Welcome to the Deep Dive. We're diving into something
pretty crucial today. It's the whole global race
for AI dominance. And we always hear about the
big tech companies battling it out. But this
is bigger. This is about countries going head
to head. And the stakes are, well, they're massive.
We know you guys want to get up to speed on these
big issues quickly, but also thoroughly. And
that's what we aim. to do here. Right. To get
to the bottom of this, we're looking at a really
interesting discussion by a security PhD. And
they've kind of laid out how all these national
interests are getting tangled up with the AI
revolution. I mean, they touch on everything.
Economic power, digital sovereignty, even the
semiconductor industry, which is a huge bottleneck
right now. Yeah, and we're going to unpack all
of that for you. Basically, why are countries
so obsessed with AI? What are the potential consequences?
So let's just jump right in. Why is AI such a
big deal for nations right now? Well, the most
obvious factor, the one that everyone immediately
thinks of, is the military implications. You
know, the possibility of smarter drones, better
cyber weapons, that kind of thing. And yeah,
those are serious concerns. It gives countries
a huge strategic advantage. You could take away
all the economic arguments and nations would
still be fighting tooth and nail over AI just
for the military. applications it's not even
just about having fancier weapons right it's
about like completely changing the whole strategic
game but the economic side of this is obviously
gigantic too oh absolutely I mean you see that
New York Times estimate of AI adding like 4 .4
trillion dollars to the global economy every
year that's something like 4 % of the entire
world's GDP right now it shows you the scale
of the opportunity but and this is key these
benefits aren't going to be spread out evenly
Some countries are in a much better position
to capitalize on AI than others just imagine
countries that control key AI tech They could
use that economic power to swing trade deals
influence international policy, you know It creates
a whole new set of dependencies. So it becomes
this kind of winner -take -all situation Why
is AI development so skewed like that? What makes
it that way? It all comes down to the resources
needed to build these advanced AI models. We're
talking immense computing power, tons of data.
Most players simply don't have the resources
to even get in the game. Smaller companies, even
some entire countries. Now, once you do have
a trained AI model, using it, that's called inference
becomes super cheap and easy, so you have this
huge upfront investment, then a really low cost
to actually use it. And that just makes a winner
take all dynamic even more extreme. So you absolutely
have to be in it to win it at the very highest
level. And if you are, you get this huge advantage
that lasts a long time. The source we're looking
at even compares it to like the pharmaceutical
industry. How does that work? Oh, that's a great
comparison. Think about it. You have these pharmaceutical
companies spending billions on research and development,
then the actual manufacturing of the drug is
relatively cheap. And the legal systems, especially
in certain parts of the world, are designed to
protect those initial R &D costs. It gives the
big pharma companies huge control. And we might
see something very similar happen with AI. What
kind of legal frameworks will pop up to protect
AI developers? How will governments regulate
AI development and its use? It could end up looking
a lot like drug approvals, which would solidify
the power of the early leaders even more. Yeah,
it seems like a few powerful nations could end
up holding all the cards. And then there's this
whole other consequence of AI we haven't even
touched on yet, you know, mass job displacement,
automation. Yeah, that's a big one. It raises
this huge question about the future of work,
the future of our economic systems. And sure,
there's some talk about things like universal
basic income, you know, as a safety net for people
who lose their jobs to automation. But honestly,
most countries seem way more focused on winning
the AI race than on figuring out the They want
to make sure their own companies and economies
are at the front of the pack, not really worried
about global job losses. And they're doing all
they can to attract and support their tech companies
to get there. Absolutely. We're seeing governments
throwing everything they've got at tech companies.
Deregulation, tougher cybersecurity, big tax
breaks, direct financial incentives, you name
it. That whole bidding war over Amazon's HQ2
a few years back, that's a perfect example. It
shows you just how fiercely these regions are
competing to become the home of these tech giants.
Like a modern day race to be the technological
superpower. And the prize is economic growth,
strategic advantage, the whole nine yards. And
as these tech companies get bigger and more important,
their relationship with governments has to change
too, right? Yeah, there's a definite power shift
happening as tech companies become essential
for economic growth and even national security.
They have a lot more leverage with governments.
What they want, what they need starts to shape
policy decisions more and more. And this whole
nationalistic competition seems to be changing
how globalization works. The source we're looking
at suggests we're moving away from this idea
of a completely open, interconnected world. That's
one of the key takeaways here. We're seeing a
shift away from the kind of globalization we've
had for the last few decades, you know, the US
-led system. Countries are starting to realize
that these big global supply chains are vulnerable.
They're worried about being too reliant on other
countries for critical technologies. I mean,
the pandemic and the war in Ukraine really exposed
those vulnerabilities, didn't they? Suddenly
we couldn't take access to all these essential
things for granted anymore. Exactly. It showed
everyone just how fragile these global supply
chains are, especially when you're relying on
a handful of producers for essential stuff. And
naturally, this thinking has spilled over into
AI. Countries want to make sure they can build
their own AI systems that they're not dependent
on anyone else. And it's not just about having
a stable supply of AI itself. The discussion
also brings up the issue of bias. Bias in the
data used to train these AIs. That's a really
important point. We're realizing that the data
used to AI models carries the biases of its origins.
So if a country relies on AI models developed
somewhere else, they might be importing ways
of thinking, priorities that don't really match
their own. You know that anecdote about European
friends thinking ChatGPT sounded American? It's
like the AI has this cultural fingerprint based
on the data it was trained on. So this push for
what's it called, digital sovereignty, it's leading
to some real action from countries. Absolutely.
We're seeing all kinds of measures to protect
data and build up domestic tech capabilities.
The EU's GDPR, that's a big one. It affects companies
way beyond Europe. It's a clear example of a
region saying, hey, we're going to control our
citizens' data, even if it's being handled by
companies based elsewhere. And Canada has rules
that stop public institutions from being forced
to use foreign -hosted services for sensitive
data. It's all part of this trend. And then there's
China. They've set some really ambitious goals
with that Made in China 2025 plan. Oh, yeah.
China wants to be totally self -sufficient in
technology by 2025. It's incredibly ambitious.
Now, they still rely on global supply chains
for some raw materials. But when it comes to
AI, they've got some advantages. Like their approach
to individual rights and privacy, it lets them
roll out technologies like facial recognition
really quickly and collect tons of data. Those
examples from Shanghai are pretty eye opening.
They are. I mean, they've got cameras everywhere
tracking everything from traffic violations to
jaywalking. They even display people's personal
information on public screens. It's a level of
data collection that would be really hard to
imagine in many other parts of the world. But
it gives them this huge edge in terms of building
the massive data sets needed to train these advanced
AI models. And meanwhile, the EU has its own
set of challenges in this whole AI race. Right.
The EU was worried about becoming too dependent
on American AI tech, and they're having trouble
attracting and keeping top AI talent. Salaries
are often lower, and there aren't as many cutting
edge research opportunities compared to North
America. This brain drain is a big problem for
their AI ambitions. It's interesting to look
at all this in a historical context. The US came
out of World War II as the dominant global power,
and at first they were all about globalization.
Exactly. After World War II, the US was the leader.
both economically and militarily. And they pushed
for this interconnected global marketplace with
themselves right at the center. Technological
independence wasn't a big concern because this
system worked for them, and they were driving
most of the innovation anyway. U .S. universities
were thriving. They attracted the best minds
from around the world because they had the funding
and the opportunities for groundbreaking research.
But that way of thinking has definitely changed
over time, hasn't it? Oh, yeah. The US started
seeing industries moving overseas, they tightened
immigration policies, and other countries started
catching up technologically really fast. So in
recent years, the US has become more protectionist.
They're focused on maintaining their own technological
edge. Which brings us to what the discussion
calls the semiconductor Cold War. I think for
a lot of people, semiconductors are this kind
of abstract thing, but they're the foundation
of everything in AI, right? The bedrock, absolutely.
And the key player in this Cold War is the Taiwan
Semiconductor Manufacturing Company, or TSMC.
Most people haven't heard of it, but as our source
points out, it's the 10th largest company in
the world by market cap. They're not a consumer
facing brand. They operate behind the scenes,
making the advanced chips that power, well, everything.
Your phone, the most sophisticated AI systems,
the servers running giant companies like Apple,
Nvidia, AMD. It's all built on TSMC chips. And
they basically have a monopoly on these advanced
chips, something like 90 % market share. It's
a huge amount of power concentrated in one company.
It is. And it shows how much the industry has
changed. It used to be that the big players,
companies like IBM, Texas Instruments, they did
everything in -house, designed and manufactured
their own chips. But as chips got more and more
complex, more expensive to develop, companies
started specializing, some focused on design,
others on manufacturing. Yeah, the story of Intel
and AMD is a great example of that. AMD started
outsourcing their manufacturing to TSMC, and
it seems like that gave them an edge over Intel.
Exactly. Intel, they still make their own chips,
but they had a lot of trouble moving to the newer
manufacturing processes. AMD, by partnering with
TSMC, who had the expertise and the scale from
serving the entire global market, they were able
to make those technological jumps more smoothly.
Of course, AMD's chip designs themselves were
also really innovative, so that helped too. And
the founding of TSMC is a fascinating story in
itself. It was started by this American semiconductor
veteran who basically created the entire industry
in Taiwan. And what's really remarkable is that
Taiwan wasn't a tech hub back then. It was this
one guy's vision and determination that created
a company that now accounts for something like
15 percent of Taiwan's entire GDP. And the amount
they invest in R &D is mind blowing. Five percent
of Taiwan's GDP in a single year just to build
new factories, those fabs. Yeah, that shows you
how strategically important this industry is
for Taiwan. TSNC is expanding, building new fabs
in the U .S., Germany, Japan. But those are still
just a small part of their overall manufacturing
capacity. Taiwan's location being close to China
for assembly and shipping, that's been a big
advantage for them. But with all the tension
between the US and China, it's not clear how
that's going to play out in the long run. And
TSMC is way ahead of everyone else technologically.
Only Samsung and Intel are even close to making
the same kind of advanced chips. And they're
constantly pushing the boundaries with these
nanometer advancements. Can you break that down
a little bit? What does that even mean? Basically,
nanometers are these tiny, tiny measurements,
one billionth of a meter. And the smaller you
can go, the more transistors you can fit on a
single chip. More transistors means more processing
power, better energy efficiency, and ultimately
the ability to handle the incredibly complex
calculations needed for advanced AI. So this
race to shrink the nanometer size, going from
five millimeter to three nanometer, with TSMC
already working on two nanometer, it shows you
just how intense the innovation is in this field.
So obviously all of this makes countries that
aren't close allies with Taiwan or South Korea
pretty nervous, especially China. They need these
chips and they're falling behind. Exactly. And
the U .S. has already taken steps to limit China's
access to this tech. The biggest move was blocking
the sale of EUV lithography machines to China.
EUV stands for extreme ultraviolet lithography.
It's this super advanced technology and you need
it to make the most cutting edge chips. the five
millimeter and smaller ones. And there's only
one company in the Netherlands that makes these
EUV machines. So that's a major bottleneck. But
the source we're looking at mentions that Chinese
chipmakers have been making some unexpected progress.
Yeah, it was pretty surprising. SMIC, a Chinese
chipmaker that's closely linked to the military,
they managed to produce seven millimeter chips
without anyone knowing. It came out because someone
analyzed the chips in some Bitcoin mining equipment.
that definitely raised some eyebrows. It means
that China might be further along in advanced
chip manufacturing than we thought, even with
all the restrictions in place. And this plays
right into the U .S.'s fears about Taiwan. They're
worried that China might invade and then all
that crucial chip -making expertise would be
in their hands. It's a huge geopolitical concern.
The U .S. knows that having so much of the world's
advanced chip manufacturing concentrated in Taiwan
right next to a potential adversary is a huge
risk. And that's why the US took the step of
officially classifying microchip manufacturing
as critical to national security. That happened
in late 2022. And it was a big deal. It showed
that the US was really serious about this. And
they didn't stop there. They actually expanded
the rules that prevent Americans from working
for foreign militaries. They broadened it to
include any substantial contribution to microchip
development in countries like China. Which led
to that really dramatic situation for American
engineers and managers working at Chinese chip
companies. Yeah, the US government basically
gave them an ultimatum. They said, you have to
choose. Give up your US citizenship or quit your
job in the Chinese chip industry. And they were
serious. They threatened legal action. It led
to a ton of resignations. And it was a big setback
for China's plans to build up their chip baking
industry. It shows that the U .S. is not playing
around anymore. They've taken a clear side in
this tech competition. So to sum it all up, what
we're seeing is this fierce global competition
over AI driven by the need for better weapons
and the potential for huge economic gains. And
this competition is pushing countries to become
more self -sufficient in technology. They want
to control their own data, build their own AI
systems, and make sure they have access to the
essential components, like those advanced semiconductors.
It's led to what some people are calling a semiconductor
Cold War, where control over chip manufacturing,
especially TSMC's dominance, has become the central
point of geopolitical tension. It's a key battleground
in the overall fight for AI supremacy. It all
ties together. The drive to be the leader in
AI is having these huge ripple effects on global
politics, on trade, on how technology develops.
So here's something to think about. We have this
intense competition between nations, and we know
that semiconductor technology is essential to
all of this. Given how much is at stake, and
how quickly things are changing, what kind of
unexpected things might happen, what new alliances
might form, what disruptions might we see in
this race for AI dominance, and how will all
of this impact our lives and the stability of
the world in ways we can't even predict right
now, that's something to chew on. Thanks for
joining us on the Deep Dive.