Taiwan is now Arrakis

He who controls the spice controls the universe.

Yep, that’s the plot of Dune, by Frank Herbert.

It is, in fact, the plot of the entire Dune series of books, one of the ur-texts of modern science fiction. There’s this galactic empire, see, and interstellar travel requires access to a certain narcotic drug, colloquially called “spice”, which only exists on one barren world – Arrakis. So if you want to control the empire, you have to control the supply of spice. And if you want to control the supply of spice, you have to control Arrakis.

I thought about all this when I read this little gem in the aftermath of Intel’s self-immolation last week … you know, the earnings announcement where this crown jewel of American innovation and strength told us that they had decided to financialize themselves into oblivion. Or as I like to call it, “pull a GE”.

TSMC gets large Intel chip order, Apple R&D plant (Seeking Alpha)

Taiwan-based newspaper Commercial Times reports that Intel has ordered 6nm chips from TSMC for next year.

The unprecedented Intel order would reportedly include 180,000 wafers, only slightly behind the raised 200K order from AMD, major TSMC client and Intel rival.

TSMC’s leading-edge capacity is now fully-booked for the first half of next year.

In other news for the pure-play foundry, Economic Daily News says Apple is setting up a display tech R&D plant within TSMC.

The world’s principal supplier of semiconductors – the spice of OUR global empire – is now Taiwan.

Forget about Hong Kong. Forget about the Uighurs. Forget about the virus. Forget about the Trade Deal. Forget about the South China Sea. Forget about all the reasons you’ve been told that the United States should or could be at odds with China.

And by forget, I don’t mean that you should really forget. What I mean is that none of these reasons really matter anymore. None of these reasons are spice. None of these reasons are the supply of semiconductors – the sine qua non of modern global power.

There is no future where the United States can both maintain its existential national interests and allow the world’s principal supplier of semiconductors to come under the direct political control of China.

And there is no future where China can both maintain its existential national interests and allow the world’s principal supplier of semiconductors to remain outside its direct political control.

Thanks a lot, Intel. Thanks a lot, Bob Swan. Thanks a lot, Jack Welch. Thanks a lot, all you Wall Street wizards of financialization.

Taiwan is now Arrakis. It’s now the most important country on earth. And we WILL fight over it.


  1. Interesting, TSMC is looking for land right now in the Phoenix-area for a huge manufacturing plant.

  2. We are Duned!

  3. Ha! I just finished reading Dune yesterday; it’s been over 30 years since the last time I read it.

    It is amazing how we find so many short-sighted ways to put ourselves at a long term disadvantage.

    Good thing Taiwan is in such a defensible location…

  4. This is somewhat of a departure from Moore’s Law.

  5. Maybe we can ‘worm’ our way in.

  6. Two things embedded in this piece that are worthy of further thought, IMO:

    (1) if the world’s “most important commodity” is now information (yes, I know - oil is still foundational) than computer processors and say, search algorithms, are of strategic importance themselves (what you’ve said, obviously, with this entire piece and comparison to Dune) — truly living in an age of information though, processors and tech can change the balance of power instantly, like a digital Dreadnought, and

    (2) the great, overarching, slow-motion story of the age is the conflict between the nation-state and non-state actors. This instance puts this idea in stark relief as corporations that are not constrained by national boundaries or dictates can cause “problems” for countries.

    Just some thoughts.

  7. Back in the late 60’s, I was an assembler language programmer on a 16 bit 64 KB Varian 620i. It was the size of a small refrigerator. Most programming errors (bugs) were initialization or reinitialization flag flaws. These flags were usually set with a single bit in one byte of core (ram).
    Yesterday, my grandson showed me his toy camera which had a 32 GB mini-SD card smaller than my little fingernail. I don’t code anymore, but I would suspect flags today are still set with only a few bits in a byte. So I would suspect the real power (spice) will be manipulation of the flags, not the flag holders.
    At this point, BenH might be thinking exactly right, it’s not about the supply, it’s about the backdoor intercept loop that only insiders are aware.

  8. (Interrupt loop)

  9. Can you expand on the end there? Are you speaking metaphorically or literally? That is, do you mean it matters how the actual chips can be manipulated by state actors?

  10. The users of the circuits can indirectly be utilised.

    It is a food chain.

  11. Well, “principal supplier of semiconductors” can be a transient thing. There’s still a lot of semiconductor manufacturing in the US, in Germany, and in other places, and while the percentage of semiconductors made in the US may have dropped significantly with Intel’s transition, Intel hasn’t been making competitive products for a few years now.

    Furthermore, China has been maintaining its existential national interests with the world’s principal supplier[s] of semiconductors outside its direct political control for quite some time now. Why would they suddenly decide that a), that had to change soon, and b), rather than just stealing IP and DIYing it, they had to push the giant red button?

    I think the article’s way overstating how big a deal this is, but I guess time will tell.

  12. Tariffs FTW I guess?

  13. Yes - manipulated. An interrupt is one way A signals B. Since there are a lot of different signal sources, each source has a different ID. B has to know what A’s ID is in order to do an ‘if ID on, then goto’ instruction. This latter instruction is looped, so B is always testing for A. In my days, these operations were done by sequential executions of instructions (bytes) in core. These days the chips run some things autonomously e.g. graphic accelerators

  14. It’s a strange new world. My neighbor (I live in a suburb of Houston) has been with Fluor(FLR) engineering and construction for 35 years. In the fall last year, was promoted in charge of Asia. He was 2nd in Asia before that working out of the Philippines, in process to move to Shanghai in January. About 8 weeks ago, FLR brought him back to Houston and shut down Asian operations. Expected some scaling back, did not expect just leave. Granted, they have made one misstep after another in the last 5 years, but Trump was supposed to change the world for them. Crazy how fast things change.

  15. Telelogical control of the supplied chips is the objective, not simply supply.

  16. Does mainland China somehow exert design control over Taiwanese manufacturers?

  17. There’s the rub.

  18. Avatar for glarri glarri says:
    1. Ben could you give us a few more words explaining what Intel said during their earnings call that indicated that they had “decided to financialize themselves into oblivion”.

    2. Intel just hired Pat Gelsinger to be their CEO. He is a 30 year Intel veteran engineering leader. That makes me think that the Intel board was to get back to engineering excellence and product leadership (or I am naïve and the new CEO is a smokescreen).

    3. TSMC is building a new fab in Arizona, to come on line in 2024.
      I wonder if the TSMC execs got a greencard deal for themselves and their families, so some of the Spice production is coming to US soil.

    4. … which is good news, because with China having sights trained on Taiwan, and North Korea having 100,000 munitions pointing at South Korea where Samsung’s fabs are, an awful lot of the world’s leading edge semiconductor fabs are in geopolitical peril.

    5. I expect the Pentagon (think F16s and satellites) and the NSA (think code-breaking and automatic transcription of Arabic and Persian language telephone calls into English text) both care a lot about the USA maintaining a competitive domestic silicon manufacturing capability. I doubt Uncle Sam will let Intel’s fabs disappear.

    1. Pork killed the Veterans bill. Ben don’t lead with a one liner that just will derail your readers. The comment was a distraction at best.

    2. Chip manufacturing needs water - a lot of it. Chip manufacture also requires seismically inactive areas.

    Neither Arizona nor Taiwan are good “manufacturing hubs”. Taiwan is at capacity, and they don’t know it yet. If you don’t believe me look up articles from last year’s Taiwan drought where TMSC was trucking in water.

    Anyone “proposing” a plant in Arizona does not intend to Build - but instead to raid the unsuspecting (ignorant?) coffers of the politicians who would create “incentives” for the move.

    Hmmm didn’t Foxconn propose a plant somewhere? Hmmm yes! In Wisconsin!

    It is easy to build the “shell” take the cash and never buy the tooling.

    Think differently.

  19. Public purse.
    A minor distinction in language terms, but an inch on a bureaucrat’s map can be an odyssey to the foot soldiers.

  20. This whole Arrakis reference is so nerdy —and of course I totally get it. :nerd_face:

  21. Water is a red herring. Energy and technological expertise, and unflinching support of a powerful educational system are the things.

    Motorola moved its budding semiconductor operations to the Arizona desert in the 1950s. Why? Certainly, some of the executives wanted to get out of Illinois winters :sunglasses:. For whatever reasons, semiconductor design and fabrication thrives in Arizona and continues to grow.

    A stable supply of water is important. But, even the semiconductor industry is not somehow stuck in the dark ages: relentless work on reducing new water consumption and improving water re-use has been a big technological push.

    Important to know: water is not magically destroyed by semiconductor fabs. The raw water feedstock goes in and then comes back out. The things that happen to make that water usable for semiconductor fabrication are extensive, and grow in complexity and cost every day. The water effluent that comes from semiconductor manufacture returns to the world. It doesn’t vanish from the universe.

    I have friends who work in water processing for semiconductor manufacture. The technology improvements in the past 30 or so years to make cleaner, more pure water (technically, scrubbing and polishing) are incredible. We are talking darned clean H2O, with impurity levels below 1 part per billion. And the need for greater purity never ends.

    Water traditionally leaves the system as effluent to the municipal water system, or as water vapor. Both of these are wasteful, and either loses the water to the atmosphere or puts heavier loads on wastewater treatment. Both are inefficient uses of water; the progress to reduce both is intensive and successful. They are also capital and energy intensive. But, so is everything else in semiconductor manufacture.

    Energy is absolutely critical. A stable supply is vital. While not apparently very public, the agreements between semis and the state of Texas to ensure power are significant. (I am not from Texas, but it seems that those agreements are to the effect of “better to have the state go black than to allow a semi fab to have power drop unexpectedly :innocent:.”)

    If there is agriculture, especially really water-hungry crops like alfalfa, hay, cotton, whatever, there’s water for semiconductor manufacture. Comparing the impact on a state’s economy from preferring one use over another, and adjusting the laws to suit, is outside my scope as an engineer; I leave it as an exercise for the reader.

    Cheers - Jon

Continue the discussion at the Epsilon Theory Forum


The Daily Zeitgeist

ET Zeitgeist: Raccoons Never Sleep

By Ben Hunt | May 28, 2021 | 5 Comments

Lemonade (LMND) isn’t just an insurance company. No, no … they’re an AI Company! ™.

Plus Chamath is up to his old tricks.

I hate raccoons.

Read more

Inflation as Ad Campaign

By Ben Hunt | May 24, 2021 | 0 Comments

An ET Pack member sent me this. Anyone else come across ads that directly call out inflation expectations? Would love to collect more screenshots like…

Many People Are Saying … Bitcoin is Art

By Ben Hunt | May 24, 2021 | 0 Comments

The Bitcoin Is Art thesis that I put out back in 2015 (The Effete Rebellion of Bitcoin) and recently put forward again (In Praise of…

Why Am I Reading This Now?

By Ben Hunt | May 24, 2021 | 1 Comment

Pack member Rob H. brought this up at last week’s Office Hours, and it deserves its own thread (as well as some attention from the…

Homeschooling Resources on ET Forum?

By Ben Hunt | May 24, 2021 | 0 Comments

I think a homeschooling VMPT is a natural for the ET Forum! On last week’s Office Hours conversation, ET Pack member Dan W. brought this…

ET Zeitgeist: With Enemies Like This

By Ben Hunt | May 21, 2021 | 9 Comments

This has been a bad week for Bitcoin and Bitcoin! TM alike. There’s no getting around that.

But whenever Paul Krugman and the Wall Street Journal agree on something … I want to be on the other side of that trade!

Read more


This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.

Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.