Technology Chokepoints: Vulnerabilities in the Supply Chain

Photo Credit: Image generated using AI by Gemini

There has been a lot of discussion about maritime chokepoints. Shipping products around the world is an unseen necessity to obtain physical products that are not made locally. The people who man these enormous vessels have always had a tough job and moving through treacherous waterways has increased their stress as well as the ability to get their products abroad. Side note: if you are interested, Rose George’s Ninety Percent of Everything is an excellent book to learn more about freight shipping and I highly recommend it, but back to chokepoints! Right now, the biggest concern about moving products on the high seas is how oil and gas is getting out of the Middle East. This has caused energy prices to rise, which is made many economies unstable. Hope is on the horizon though as Kpler, the data analytics firm who tracks oil tankers, reported that crude oil is almost back to the shipping levels before the US-Israeli-Iran war that started earlier this year and passing through the Strait of Hormuz again. Many countries have struggled through this energy crisis using most of their oil reserves and so there was at least a Plan B if this kind of crisis happens. There is another possible crisis with a different chokepoint that is creeping into many policy discussions and it has to do with technology. What happens when a country decides to shut down their technological exports or if there is an attack on another’s digital infrastructure?

Let’s start off with physical technology exports as these can have an impact on our daily lives. Using my computer to write this article, picking up my phone to distract myself when I cannot think of the next sentence, and listening to music in hope that I will get back on track all require some kind of tech that was not built locally. Some of the most fundamental components are items that most of us will never see but certainly rely on it to make it all work. One of the most crucial components is the transistor that is printed onto a silicon wafer. The transistors are described as “devices that control the movement of electrons, and consequently, electricity” and these are printed on to tiny chips. The only company who is able to produce this product is ASML in the Netherlands using their patented extreme ultraviolet (EUV) lithography machines. These transistors are highly coveted in the chip industry and they are the only game in town that are able to produce them. If anything happens here, the supply chain for all of the items to follow will need to resupply with lower quality products. ASML’s most significant customer is TSMC. This Taiwanese company fabricates an advanced semiconductor that is sought after for logic and AI processors. Once the transistor is printed onto the microchip, the semiconductor directs how electronic devices process, store and receive information. Chips are made for several functions in electronic devices. The Conversation breaks down some of those processes:

“For instance, memory chips store data and software as binary code, digital chips manipulate the data based on the software instructions, and wireless chips

receive data from high-frequency radio transmitters and convert them into electrical signals. These different chips work together under the control of software. Different software applications perform very different tasks, but they all work by switching the transistors that control the current.”

Naturally when we purchase any kind of technology, we want the best possible product that will compute faster. Having a TSMC chip in your laptop or phone or helping to build large language models for AI makes a significant difference for competitiveness when there are so many alternatives on the market. These products are so important that ensuring security is a significant factor. For ASML, their location in the Netherlands offers more security as they are in a NATO country. For TSMC, they are in a much more precarious situation as they are in Taiwan. It is something to think about considering their relationship with China and what that would mean if China took over the company. For the most part, shutting down a lucrative export would be like shooting yourself in the foot, but stifling who receives certain products can build enormous power over technological trade and the electronic supply chain.

Electronics are not the only factor when it comes to tech chokepoints. To use these products, there must be software and access to the internet. The United States has a significant monopoly when it comes to software as many companies use Microsoft for daily work functions and communication. There is also the search engine Google that is used to search the internet, watch videos via YouTube, and an e-mail service that is widely used. Both of these companies utilise their ubiquity and accessibility of their products to make their tools easy to use and have an integrated user experience. Some countries are concerned about the influence that these tech companies have over products that are heavily integrated into public entities. There has been a lot of discussion with some of the member states in the European Union and a call for digital sovereignty. The changes to move away from US tech companies is slow but anxiety over turning off these services to anyone outside of the US is a chokepoint that is worthy of discussion and contingencies. Even if US tech companies do not turn off permissions to use their services, there is another significant concern of access as many of them are web-based. Without cable infrastructure, the flow of data will be interrupted causing a whole host of problems in the public and private sectors. The Hinrich Foundation outlined several scenarios of technology chokepoint, but one that is becoming a very likely prospect is the severing of subsea fibre-optic cables. There is room for debate on whether or not hostile actors have intentionally or unintentionally had commercial vessels drag their anchor across the ocean floor in order to sever underwater cables but the impact creates major disruptions. Network operators would need to reroute internet traffic so that the data can still be delivered to the end user. This can hit financial institutions as well as logistics companies who work in real-time to provides their services across many borders. Looking at the image below, imagine if many of these cables were severed at the same time.

Infographic: Hinrich Foundation

There would be major data gridlock and the ability to use the technology that we have become so accustomed to will be inaccessible. Energy and technology is essential for growth and development. We have become reliant technology to both help and provide entertainment to us in our daily lives. When there is a disruption that hits our wallet or ability to communicate, understanding hidden chokepoints highlights our need to understand the geopolitics of it all.