner with the Castro family in power.
You're overlooking the Samson Strategy:
In no scenario does China seize that capacity intact.
We'd nuke the whole island ourselves, and make it look like the ChiComs did it, and be prepared to erase something like 70% of their population if they so much as blinked afterwards.
There will be no one around afterwards to say different, and long-term, I like our odds of coming out of the ashes better than theirs, though that would be cold comfort to tens of millions who wouldn't survive the transition.
But the danger of such a strategic single point of failure is sobering.
This is ball bearings to Nazi Germany, and oil and shipping to Tojo.
And even with the drooling pants-pooping idiot warming the chair behind the Resolute desk, saner heads at the highest levels will advise the ChiComs, for exactly the reasons outlined, that if they want to rule the ashes of 500-800M former good comrades, and return to 1800 with us, they should, by all means, see if that lemon is worth the squeeze.
Otherwise, they can get back on the porch, and think of something else to play with.
Good essay on offshoring insanity, from a few years ago:
Dunno what Aesop is thinking, but the Republic of China has openly said that the factories, all the factories, everything that makes Taiwan a productive powerhouse, will be blown the instant ChiCom feet touch on the ROC's land.
But will West Taiwan listen? Probably not, but it may be one of the few things holding them back. Sure isn't BoogerBrain in the White Horse.
Booger Brain is lucky if he can find the White House china with his pudding-eating spoon, let alone find the actual one on a map.
Ok, we're losing perspective here. I generally like Denninger but…he is given to hyperventilation as much as his piss poor grammar.
Yes, we all agree that a chip shortage would be dire. But it ain't the apocalypse. It's an economic collapse and a political revolution. I say yes to both and sooner the better.
We are already dead men walking. We are ruled by a criminal Cartel that doesn't give a crap about us and is openly scheming to eliminate as many of us as possible via injections, hyperinflation, fetanyl poisoning, criminal gang invasions, etc…
We need to crash this thing and then take our chances on recreating what we can in what's left of America. This is life .and death. Microchips can go hang. I know my big brother in Lubbock could fabricate just about any damn thing he needs out of rusty scrap and tobacco. There are lots of Americans like him. In my small town, there's enough farmland and resources to self sustain without chips. Back to simple, dirt scratching and livestock. Oh well. Let's see the feds try to rule over that sheetshow.
This may sound grim but i guarantee you that it's way better than what the Criminal Cartel is planning for us if this economy is allowed to continue functioning to their benefit.
Definetly right on one thing, I've been waiting 8 months on a new furnace and it's not expected to ship before the middle of next month due to problems getting parts, aka chips, for the control board.
The politicians are bought, short sighted, and incompetent.
The list if thing that needs to changed from banking through production is extensive.
Semi Conductor Capital Equipment is part of our business. There are two huge "builds", facilities, being built in Phoenix Az. One by Intel the other by a Taiwanese company. And they're both in a hurry.
Our neighbor works for the power company. We live in a very desirable area of a free red state and there has been a housing boom going on. However, he says that the power company no longer get transformers for the newly planned housing developments. The nearest delivery date is 2 years out.
One would hope they have replacement transformers for the ones already in place, but who knows.
They probably have spares for the smaller transformers like those on the street poles. Transformers in substations, nope.
The above catastrophe wouldn't happen overnight but over the lifetime of existing equipment. If we were to bring back manufacturing to CONUS we could always build with pre chip designs until chip manufacturing caught back up. Of course we'd need a DC that would backstop the necessary, such as rollbacks on car emissions and drop the whole energy star program.
Bush I, Clinton, Bush Jr., and Obama worked to sell our butts downriver to the Chinese. I remember a number of fab facilities in Austin, TX, in the late 1990s and many closed because you know, God forbid you have to pay those American wages. But hey, someone saved $$$!!!
Just elect a party and leader who have a great respect and love for the communist party style of government. It working here in Canada…