How are they made?

Chips are made up of layers of thin, flat pieces of silicon – called wafers – that hold electric circuits. These circuits are comprised of billions of switches called transistors. Highly complex, powerful chips containing these networks of transistors are commonly referred to as semiconductors.

If you want to make semiconductors, you’ll need $380m. This is the cost of the latest EUV machine from Advanced Semiconductor Materials Lithography (ASML). Shipping is a nightmare: the machine is so large and so delicate that it requires 40 freight containers, three cargo planes and 20 trucks to transport it from the Dutch factory in Veldhoven. All this to create and focus light with wavelengths almost as short as X-rays, with enough energy to penetrate solid objects.

Chipmakers strive to meet a prediction called Moore’s law: that capacity – or the number of transistors on a chip – tends to double every two years. If chips are to stay the same size, and ideally get smaller, this means that transistors must be ever finer.

ASML’s machine carves the patterns into the silicon wafers that hold the transistors. The finer the patterns, the more computing power you can pack on to a chip. Marc Assinck, a company spokesperson, likens light wavelengths to the thickness of a pen stroke. The more detail you want on a page, the thinner your pen should be. EUV light has a wavelength so narrow that it is invisible to the human eye and passes right through most materials. 

The light is produced by firing a laser at microscopic balls of tin. The tin evaporates into plasma, and the plasma emits light, which is moved through the lithography machine, hitting specially made mirrors. The light is shone through a “mask”, which is the pattern of one layer of a chip, on to the wafer. The area exposed to light hardens and the area not exposed is dissolved in a chemical solution, leaving behind a 3D pattern.

Think of a chip like a building with 100 floors. Each building takes four months to produce, and each floor has its own layout, only the features of this layout can be just 25 nanometres: smaller than particles of influenza viruses, which are about 100 nanometres. EUV and other lithography machines carve the patterns of these layers, one by one.

The machines aren’t easy to make. Like chips themselves, they’re assembled in dust-free rooms, the cleanest spaces on earth. Chips function at the level of atoms: a single speck of dust can render them useless.

Why is Taiwan so important?

ASML makes the machines that make chips, but it doesn’t make the chips themselves. That is done, chiefly, by another remarkable company with another unremarkable name: TSMC, or Taiwan Semiconductor Manufacturing Company, which produces nine in every 10 of the world’s most advanced semiconductors – including those that power iPhones. Because Taiwan makes and supplies so many of the US’s semiconductor chips, the US has an added interest in protecting Taiwan amid concerns that China will invade.

In 2022, the US convinced the Dutch government to place export controls on ASML’s machines, restricting their sale to China. To date, ASML says, no EUV lithography machines have been shipped to China, which means that unless – or until – it invents its own EUV lithography machines, China will be working with technology a few years older, and less powerful, than that of western countries – deep ultraviolet lithography, for example, instead of extreme ultraviolet. These machines can still produce very complex chips at scale – just not as complex.

Artificial intelligence, another technology in which the US and China are fiercely competing to advance, relies on among the world’s most complex and powerful semiconductor chips. The leading designer of these chips is an American company called Nvidia. Its chips are produced by TSMC on machines made by ASML.

China’s lack of access to EUV lithography explains why the debut of the Chinese chatbot DeepSeek came as such a shock to markets. A Chinese company produced a product as powerful as Chat GPT with less advanced – cheaper – technology. DeepSeek claims that it cost just $6m to train, compared with the billions of dollars spent by US companies to do the same thing.

“The US believes that AI will be a transformative technology, impacting nearly every sector of the economy,” says Chris Miller, the author of Chip War: the Fight for the World’s Most Critical Technology. “So it doesn’t want China to gain an advantage.”

It is also crucial for defence and intelligence. The Chinese People’s Liberation Army has made “significant progress” in its efforts to use AI in combat in recent years, according to the Centre for Security and Emerging Technology.

But not everyone believes that China’s access to ASML’s machines should be restricted, including ASML.

Asked at a Bloomberg conference in October how much the restrictions were really about security threats, its CEO, Christophe Fouquet, said: “More and more people are asking themselves this exact question … Is it really about national security?”

The debate might not need to continue for long: in 2024, Chinese company Shanghai Micro Electronics Company (SMIC) revealed that, a year earlier, it had filed a patent for an EUV lithography machine.

Where do rare earths come in?

China boasts other advantages over western countries in the race to produce chips. In addition to silicon, semiconductors require so-called “rare earths” – in particular, germanium and gallium. By 2030, Gallium demand is projected to increase more than 350% from 2015 levels. Germanium demand is expected to double over the same period. China produces 98% of the world’s raw gallium, and more than two-thirds of the world’s raw germanium.

This is one reason why Donald Trump is pressuring Ukraine into handing over its rare earths in exchange for aid, and why, after Trump’s first meeting with Indian prime minister Narendra Modi, the pair announced they had agreed to launch “a recovery and processing initiative” for rare earths.

Will quantum chips change everything?

Then there are quantum chips. Quantum chips would, in theory, allow computers to solve problems much, much faster than the world’s current super computers. This is because instead of being the equivalent of on or off, or a zero or a one, quantum chips can be both states at once – and every state between. A common explanation is a maze: a normal computer would find the path through a maze by testing each option, one after the other. A quantum computer could test all of them at once.

So far, quantum computing has been achieved only in limited circumstances. But Microsoft announced this month that it had built a chip that could mean quantum computers might be built within years rather than decades.

Meanwhile, China’s public spending on quantum technology is four times that of the US, according to the Mercator Institute of China Studies, a European thinktank. And the chips are not made with EUV machines. Instead, quantum chips are made by machines that carve patterns into chips using electrons. And China has these machines.

China also has a resource often overlooked in the chip debates, says David Reilly, professor of physics and the head of the University of Sydney’s quantum programme.

“The key to all of this is people,” he says. Breakthroughs happen because people see a need, and know what the existing ways to meet that need are, and can imagine what they might be.

“There are a lot of smart people in China. They produce a lot of Stem graduates,” he says. And those graduates tend to do undergraduate or postgraduate degrees at the top US, Australian, European universities before returning.

“I don’t want to say governments are sort of blind to that, but we do focus a lot on the transfer of tangible stuff,” he says. “Inventions don’t happen in a vacuum.”