Earthquake shows risk to chips

Hi, it’s Drake in New York. The world’s chip supply is concentrated on one tiny island. But first...Three things you need to know today:• De [View in browser]( [Bloomberg]( [by Drake Bennett]( Hi, it’s Drake in New York. The world’s chip supply is concentrated on one tiny island. But first... Three things you need to know today: • Demand for data centers to power [AI is vastly underestimated]( • Meta is challenging proposed changes to [its privacy accord with the FTC]( • AI startup Cohere introduced [a new business-friendly model]( No quick fix The [earthquake that struck Taiwan]( Wednesday morning killed at least 10 people and injured more than 1,000. Considering that it was, at magnitude 7.4, the strongest quake the island had suffered in decades, things could have been far worse. Taiwan has built defense mechanisms against the earthquakes that are a fact of life there — strict building codes minimize the damage, search-and-rescue teams and aid volunteers are well-trained, and citizens themselves know the drill. As news stories were quick to point out, the quake also was a reminder of just how much the [global economy]( relies on Taiwan. The small island produces somewhere from [80% to 90% of the world’s advanced semiconductors](. Just one company, Taiwan Semiconductor Manufacturing Co. (TSMC), accounts for half of global supply. Read More: [Taiwan Quake Jolts Production of Most Advanced Chips]( Taiwan’s chip production facilities —built, like everything else there, with earthquakes in mind — were little affected by the quake. But the greater threat to the self-governing island and its chip industry isn’t seismic, of course, it’s China, a massive, nuclear-armed and increasingly aggressive neighbor that denies Taiwan’s right to independently exist. The 2022 book Chip War: The Fight for the World’s Most Critical Technology told the story of how global chip manufacturing came to be so concentrated in such a precarious place. The author of that book, Chris Miller, has said that the [effects of a catastrophic event]( knocking out TSMC would be akin to the Great Depression. To address this threat, policymakers in the US and elsewhere are trying to figure out how to make advanced chips in more places. But that is easier said than done. The Biden administration is committing billions of dollars to induce firms like Intel Corp. to build and expand manufacturing facilities in the US. According to the White House, if all goes as planned, the US, by the end of this decade, will go from making less than 10% of the world’s advanced chips to making … 20%. It’s not a trivial change, but it’s not going to fundamentally change any geopolitical calculations. How did we end up here? The rise of Taiwan’s semiconductor industries owes something to the fact it had the right combination of cheap, but highly educated labor in the 1970s when the American companies that invented semiconductors were looking to offshore production. But it also points to the willingness of the government there to engage in industrial policy at a scale far beyond the [loans and grants]( the Biden administration is offering — as Chip War details, government ministers in Taiwan would get on the phone and personally strong-arm the island’s wealthiest families to invest in TSMC. The reason the Taiwanese government was willing to do all this was because they saw the stakes as being more than economic. They understood that the more important Taiwan’s products were to American companies, the more important the island’s fate would be to America. In other words, Taiwan’s chip industry, envy of the world, is perhaps its best defense mechanism.—[Drake Bennett](mailto:dbennett35@bloomberg.net) The big story Elon Musk said the [demand for specialists]([in artificial intelligence]( has forced Tesla to make special efforts to retain them, including raising compensation, after several of those engineers left the carmaker to join his startup xAI. One to watch [Watch Open AI Chief Operating Office Brad Lightcap interviewed on Bloomberg Television about the company’s products and future.]( Get fully charged Workers at Meta felt burned after they lost money from an investment in a co-worker’s real estate venture he pitched [on the company’s internal messaging system.]( YouTube’s CEO said the use of the platform’s videos to train OpenAI’s test-to-video generator would violate the terms of service. Hydrogen fuel cell cars haven’t [taken off in the US](. More from Bloomberg Bloomberg Technology Summit: Led by Bloomberg Businessweek Editor Brad Stone and Bloomberg TV Host and Executive Producer Emily Chang, this full-day experience in downtown San Francisco on May 9 brings together leading CEOs, tech visionaries and industry icons to explore the opportunities and pitfalls at the intersection of business and tech, from AI to the chip wars and beyond. With Evan Spiegel co-founder and CEO of Snap, Steve Huffman, co-founder & CEO of Reddit, and Sarah Bond, president of XBox and many others. [Learn More](. 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