Geo-economics on the frontline

Exploring the intersection of technology and geopolitics, When the Chips are Down delves into the critical role of semiconductors in this evolving high-stakes dynamic

When the Chips are Down: A Deep Dive Into a Global Crisis 

Author: Pranay Kotasthane & Abhiram Manchi

Publisher: Bloomsbury

Pages: 172

Price: Rs 599

Speaking recently at an event in New Delhi, External Affairs Minister S Jaishankar observed that since the start of  economic liberalisation of 1991, India pushed hard to integrate with the world, but assumed that technology was something that could be bought off the shelf. Collaborations between Indian companies and foreign entities dwelt on technology transfer as a one-way street flowing towards India. He is right. That is why India took two decades to sign on to the global intellectual property regime and, that too, with caveats. Technology as a capital asset has come to acquire a decisive place only in the past decade, as Indian companies have begun to develop the wherewithal to adjust to it.

The Indian state, too, has begun to realise that developing robust technological strength is essential, if the economy has to develop. Without a diverse technological base to push productivity, the needle of gross domestic product (GDP) growth will not swing upward. To that extent, technology as a foil to global politics is a given.

A huge change in this context is the recent signing of the initiative on critical and emerging technology (iCET) between India and the USA. The agreement formalised in July this year is key, making possible a huge range of technological collaborations between the two nations. Notice that this time it is not about just a hand-me-down approach from Washington DC to New Delhi.

But just as India kept technology on the back burner, popular literature on technology has been sparse, with the exception of those on nuclear technology. When the Chips are Down, by Pranay Kotasthane and Abhiram Manchi seeks to correct this imbalance. Both writers are well qualified to do so. Mr Kotasthane teaches public policy at the Takshashila Institution where his research on semiconductors flows from his background as a chip design engineer. Mr Manchi, with several years of experience in the sector, provides an able foil to the venture.

Would a book on semiconductors hold my attention for a couple of hours? Surprisingly, yes! I finished reading this slim book in one go.

The authors argue rightly that trade wars in this century are going to be technology wars at their core. Thus, national investment in high technology is as much a security concern. The battle over semiconductors is possibly the most visible manifestation of the stakes. Even during Covid-19 in the high noon of 2020, global semiconductor sales rose 6.6 per cent to $440 billion, when global GDP contracted 3.5 per cent, according to Semiconductor Industry Association data. Those numbers have shot into the stratosphere since then. By the end of 2022 it had crossed $600 billion.

To keep its lead in the sector, the US government’s Chips and Science Act plans to invest $280 billion in the industry, something, as the book notes, is akin to the Manhattan Project, which created the atom bomb.

This move has vast implications. “Aggressive national competition over high technology might produce nonlinear breakthroughs this decade. The literature on national innovation suggests that a nation-state’s net negative balance of security concerns (termed creative insecurity) helps explain why only some nation-states focus on innovation,” the book notes. It explains that “given that leading powers increasingly feel creatively insecure, national policies will focus on innovation more than before, sometimes at the expense of consumers and other policy priorities. This situation sets the stage for some key breakthroughs, which is not unlike the Sputnik moment when the beach ball-sized artificial satellite led to a drastic change in science and innovation policies in the US.”

The authors argue such security compulsions will have implications for the relationship between industry and the government, quite unlike what happened in the 19th and 20th centuries. “There is likely to be higher alignment between private high technology players and their national governments,” they predict. As an example, they point to Intel, which, bowing to US government pressure, gradually withdrew from China and “dropped its plans to start a new fab in China”.

It is this realisation that has brought India and the US closer through iCET. Technology is now explicitly the handmaiden of the state. When a century earlier, European and US-based oil companies ventured into Asia, state support was not overt — though it was well understood that this would change in any conflict over access to oil resources. Now, the link between technology and corporate investment has become more explicit.

Such cohabitation of the state and the private sector will also significantly impact the level of choice citizens will have in their social, political and economic life — and not necessarily in that order. For instance, citizens will be encouraged to demonstrate their national priorities in their purchases. The trends will only deepen as the decades roll by and make the power of the incumbent government hugely scalable.

Drawing on examples from the semiconductor space, the authors refer to this emerging trend as semiconductor geopolitics, geo-economics and technology. It is difficult to quibble with them on this score.

The one element the book could have explored is these future questions. Admittedly knowledge about the development of the industry in Asia, spanning, Taiwan, Japan, South Korea and then China is still scattered and the authors have brought these strands together cogently. But in the process, the future is left somewhat undecided. Hopefully, they will examine those issues in depth in another book.