In recent years a global confrontation has been raging around the world, with all the characteristics of a major war. It is the ‘war’ of semiconductors, which is leading the US and the EU to form a ‘Western alliance’ and invest billions of euros to produce more chips for electronic devices on their own territory. At the same time, it is pushing China to seek its own synergies and to look “more warmly” at the possibility of invading Taiwan, where an estimated 65% of the world’s semiconductors are produced or assembled into systems, said Tom Katsioulas, a member of the US Department of Commerce’s newly established Advisory Board for the Internet of Things (IoT), points out to the ANA-MPA.

The stakes are high and are expressed in terms of economic, national security and geopolitical balances. This is because semiconductors are literally everywhere: it is estimated that by 2030 there will be 125 billion Internet-connected devices. If we calculate that each one incorporates, on average, three chips, the number of embedded chips will exceed 375 billion. Who designs, produces and distributes them and what are the potential risks in the electronics supply chain? The last two years have highlighted the huge problem in the global semiconductor supply chain: semiconductor shortages are estimated to have cost the US economy $250 billion last year, and led to the closure of many European factories. The semiconductor market is estimated to double by 2030, while manufacturing/production in the US and the EU has fallen dramatically compared to the past: although the two regions still hold the lead in the design of the most complex chips, with a share of 74% and 20% respectively, production and assembly … are elsewhere, namely in China and East Asia (the US share of production is only 12% and the EU’s share is around 9%, while in assembly and packaging it is practically absent). At the same time, following the complex, hard to trace supply chain routes, chips designed/manufactured in the US are even found in Russian spy equipment. A chip of Silicon Valley company “Marvell”, was found in a Russian surveillance drone. When the US company tried to trace how its product ended up there, it ran into a “wall” of labyrinthine trafficking routes through distributors in Asia and was ultimately … left wondering. At the same time, chips made in the US, Israel, Germany and Japan were recently found in Russian drones used in Ukraine, launching a wide-ranging investigation into supply chains.

Against this backdrop, with the so-called “CHIPS Acts”, the US will soon allocate 52 billion dollars and the EU 42 billion euros to re-launch semiconductor production in the Western world, with the aim of mobilizing multiple funds from the private sector through Public-Private Partnerships (PPPs). The reasons are obvious: in a period of gradual expansion of IoT and 5G and 6G networks, the “surface” created for economic growth from production of semiconductors, but also risk of attacks with huge impact through their malicious use, is getting bigger and bigger. IoT is paving the way for smart factories, hospitals and homes, connected cars and autonomous driving. This means opening up new markets, but at the same time it exponentially increases the ability of hackers to attack even critical infrastructure. It was these assumptions that led to the creation of the IoT Advisory Board at the US Department of Commerce.

Are the measures being taken to …return semiconductors to the West sufficient? Are there opportunities for Greece? What can be done at the level of chip traceability in the supply chain and how likely would a large-scale cyber-attack, e.g. from China, be? Tom Katsioulas, who was appointed to the Advisory Board by US Secretary of Commerce Gina Raimondo on 11/10 for a two-year term, answered the questions of APE-MPA and journalist Alexandra Gouta.

China’s strategy and its interest in Taiwan

“In the US and the EU we have the semiconductor design. But everything to do with manufacturing and assembly is mainly done in China and Taiwan. If China suddenly invaded Taiwan, there would be huge economic damage, especially to the large volumes of advanced chips, those used by, for example, Apple and Qualcomm. Fortunately, there is no one recipe that could destroy the whole industry at once, because the dispersion in the supply chain is large. ‘Six major regions – the US, South Korea, Japan, mainland China, Taiwan and Europe – each control 8% of the total value added in the supply chain, and the typical route of a semiconductor involves most, if not all, of these geographic regions at various stages of the design and manufacturing process,’ he points out.

He adds that at a time when chips are designed in the US and the EU, but are usually manufactured in factories in Asia, the West has “weapons” in its hands. “The European company ASML, for example, controls the production machinery for the most advanced chips and this is Europe’s biggest strategic advantage. If ASML stops selling to China, the Chinese economy will slow down significantly, it would take them many years to build something like this. That’s why America is putting pressure on the chip equipment manufacturers to stop selling high-end products to China,” he explains.

The US and the EU are investing to address the issue. But are the funds being made available enough? “Not even enough to get us started!” he says, quoting the CEO of Dutch NXP, Kurt Sievers, who says that for Europe to achieve its goal of increasing to 20% – by 2030 – the 10% market share held by semiconductors, it would need €500 billion, not the €42 billion being given. “This is why the US and European CHIPS Act talks about public-private partnerships (PPPs). The aim is to at least quadruple the funds allocated,” he says. He adds that cooperation between supply chain stakeholders needs to be orchestrated, but also persistence in funding to achieve a positive result: for example, the EU’s 42 billion in seed funding should be followed by annual programmes of 100, 200 or 300 million, so that the supply chain is gradually reshaped and there is an economic incentive for businesses to invest capital.

The West is not only looking for allies within its geographical “circle”. “At the US-EU Trade Technology Council, European Commissioner Thierry Breton and the US Secretary of Commerce, Gina Raimondo, have already said that the supply chain is a global challenge and we need to build networks of trust with the Indo- Pacific countries, Japan, South Korea, Australia, Singapore, India, etc.” he says.

The opportunity for Greece and the … eco-islands

An additional $500 million may, according to early indications, be made available by the US Department of the Interior for partnerships with foreign governments in the global semiconductor supply chain. Can Greece take advantage of these developments? According to Tom, the answer is ‘yes’. Greece does not have the manufacturing part in semiconductors, “but it could well claim a large share of the available resources by creating software platforms, adding value to the fabs (chip factories) that will be set up in the rest of Europe and America. It could, for example, develop a platform that does software monitoring for semiconductor design/manufacturing,” he estimates.

“My advice is for the members of HETiA (Hellenic Semiconductor Industry Association) to start talking to the ICT (information and communications technology industry) representatives who make software for enterprises to see how they can combine chips with the enterprise. If they work together and combine their expertise, then Greece can get a sizeable chunk of the $500 million,” he notes. Asked if Greece has a comparative advantage over others that will also claim a share of the half-billion-dollar pie, he answers the question: “The competitive advantage of Greeks is that they are multi-domain handymen. They look at things in a broader context. If you put a vision in front of them, they can achieve wonders in this field, provided they can team-up the business software experts on the one hand, and semiconductor experts on the other,” he says.

Do Greeks have the culture for collaboration? According to Tom Katsioulas, although this was an issue in the past, the culture has started to change in recent years, however, the fact remains that the Greek innovation ecosystem is not exactly an ecosystem: “We are not so much an ecosystem, but ‘clusters of eco-islands’. There can be 10,000 different things going on in innovation and the collaborations can be ‘loose’ because they are among dispersed experts. Greeks and Israelis have a lot in common in terms of creativity and innovation. The difference is that we are dispersed, not united in one place, and we don’t have the military-style discipline of the Israelis, who are concentrated in ecosystems and collaborate with the Jewish Diaspora.”

 “Jungle”, Trojan horses and ghost companies

That’s all well and good, but how easy is it to trace the semiconductor supply chain? “No one can control where a chip will be found. The US and EU will spend almost 100 billion on our own semiconductor production, but the question is how do we ‘control’ the supply chain. You can’t open up Russian drones and find American chips in them… The fact that those chips get there, means that no government can impose effective sanctions. When America imposed sanctions on Iran, to cut off the money going into Iranian banks to stop them from funding nuclear weapons, dozens of ghost companies were created in Europe alone, essentially trading just to fund Iranian banks. Similarly, when a chip goes out into the supply chain jungle, no one knows where it will end up and who will turn it into a Trojan horse,” he says.

If you have a chip connected to the Internet, he adds, you can install a “Trojan horse” that will remain dormant for five years before it “wakes up” and does damage. In addition, he continues, there are “super-micro” attacks, with tiny “invisible” chips that can “listen” to anything a data center sends to the cloud. “Imagine now in Amazon and Microsoft’s big data centers, having on every “box” such a chip that collects data and “flies” it to countries like China, North Korea, Russia and Iran. You can hit too many users, businesses, critical infrastructure, whatever, all at once,” he notes.

Trackers and “nation-state” attacks

This is why the ability to trace the path of a chip is crucial: “It is not enough to trace the chip as a physical object. It is necessary to authenticate it every time it goes to a new destination. You need whenever you power-up to ensure that the chip is yours, that no one has interfered, therefore we need to develop what we call identity. Whenever a chip is programmed, whenever you give it something new to do or change something, the identity changes (…). We need to achieve digitisation in chip engineering process. Traceability is a goal but it is something very difficult to achieve, it takes a lot of work. In addition to infrastructure and security, we need to organise the ecosystem and supply chain processes that all companies in the value chain should follow in order to create a ‘digital circle of trust’, he stresses.

Really, how likely is it that large-scale damage could be caused by a country that wants to promote its interests through a cyber-attack against another state (“nation-state attack”), also using “Trojan horses” in semiconductors? “To damage many different kinds of electronic devices and environments at the same time, i.e. to achieve a nation-state attack, is very difficult, but not unlikely. It is very difficult because it would require large teams, long-term planning and a huge investment. The supplier of systems used in critical infrastructure using PLCs (Programmable Logic Controllers) is not one: it is companies like Siemens, Rockwell, Schneider, etc. So, if I want to do a heavyweight attack, I need to create a plan that works with any architecture, I need to analyze all the systems, find their weaknesses, etc. This could only be done with huge investments. Could countries like Russia or China do it? Russia’s GDP is the eleventh largest in the world, but China’s is second in the world, so…” he concludes.

Alexandra Gouta