President Biden just signed a $50 billion law to boost semiconductors. What are they, exactly?

Christian Thorsberg

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U.S.-China relations have become increasingly contentious, particularly around Taiwan — the island 80 miles off China’s coast that leads the world in semiconductor production.

But what are semiconductors? How do they impact our everyday lives? National security? The supply chain? Why did President Joe Biden just sign a bill to increase their domestic production?

Here is a grossly oversimplified, stepwise explanation of what they do and why they’re so important.

How does electricity work again?

Let’s journey for a moment back to high school physics. A material that can conduct electricity — meaning an electrical current can pass through it — is called a conductor. A material that cannot conduct electricity — no electricity can pass through it — is called an insulator.

This binary is important: The presence or absence of electricity, at different places and times within a machine such as a computer, is effectively how such a device is able to operate. The computer very quickly interprets and responds to these electrical signals — all controlled by the presence of conductors and insulators — and responds to them.

In early computers, these conductors and insulators were massive, clumsy and physically moved when controlling current. That’s why, in those black-and-white images of the first computers, they were stored in massive rooms. It’s also why early computers were so slow compared with modern standards.

And that’s where semiconductors come in. Semiconductors function somewhere between conductors and insulators — they “semi” conduct electricity, controlling the flow of electrons themselves — sometimes to conduct, sometimes to insulate.

What are semiconductors made of? How big are they?

Semiconductors are tiny, work instantaneously and can be produced cheaply — which led to the computer boom. Silicon is the most common semiconductor — hence “Silicon Valley” — though germanium and gallium arsenide are also used.

What’s important is that semiconductors are being made smaller and smaller so as to fit as many as possible on the microprocessing chips that control computers. The more semiconductors per chip, the more efficiently computers can run. And these aren’t just desktop computers and phones — these chips are used to process all scales and realms of data transfers, from vehicles to artificial intelligence to manufacturing to weaponry.

And here’s where scale goes out the window and the industry’s nuance becomes eye-popping. The number of semiconductors (the word “transistors” is sometimes used interchangeably) that can fit on a microchip doubles roughly every two years.

As of today, 5 nanometer chips (”5 nanometer” refers to the size of each semiconductor; for scale, a human hair is 80,000 to 100,000 nanometers wide) are being produced in bulk. Tens of billions of semiconductors are being fitted onto minuscule chips.

Today’s world is all about computing speed — which means the race for the fastest, smallest microchips is on.

Why is Taiwan in the middle of this? Why did Biden sign the Chips bill?

There are only a handful of large companies that produce microchips in bulk: Samsung and Intel are recognizable names; Nvidia, Broadcom and Qualcomm are also industry leaders.

But the world’s largest chip producer is Taiwan Semiconductor Manufacturing Company (TSMC), located in Hsinchu, Taiwan. The company made a record $18.16 billion (net) during this year′s second quarter. The island’s main trading partner is China, and its largest export (33 percent of the total) is semiconductors — a crucial advantage on the world stage.

On Tuesday, Biden signed the Chips bill, which offers funding and tax credits for American semiconductor companies — incentives aimed to help bolster national production of the all-important technology.