A lesson from the Ukraine war: Secure our semiconductor supply chains

There are many lessons emerging from Russia’s invasion of Ukraine, and others yet to be discerned. One insight that the war has reinforced concerns the tremendous strategic value of semiconductors. These tiny silicon chips offer a huge warfighting advantage for the Ukrainians — but also should remind the United States of the urgent need to secure our own semiconductor supply chain. 

In the war thus far, Ukrainian forces have used small, relatively inexpensive weapons such as Javelin and NLAW anti-tank missiles, Switchblade drones, and Stinger anti-aircraft missiles to destroy hundreds of Russian tanks, armored personnel carriers, helicopters and jets. Each Javelin, NLAW, Switchblade and Stinger costs a tiny fraction of the price of a tank or jet. Collectively, these weapons have imposed punishing costs on the Russian forces in blood and treasure.

None of this would be possible without advanced semiconductors, which power critical battlefield systems, including the guidance systems in each missile. Just one Javelin, for example, contains about 250 microchips. Notably, the Javelin and Stinger both trace back to the Reagan defense modernization in the 1980s — when Reagan’s Cold War strategy included securing America’s semiconductor supply chains and leveraging our technology edge over Moscow. 

One reason that Russian forces haven’t countered these Ukrainian advantages is that the Kremlin is starved of chips. The United States has led our allies in banning the export of semiconductors to Russia. Since Moscow lacks its own advanced chip manufacturing capacity, without imports the Russian military cannot replenish its precision-guided munitions. Russian forces instead are resorting to old-fashioned “dumb bombs” and artillery, which are much less accurate. The West’s advantage in semiconductors is measurably eroding the Kremlin’s fighting ability. 

That is the good news. But the war also holds a cautionary tale for the West: the peril of relying on supply chains that can be choked or cut by an adversary. Since the war’s outbreak, the United States and our allies have inflicted severe financial and industrial sanctions on Russia. Yet the effect of these sanctions has been blunted somewhat by Europe’s dependence on Russian energy exports, especially natural gas. While Russia has been cut off from other revenue sources, European money for oil and gas still flows into the Kremlin. Paradoxically, even as EU members send billions in military aid to Ukraine, they continue to pay Russia more than $20 billion per month for fossil fuels.

The hard truth is that supply chains dependent on massive, capital-intensive facilities can’t be rerouted quickly when the guns begin to roar. Countries can rush to cobble together alternative supplies — witness Germany’s scramble to build liquefied natural gas terminals and ink a supply deal with Qatar. But the immense fixed costs mean that leading European economies such as Germany and Italy are largely at the mercy of existing dispositions. European leaders now regret that the continent made itself so reliant on Russian oil and gas.

For the United States, our most critical supply chain vulnerability is not in energy; it is in semiconductors. We are still among the world’s leaders in chip design, but America manufactures only about 12 percent of global chip output — a share that has declined steadily for three decades. Meanwhile, the United States is the world’s second-largest importer of chips, and we import almost three times as many semiconductors as we export. Almost all of those come from Asia. Considering that virtually all our electronics, including the device on which you are probably reading this article, rely on chips, it is no stretch to say that our daily lives — indeed, our national livelihood — depend on semiconductors.  

Fortunately, democratic Taiwan, not communist China, at the moment retains an overwhelming lead in this most critical commodity for the information economy. Yet Taiwan is the most likely target of aggression by Beijing. The U.S. Indo-Pacific Command has warned of the risk that China will attempt an invasion within five years.

In an invasion or blockade, Taiwan’s more than 50 percent share of global advanced chip output would disappear immediately from the world market. If anything, that calamity actually understates the problem: Critical sea lanes around Taiwan also would be disrupted, because insurers would not cover ships passing near a war zone. This would prevent chips made in manufacturing hubs such as South Korea, Vietnam and Japan from reaching markets. 

The resulting shortfalls would cripple the supply chains that power global manufacturing, devastating the American economy. U.S. manufacturers, still trying to catch up from COVID-related disruptions, would struggle to produce airplanes, automobiles, home appliances, personal electronics, communications devices and countless other products and systems. Once these shortfalls arise, they are hard to make up — chip-making plants, or “fabs,” cost billions of dollars and take years to build.

A chip-supply crisis would put American national defense at grave risk. Advanced precision munitions would be decisive in a war with China. Magazine depth — each country’s stockpile of precision munitions and ability to build more — would help decide which side would prevail, or at least outlast the other. American reliance on chip supplies from Asia would make it hard for American manufacturers to keep pace. In the 21st century, if we are to remain the Arsenal of Democracy, we must be able to make chips — and lots of them.

Some have opposed chipmaking incentives as a market-distorting subsidy. But chip-making capacity is not purely, or even primarily, about economic efficiency — it is a matter of national defense. Fielding world-class military and intelligence capabilities is essential to protecting America’s economy, sovereignty and way of life.

In short, we must prepare to build chips if we hope to win a high-end war in the Western Pacific.  This is true especially if we hope to avoid such a war by deterring China’s aggression. The better prepared we are — and the more visible and credible that deterrence is — the less likely it becomes that China will risk an invasion.

We conclude with a note from history. In the past, geopolitical shocks often have catalyzed new national security programs. In December 1941, Japan’s attack on Pearl Harbor and Nazi Germany’s declaration of war on the United States accelerated the naval expansion commenced by the Two-Ocean Navy Act of 1940. In June 1950, North Korea’s invasion of South Korea prompted the Truman administration to embrace the rearmament program that its iconic Cold War strategy document NSC-68 (then still in draft form) already urged. 

Similarly, the lessons from Russia’s invasion of Ukraine should spur Congress to finish long-pending semiconductor bills. For example, over the past year, the Senate and House passed different versions of the CHIPS Act to support American innovation in the design and manufacture of semiconductors, and to help protect our semiconductor supply chain.

The growing threat from China already had galvanized many in Congress, but final passage and funding remain subject to the vicissitudes of a House-Senate conference committee. Russia’s war in Ukraine underlines the need to finish the job.

William Inboden is executive director of the Clements Center for National Security and associate professor at the LBJ School of Public Affairs, University of Texas at Austin. His previous service includes the State Department and National Security Council in the George W. Bush Administration.

Adam Klein is deputy director of the Strauss Center for International Security and Law, and a faculty member at the University of Texas School of Law, Austin. He previously served as chairman of the U.S. Privacy and Civil Liberties Oversight Board, which oversees U.S. intelligence and homeland security programs.