Should the UAE Invest in a Tech Sector?

Photo of interior of computer chip

The UAE is pouring money into building a tech sector, focusing on semiconductor fabrication plants and data centers.

While semiconductor fabs are central to chipmaking, they require immense technical expertise, specialized labor, and integration across thousands of precise steps; meaning this is a nothing sandwich.

Data centers are more achievable, but that doesn’t mean they’re a good idea either. The UAE would need to subsidize access to scarce high-end chips, figure out the high cooling costs (because desert climate, duh), and even then, the geographic limitations will prevent them from becoming a global hub.

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Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado. Today we are taking a question from the Patreon page and specifically about tech and some of the things that are going on in the Persian Gulf, specifically, a number of the Persian Gulf Arab states, most notably the United Arab Emirates, are splashing around a lot of cash and trying to build a tech industry. 

There are two forms of taking. The first is they’re trying to get kind of like what happened in Arizona, a high end semiconductor fabrication facility. And second, they’re getting a data center. Two very different pieces of technology that have very different requirements. So let’s start with the semiconductor fab facility. 

Semiconductor fabs like the kind that we now have outside of Phoenix, the one that’s being built outside of Columbus, Ohio. 

The ones that are in Taiwan, are incredibly sophisticated. And what people tend to forget is that these are not just like assembly locations. They bring some of the most advanced machining in one place. They bring some of the most advanced materials into one place. They bring some of the most sophisticated designs in one place. And basically, you’ve got something in excess of 10,000 pieces that come together on the floor of the fab. 

It’s not simply an issue of making a semiconductor. You have a high end machine that’s called a extreme ultraviolet machine that does etching, and you have to dope. Well, let me let me back up. Just show you the whole thing. The whole process. Step one. You buy some really, really expensive sand silicon dioxide. That’s just pure, pure, purified. 

Usually only comes from the United States. You melt it down and know that you put in a seed crystal. And over the course of several days, sometimes weeks, you grow it into a crystal that weighs more than a car. You then slice it laterally into wafers, and then you take those wafers into your semiconductor fab facility, because these are all done in different places. 

And then you hit it with lasers that come out of the EV system. You dope it, you bake it again, you dope it, you bake it again, you do that, you know, ten times, 20 times, 90 times, and eventually you get a bunch of semiconductors on your disk. You then break those into pieces and test them and eventually incorporate them into actual hardware, like, say, a motherboard or a flash drive. 

And then goes into the intermediate products trade. So fabs are essential. Absolutely. But they are one step in an entire process that has thousands of steps. They just happen to be where a lot of these steps come together. They are not the high value added part of the process. That’s going to be almost everything else. Does that mean that they’re not important? 

No. Does it mean you can do it with unskilled labor? No. 

the United Arab Emirates have skilled labor? No. So if the UAE were to pay the $2,025 billion it takes to build a top rated facility, then they would have to do exactly the same thing that the Chinese have had to do import the labor to make it run the most exacting work that is done in a high end fab facility is the quality checks at every step. 

And that is something that if the chips are above, say, 20 to 30 nanometers, the Chinese can’t do it at all. And the idea that the UAE could do it is absolutely laughable. So if they did built this, no one would want to probably work in the unless the pay was absolutely immense and you would have basically a white elephant project generating very error prone, high cost items. 

That’s probably going to happen. What is less unlikely would be, say, a data farmer or data center. This doesn’t require nearly. The maintenance work is not nearly as, worker intensive. Basically, you get a bunch of GPUs. You build into something called a module with a bunch of Dram and Nand chips. Now, Dram, our memory chips and Nand are long term memory chips. Flash memory, short term needs power. Nand is, long term memory, not as quick, doesn’t need the power, and the GPU is all the processing. So you basically build a module and then you put a bunch of them in a server, and you put a bunch of server blades in a rack, and you put hundreds of racks in a room with really good cooling, and then you just let it run. 

Data cables coming in, data cables going out. Traffic comes and goes, you can house AI algorithms on it. You can. How’s your AOL account on it? Whatever you want. Two problems. Number one, all of the hardware is really, really expensive. And demand for the high end chips is very, very high. So most server farms do not have the sub seven nanometer chips that are, for example, necessary for most AI applications. 

Second problem latency. As a rule, you want your data center to be as close to your demand as possible. So the United States of various quality sets of about 10,000 data centers. And we try to put them either right outside of a population center or somewhere roughly in the middle of the country for trans coast traffic. So the idea that the UAE, with a couple first world cities is going to need a couple of data centers makes perfect sense. 

The idea that it’s going to be a global information hub, no, because there are no countries near it that generate the volume and quality of data that would want to go all the way to Dubai and Abu Dhabi before then moving on. So if the Emiratis decide to go down this path. This won’t be nearly as much of a white elephant project as, say, building a fab facility, but they would have to subsidize it in order to get the high end chips. 

And it appears that’s exactly what they’re doing. There is one of what’s supposed to be one of the world’s most advanced data centers, under construction in the United Arab Emirates right now, if everything goes to plan really does with these things, if everything goes to plan, it’ll become operational before the end of 2026. But it will be in a very expensive place to operate because the single largest expense for data centers is cooling its electricity. 

And I don’t know if you knew this, but the UAE is in a near equatorial desert. So the operational costs will be massive. And while labor is not a huge component of a data center when it comes to costs, they still don’t have the labor force to do even that. So if they do this, they seem to be doing it. 

It will be very expensive and it’ll just kind of be a feather in their cap. It won’t be actually something that a lot of people want to use.

George Jetson Would Be Disappointed with Autonomous Vehicles

A Waymo autonomous driving vehicle

I hate to be the bearer of bad news, but it doesn’t look like we’re all going to have personal Waymos anytime soon. There are four major hurdles.

The subsidies that have made a lot of the progress on autonomous vehicles possible are being phased out, so all that infrastructure that is needed won’t be made. Lithium is the backbone of EV’s, but most of the processing is in China; the US would need to build local capacity for this to work. Tesla, the leader of US EV innovation, hasn’t released a new model in years. And of course, the chip shortages that are coming soon will restrict growth.

So, mass adoption for electric and self-driving cars isn’t happening. There are niches where this technology will likely do well…think convoy trucking.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Oregon. And today we’re taking a question from the Patreon crowd, specifically what I think the future of electric and automated vehicles are specifically self piloting sort of stuff. It doesn’t look great. A couple of problems here. First of all, there are very few electric models that make sense to your average consumer without a huge amount of subsidies. 

And under the Trump administration, those subsidies are basically going to zero. And if you don’t have the infrastructure in place to support charging, and if you don’t have the subsidy support, mass adoption, you’re never going to build the infrastructure that you need to support support charging. So outside of some very specific places where there just has the right concentration of infrastructure and support places like say, Oslo and Norway, this really doesn’t have much of a future in the rest of the world, most notably in the United States, where distances are large, about half the population doesn’t have a grudge to charge. 

That’s problem one. Problem two is manufacturing. Right now, the vast majority, something like 80% of global lithium is processed and turned into lithium metal in China. And that is an infrastructure we’re going to lose. So if these are technologies you really want, you have to build the processing locally. And the Trump administration is actually moving in the opposite direction and removing some of the grants and the subsidies that the Biden administration established to build up this sort of infrastructure. 

So that’s problem two, problem three is legacy infrastructure. It’s not just that the United States loves their cars, but in the United States, the sort of engineering that is necessary to do this thing is really held within one company. And that one company is Tesla. Tesla is arguably the most what, until recently, the most subsidized company in modern American history. 

And those subsidies are also going to zero. The bigger risk here is that Elon Musk’s entire corporate empire is going to dissolve over the next couple of years. And I just don’t see Tesla, which hasn’t issued a new model in three years, being really part of the American automotive future. As for other companies, you know, Ford, Chrysler and the rest, they’ve all tried to get into EVs, running them alongside their other vehicles. 

But they have proven to be not as popular because, again, that infrastructure doesn’t exist. And that means you have a huge upfront cost for people who want to do it. And so with the last data we have, which is about a year ago, over three quarters of the people who owned an electric vehicle in the United States, it wasn’t their first car, their second car, it was their third or their fourth car. 

It was a showpiece. It was a talking point. It was allowing them to beat their chest and say they were environmentalists. Although I would argue, that if you look at the full cycle for producing an EV, the amount of carbon and energy it takes to build it in the first place, it’s actually not a very smart environmental choice. 

And then fourth and finally, and the one that’s going to become just crushingly important in the not too distant future, are the chips. An electric vehicle that is capable of automated piloting requires about 2000 U.S. dollars of chips. About half of those are relatively cheap and easy to obtain. The other half are the high end ones. And in the world that we’re moving into, that is the globalizing the capacity of the world to make the high end chips is going to go to probably zero, which means anything that is more advanced than, say, the iPhone 12, roughly, is something that we’re simply not going to be able to produce in sufficient volume. 

If you’re going to do true auto pilot, you need a significant amount of processing power on your vehicle that is not dependent upon the weather, that is not dependent on an uplink. It has to be done locally, otherwise you’re driving yourself. So what that means is at the end of the day, your individ person vehicles are not probably going to be auto piloted, or even electric, for much longer. 

That doesn’t mean the technology is going to die. It just means it needs to find a niche where it’s more appropriate. And what we’re probably going to be seeing is convoy in for trucks. Basically, your first vehicle has a driver software engineer, mechanic kind of person, maybe 2 or 3 people in it, and then a line of two, three, 4 or 5, six, seven trucks follows that first vehicle nosed tail. 

The technology that is required for that does not require electric vehicles, and it requires a much lower quality of chip to make it happen. That is something we can do with today’s technology. The reason that hasn’t happened yet has to do with legal issues. Until Congress codifies where fault lies, when something goes wrong, it’s difficult for auto manufacturers to really get into the business of making automated vehicles function. 

So the question is, you know, who’s at fault when there’s an accident? The driver, the person who did the last software patch, the manufacturer, the person who designed the sensor until that is sorted out, it’s going to be very difficult for EVs, as opposed to EVs to get to deeper claws into the American transport system, because if we don’t know who we’re supposed to sue when something goes wrong, then the liability gets spread out everywhere and it becomes a real mess that nobody wants to touch. 

All right, that’s my $0.02.

The Revolution in Military Affairs: Artificial Intelligence

ChatGPT logo with a synthetic brain hovering above

AI is working its way into just about every aspect of modern life. I mean, who didn’t fall for that video of the bunnies jumping on the trampoline. But artificial intelligence might not be the game-changer in warfare that you think it is…at least not in the short term.

AI promises faster processing, targeting, and decision-making, which all sounds great, until you throw in the wrench of deglobalization. As the globalized world collapses, the semiconductor supply chain will fall apart. The most advanced chips will not be able to be created anymore. Between the bottlenecks of EUV lithography and the countless single points of failure, we’ll be stuck with what we currently have (or yesterday’s tech).

When you factor this into military applications, it means older systems like cruise missiles and smart bombs will be mainstays. Fully AI-enabled systems will be severely constrained and reserved for the really important stuff.

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Transcript

Hey, all. Peter Zeihan here come to you from Cassidy arch. And where am I? Capitol reef National park. Sorry, it’s been a busy week. Today we are going to close out the series on the revolution in military technology. As advances in automation and digitization in materials science and energy transfer come together to remake how we fight. 

And we’re going to close out with something that you probably don’t need to worry about. And that’s artificial intelligence in war. The whole idea of AI is it can process faster than we can’t make decisions faster than we can, and potentially target with lethality faster than we can. 

I don’t think it’s going to happen. The problem is that the semiconductor supply chain for the high end chips that are capable of doing AI, and as a rule here, the cutting edge is going to be three nanometers and smaller, simply isn’t going to be able to survive the globalization age. So any chips that are not made in the next relatively short period of time, no more than a single digit of years, are really all we’re going to have for a good long time. 

And that means that the machines that are going out and doing the fighting have to rely on something that is older, that is not capable of processing and has to be linked back to something back home, either via wire or telemetry or some sort of radio communication. And that makes for a very different sort of beast. 

There are roughly 30,000 manufacturing supply chain steps that go into semiconductors. The high end stuff. And there’s about 9000 companies involved, and about half of those companies only make one product for one end user. There’s literally thousands of single point failures, and it only takes a few of them to go offline for you to not be able to make the high end chips at all. 

But the place that I think it’s going to be most concentrated, the place where we’re all going to feel like the place where is going to be obvious is going to be with the lithography. Specifically, we are currently using something called extreme ultraviolet, which is done by a company called ASML out of the Netherlands. And they are the world leaders in all of this. 

There are other companies that do the fabs other than TSMC and Taiwan, but the lithography can really only be done by the Dutch. And it’s not like this is one company. This is a constellation of hundreds of companies, and every time one of them either has a generational change or goes public, ASML basically sweeps them under the rug, absorbs them completely, puts the staff in different areas and puts it all under referential lockdown so there is no way to duplicate what they have. 

And so if you take this gangly supply chain that wraps the whole world and any part of that breaks, we can’t do EUV at all. And that means functionally, no chips that are worse than or better than six or 7 or 8 nanometers based on where you draw the line, we can still do something called deep ultraviolet, but extreme ultraviolet. 

It just becomes impossible. And that means that the best chips that we will have ten years from now are going to be very similar to the best chips we had ten years ago. And that limits what we can do with any sort of technological innovation. For the purposes of the military, it becomes very, very truncated. Old weapons like smart bombs and cruise missiles actually don’t use very sophisticated chips. 

20 year old chips are just fine. It’s the high end, the thinking, the processing, anything that’s more than guidance and requires a degree of decision making, that is what’s going to be off the table. So while I applaud all of us for having these conversations about the implications of AI, what it means for the workforce, what it means for culture, what it means for morality and legality. 

These are great conversations. It’s very rare that we get ahead of the technology in discussing what it can and can’t do, and start thinking about the implications for us as people, but I think we have some extra time because once this breaks, it’s going to take us 15 to 20 years to rebuild it. And that was back before everything accelerated with the Chinese fall and the Trump administration. 

Now it’s probably going to take longer. So have these discussions. I think that’s great. But it’s really probably going to be a problem for the 2050s.

The Revolution in Military Affairs: What’s Ahead

Photo of a soldier pointing to a tech screen

Before we close out this series on military tech, let’s discuss what military advances are on the horizon (and our last episode will cover something we don’t need to worry about).

Many of the larger evolutions coming down the pike are related to drones. Whether it’s strikes, surveillance, detection, or deadly jobs…drones will likely be taking it on.

These technologies are just the beginning though. As battery science improves and more advances are made, the battlefields will be going through countless iterations.

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Transcript

Peter Zeihan here coming to you from a foggy Colorado today. We’re do another in our Military Revolution series how changes in Materials Science and Data Transfer and Energy storage are shifting, the way the military works, and some of the new things that will be seen in the not too distant future. Today we’re going to talk about some edge cases that are likely to move into the mainstream in just the next few years. 

And these kind of fall the two general categories. First, you’ve got the topics where humans just aren’t the best tool for the job. These are things where they’re either dangerous, or expensive, we have to train someone up to an extreme level to do a job that then has a high mortality rate. 

You know, things you don’t want people doing. And the first one of those is saving other people, search and rescue in a combat environment uses a huge amount of resources to cover a large amount of land to save 1 or 2 people. It doesn’t matter if it’s a fighter pilot, it’s been shot down or someone who’s been shot out of the field having drones do this not only builds up your combat awareness for the field in general, but also allows you to provide, say, targeted supplies and of course, guide the real force in to pull the person out of trouble. 

The general topic of recon, something that is starting to be called perch and stair. Basically, you have a recon drone, but rather than flying around at altitude, it finds a place at, say, a quarter of a building and just parks and stays there. Maybe it has solar panels on its back so it can extend its battery life and it just looks around. 

It’s a mobile sensor that, for the most part, isn’t mobile. You know, you might call this a spotter or a spy in another condition, but if you can automate that, and instead of having one guy in one place that might be able to move around, you can have hundreds if not thousands of mobile sensors that can extend their life to span by just not flying the whole time. 

And third is something called an underwater swarm. Submarines are among the most expensive things that most modern navies can float. And if you can throw a few dozen things into the water, not only do you get some excellent acoustic collection for purposes of locating them, you know, you put like a one kilogram charge on each one. It doesn’t take a lot of those to take a multimillion dollar sub completely out of action forever. 

So these are technologies that you apply them to. What we know we need. And all of a sudden they really are game changers in terms of efficiency. Now the second category are things that we used to do and maybe even used to do well, but we haven’t done it for a long time. Keep in mind that the US military has not been preparing to deal with another peer adversary until just a few years ago. 

And the immediate post-Soviet era. We thought of the Russians no longer as an enemy. And so we stopped preparing to fight a global conflict with them. We then spent 20 years in the war on terror, focusing on counterinsurgency. That means going against the Taliban. And that means you don’t really need air power. You really don’t need air defense. 

And so certain aspects of our military were allowed to atrophy just from lack of use. And the two biggest ones are air defense suppression and hunting mines, whether land mines or sea mines. The general idea was, you know, if there is no big force out there fielding things you need to shoot through, then why would you maintain an entire arm of your force doing things that are just going to sit around? 

So, for example, we really only have a couple of minesweepers left, but naval minesweepers that are drones are a great idea. In essence, you have a drone that’s hooked up to your ship as it’s puttering around at a relatively low speed doing a sonar capture. You locate the drones and you send out a suicide drone to take it out. 

They’re already doing this in, say, Romania in the western part of the Black Sea. You can use aerial drones with radar to triangulate metal signatures in the soil and locate landmines before anyone can step on them. 

And for air suppression. Back in Vietnam, we had this thing called a wild weasel. Basically, it was a bunch of suicidal maniacs on a plane who would fly into Vietnam ahead of the bombers to activate air defense. Well, do that with drones. Don’t do that with a manned plane. In fact, do that with drones backed up by other drones so that by the time the real bombers get in the air, defenses are already gone. 

Same basic concept holds for coastal patrol. Now, the United States has never really been good at coastal patrol because we have oceans between us and everybody else. But this is one of those technologies that everyone else is going to find really useful. Again, in the post-Cold War world, everyone slimmed down their military spending, with navies seen as just something you would never need again. 

History was over. It was a world of commerce. Why would anyone shoot at anyone’s commerce? Well, that’s gone, but the time it would take to build up a coastal fleet and coastal patrol capability is going to be measured not in years, but in decades. Or you can just have a fleet of drones. It basically flies patrols out on your coast and then, if necessary, a more robust naval vessel can go out to take care of whatever the issue happens to be.  

So these are all things we’re going to see in probably just the next five years, certainly the next ten. And this is just the leading edge. These are things that me as a nonmilitary guy can kind of just think of based on the gaps in the system right now as the military technologies continue to evolve. We’re going to see radical applications of all of these. 

And keep in mind that drones are really just the leading tip of this. We don’t know what our material science is going to be in the next five years. Maybe we’ll get a new battery chemistry that allows for longer loitering, that generates an entirely new field of military tech. We’re just at the beginning here.

Will Trump Pump the Brakes on Greentech?

Both in the US and globally, the green energy transition has been all the rage for the past few years. With President Trump’s second term kicking off, how will it impact the green transition domestically and beyond?

For the green folks outside of the US, the impact should be minimal. Since the US doesn’t manufacture most Greentech components or provide much financial support, Trump’s influence is (mostly) contained to the US. But the story isn’t so pretty for those in the US.

The main challenges for the green transition in the US are transmission infrastructure and financing. Federal support is crucial for developing the infrastructure to get the energy from where it is generated to where it will be used. Trump could make this development and coordination process much harder. Wind and solar projects require more robust financing than a traditional fossil fuel plant, so cuts to federal incentives or subsidies could make these projects unviable.

Without federal backing, many of these green projects would stall. Private investors might try to step in, but they can’t match federal funding levels. Trump has the ability to significantly slow down the green transition, but at least that doesn’t extend beyond the US.

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Transcript

Hey, all Peter Zeihan here coming to you from Colorado today. We’re taking a question from the Patreon page. And that’s specifically what sort of impact can Donald Trump have on the green transition, both in the United States and wider abroad? Abroad, very, very little. The solar panels aren’t made here. The wind turbines are not made here. And U.S. financial support for anyone else’s transition is well below $1 billion a year. 

So, you know, you know, whatever. It’s all about what would happen here and here. The the federal government has a lot of, means for changing the way the green transition works. A couple things to keep in mind. Number one, green technologies, as a rule, require a great deal more transmission infrastructure because where most people live is where it rains. 

And so you can grow your own food. We don’t have a lot of desert cities. So in most cases we generate power with coal, nuclear, and natural gas relatively close to where we live. And so transmission for most power plants is well under 50 miles. But most of the places that are very sunny or very windy are not within 50 miles of where we live. 

It’s in the Great Plains, it’s in the desert southwest. And so you have to build these pieces of infrastructure to generate power well away from where people are. And then you have to wire that power to somewhere else. And that often means crossing jurisdictions. And if you cross a economic or political jurisdiction, the regulatory burden becomes more robust. 

And it’s up to the federal government to try to smooth that out. So if all Donald Trump does is not smooth things out, becomes a little bit more onerous to build green tech anywhere because you can’t hook it up to a source of demand, then that’s problem one. Problem two is much bigger. You see, if you’re doing a conventional, facility, whether it’s coal, natural gas or a nuke, only about one quarter of the cost of the facility is in the upfront construction. 

And then linking that up to the grid, most of the rest is fuel, especially for coal and natural gas. So as a rule, it varies based on where you are and how close you are to the fuel source. As a rule, about 80% of the cost of the lifetime cost of a coal or natural gas facility is the fuel. You basically buy it and burn it as you go. And so with that sort of model, you only have to finance the initial 20% that it’s required for the construction of the facility and looking it up to the grid and everything else. 

You have an income stream to defray and ultimately overpower the cost of the fuel moving forward. It’s not how green tech works. The whole point of solar and wind is that you don’t have fuel. The fuel is free. Well, that means that most of the costs, almost all the costs are upfront. Over two thirds go to the construction and linking it up to the grid. 

So the degree of financing you need megawatt for megawatt is more than triple what you need for a more conventional fuel system. Now, one of the things to keep in mind in the United States is that capital costs have roughly increased by a factor of four since 2019, as the baby boomers have retired, and the money that they used to have in stocks and bonds, that fueled the sort of capital environment that we had ten years ago just no longer exists. 

They’ve all been liquidated and they’ve gone into T-bills in cash, which is driven up the cost of financing for almost everything, including power plant expansion. Well, if you’ve seen the cost of capital increase by a factor of 4 or 5, and you have to finance three times as much for wind and solar as you do for core natural gas, you can see where the problem is. 

This is normally where the government would step in with concessionary deals on whether it’s on taxes or directly on financing in order to help bridge that gap. And so all Donald Trump has to do is say, I’m not going to finance this stuff anymore, and a lot of it is going to go away, even if, as isn’t the case in the desert southwest or in the Great Plains, solar or wind are already cheaper on an all in cost basis over the entire life of the project. 

But that’s not the number that matters. Part of the problem that I’ve always had with the green communities, they keep using this thing called levelized cost of power, which shows how over the life of a project, the cost of solar and wind has gone down and gone down and gone down. And it has. But they assume that there’s no problem with intermittency. 

So like when the sun sets, solar doesn’t work anymore. If you pair a more realistic cost structure because you know you want electricity after the sun goes down. Hello. With financing the issue, then the federal presence in the financing world really is critical. And even in projects that make a huge amount of sense, not just environmentally but economically. 

If you can’t get that financing right, you can’t have the project. Private industry can step in, but it’s going to be a hard sell to do financing for something on concessionary terms, for something that it’s going to take longer to pay out as compared to a colder natural gas plant. And you might get local and state governments kicking in some for political and environmental reasons. 

But there’s no way that they can compete with the sheer volume that the federal government can come up with. So we should expect a lot of these projects to slow down quite a bit. Even if Donald Trump doesn’t call them out by name is something that he doesn’t like. You interrupt the financing and you simply don’t get much new construction.

Intel Keeps Playing Catch-Up with TSMC

Photo of an INtel microchip

We’ve discussed what TSMC is up to in a recent video, so let’s look at what another big name in the semiconductor space -Intel- is doing to keep up.

Intel was once the big dog of the industry but fell behind due to delays in adopting new technology (aka they got complacent and didn’t think anyone could surpass them). Then TSMC pulled the rug out from under them and Intel has been playing catch-up ever since.

The semiconductor production process is complex and there are lots of different steps along the way. One of Intel’s unique advantages is that it controls more stages of the production process than TSMC does. So, Intel has a bit more protection against single point failures, which in the geopolitical landscape we find ourselves in…could prove to be an essential layer of security in the long run.

So, TSMC remains the industry leader, but they could take a page out of Intel’s book and bring some steps in their supply chain a bit closer to home.

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Transcript

Hey everybody Peter Zeihan here today we’re going to talk about the semiconductor sector, specifically the American company Intel. Now Intel has had a rough few years. 20 years, ten years ago, 20 or 25 years ago, they used to be the industry leader, and they were so far ahead that they would release designs that were nowhere near the most sophisticated, because they knew it would take forever to the market to catch up. 

So they had years of work plan in front of them. Unfortunately, they rested on their laurels and they failed to invest in the technology called extreme ultraviolet that instead a Taiwanese from TSMC picked up on, which allowed for much faster fabrication and much more accuracy. Much less waste. And in a few years, TSMC overtook Intel become the world leader. 

Intel did get on the extreme ultraviolet bandwagon eventually, but it took them a while to master the technology, and they’ve been behind ever since. Now, that said, the semiconductor industry is really weird and that we really do only have that one world leader, TSMC, that makes almost all of the high end chips. Intel is trying to catch up from behind. 

And Samsung out of Korea has picked up some fabrication facilities, from a merger and is doing their best to play, but they’re a distant, distant, distant, distant, distant distant second. So I thought it would be worth understanding where this technology is going to evolve and where the corporations are going to evolve. American politicians like to focus on the fabrication facilities, the places where the semiconductors are actually, grown, attached, doped and, built. 

But that’s really not the hard part of the process. I mean, know, no offense to the fabricators. They do amazing work in difficult condition and technologically challenging fields, but the harder work is in design. A basic design for a high end chip can take upwards of 24 months to really get going, and that’s assuming you’re not really incorporating any fundamentally new technology into it. 

And most of this design work is done in the United States, with a lesser degree in Japan, but that makes it sound like it’s just some guy with a protractor basically scribbling on paper. And that’s not what it is. You’re bringing together literally tens of thousands of elements into a design to try to do something new, process faster, manage heat better, use electricity, use less electricity, use different materials, and so on. 

And all the new technologies have to be incorporated into this theoretical construct, which is then taken to Taiwan, where they work with TSMC in order to basically make an instruction booklet that the TSMC staff will follow. And then you have to worry about all of the inputs coming from around the world, because it’s not like you just take some silicon and you’re off to the races. 

No no no no no no. There’s copper, there’s palladium. There’s all kinds of different inputs, things like transistors that have to be very, very specially designed and produced. TSMC doesn’t do any of that. The logistics and the design companies in the United States do so even today, with TSMC producing 90% of the world’s high end chips. Most of the real work, most of the value added work, most of the high paying jobs are actually done in the United States, and operating a side facility while it’s still highly skilled work. 

It’s not nearly as highly skilled as what happens on the other side of the Pacific. The problem that brings me back to Intel is what happens on the other side of the equation, once you have all of your raw semiconductors, you then break them into their individual components and test them and package them. And then you have to put them into an intermediate product, like a motherboard or a memory drive or, a chip within a sensor system. 

And only then can you go into the proper manufacturing process where it is put into a car or a plane or a satellite or whatever else. So this one step fabrication, obviously unavoidable, obviously important, but it’s not really where the money is. Now, TSMC is a little obsessed with its security because it is a Taiwanese company. And you can understand why. 

And so the concern a lot of people have in the sector and more broadly is that if something happens to Taiwan, we lose all the iron semiconductors, and that is true. But if something happens to South Africa, we lose a lot of the rare materials that go into it. If something happens in North Carolina, we lose the ability to purify the silicon that goes into it. 

God forbid something happens to San Jose, we lose the ability to do a lot of the software work on the back end. There are thousands of single point failures throughout the system. What makes Intel unique, from my point of view, is that they have a number of these other steps under the umbrella. There are still literally thousands of single point failures throughout the Intel system, but probably about a third to have less than what TSMC has. 

So in a world that is on the verge of rapid globalization, the idea that we’re going to be able to make these high end chips at all is kind of a stretch to me, because there’s just too many places where a single break means the whole thing falls apart. But Intel has three advantages. Number one, more of the steps are under the umbrella. 

Number two, its fab facilities are in the United States. And number three, if we’re going to have to rebuild this environment anyway, easier to do it if you only have to replace 3000 steps instead of 4500. So one way or another, regardless of the corporate success or failure of Intel in the months and years ahead. The fact that more of this stuff is concentrated in Intel and in the United States suggests that some version of Intel is actually going to be a bigger part of the semiconductor future globally than TSMC over the long run. 

Of course, we’re all dead in the long run. So this is all about timing.

TSMC’s Semiconductor Production in the USA

I’ve done a handful of videos on semiconductors and there’s a very good reason for that. The production of semiconductors and the companies involved will be under the spotlight for the next few years as the entire industry gets shaken up.

TSMC has set up chip production in Arizona, despite initially resisting relocating to the US. This facility isn’t doing the cutting-edge stuff, but it’s still producing chips on the higher end of the spectrum. TSMC has also managed to achieve a high recovery rate on these chips in Phoenix, not quite a major breakthrough but at least it reduces production costs.

Most of the chip manufacturing is automated, so the higher labor costs in the US and skill gaps relative to Taiwan aren’t playing as big of a role as expected. However, to expand the reaches of these facilities and begin development of cutting-edge chips, some major investments will need to be made. Let’s look at what Intel is doing on this front next.

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Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from the Boston Logan Airport. It is not quite five in the morning. Anyway, it’s still a decent backdrop. So we’re going to take an entry from the Ask Peter forum—specifically, could I give an update on the status of TSMC’s efforts to establish chipmaking here in the United States?

I’m happy to report that it’s actually going a little better than I thought it was going to. The very short version is that Donald Trump almost forced TSMC to relocate some of its production capacity to the United States and made it very clear that he wanted the very, very, very top end to be made here.

TSMC said, “Sure, of course, whatever,” and then proceeded to drag its feet in every possible way. Remember that the leading edge of chips these days is less than three nanometers, getting into two nanometers, and probably within the next couple of years, getting to 1.5 and maybe even one nanometer. The facilities that are under construction in Arizona have been dragged out, dragged out, dragged out, and dragged out, with, in many cases, TSMC not even providing proper architectural blueprints so far.

So there’s been construction, then they tear things down, and then they rebuild something and tear it down. They’re basically just buying time. But the first facility actually is operational. It’s just not the cutting edge—it’s like four nanometers, which is still pretty good, but it’s not the kind of stuff you’re going to probably put into an AI server farm or anything anyway.

Part of the big news that came out in late October was the idea that they’re getting a higher recovery rate from the new facilities in Phoenix than they’re getting anywhere else. While this is an important development, you shouldn’t get too excited.

The process for making the chips: you take a little bitty seed crystal, you put it into a pool of liquid silicon, and then you steadily pull it up over the course of several days to grow a crystal. That crystal ends up weighing more than a Volkswagen. It tends to be over a foot or two across and about nine feet long. I mean, it’s a little different at every facility. You get this giant ingot, and then you slice it laterally into thin discs.

You then use a combination of lithography, baking, and doping to etch those chips. You bake them to make sure that everything sticks, and then you do it again and again and again—something like 90 times. It takes a few months to make each individual sheet.

The waste is one of two things.

Number one, you have a section of the semiconductor sheet that just doesn’t work. So that would be waste. Or maybe it’s just the shape because, usually, your chips are squares or rectangles, and the disk is round. So you can have waste at the edges.

TSMC is famous for having the highest recovery rates in the industry. With its four-nanometer nodes, it’s something like 90% coherent and only 10% waste. The TSMC facility is now 94% coherent. So it is an important technological jump. It does drop the overall cost of the items you can produce, and since U.S. labor is more expensive than Taiwanese labor, you know, that’s great. But don’t get too excited about it.

Something else to keep in mind about these facilities is the labor that is necessary.

Very highly skilled? Yes. Is there a lot of labor? Not really. Most of this is automated because you’re using a lithography facility that is being produced by ASML, the Dutch company. You know, it’s automated. The whole point of extreme ultraviolet is it doesn’t require a lot of manual adjustments.

The old technology, deep ultraviolet? No, that did. When you are doing DUV, you’re constantly making changes to every individual machine for every individual run. You get much higher wastage because the chips aren’t all exactly the same. With EUV, it’s all automated. You have to do it once, and you can apply it across the entire system for every lithography machine in your facility. The chips come out much more regular. It’s kind of like an analog versus digital sort of thing.

One of the constraints we have faced with moving this stuff from Taiwan to the United States is that the labor costs more and isn’t quite trained right. But with EUV, that doesn’t matter as much as it would have with the older technologies.

Anyway, it’s moving ahead. Facilities two through five? God knows when those are going to be operational because those are supposed to be the higher-end ones. But this low-end, high-end chip of four nanometers seems to be moving along just fine. Just keep in mind that the real breakthroughs are going to be coming from TSMC this year.

If the United States is really going to get in the game of high-end semiconductors, it’s going to be using a new lithography technology called High Numerical Aperture, which is like the next generation of extreme ultraviolet.

TSMC isn’t bothering to work with that. That’s an Intel project. The Dutch company ASML has provided the technology to both companies, and only Intel has bit. That is the technology that is going to be used at the Columbus facility, which hopes to begin operations in 2026.

We’ll see.

TSMC Cuts China’s Access to Advanced Chips

Photo of the TSMC building

The recent discovery of TSMC chips in Huawei devices has revealed some gaps in the US sanctions on China. As a result, TSMC has decided to no longer even accept Chinese orders for advanced semiconductors.

This move aligns with the Biden administration’s strategy of halting progress in advanced sectors like AI; the US also got some other countries on board as well: Netherlands, Taiwan, Japan, and South Korea.

Now it’ll be up to incoming US President Donald Trump to figure out how to use tech restrictions or tariffs (or some combination of the two) to define US-Chinese relations.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here. Coming to you from snowy and melty Colorado, where our first three feet of snow is rapidly going away.

Anyway, today we’re talking about something that happened last weekend, the ninth and 10th of November, and then followed up by an event on the 11th. On the ninth and 10th, the Taiwanese semiconductor company TSMC, which is the company that makes all the high-end semiconductors in the world, made a major announcement.

If basically it’s going to go into an EV, a high-end phone, a high-end computer, satellite communications, or artificial intelligence, it comes from TSMC’s foundries. Anyway, they said they are no longer going to even take orders for anything that is seven nanometers or smaller from any Chinese entity whatsoever. The instigating issue was a couple of weeks ago and a Huawei product.

Huawei is a Chinese telecommunications firm. They found some TSMC chips in one of the product lines, indicating that the sanctions, as they currently exist, are not working as well as some people thought they might. Some products are still making it to China and are incorporated into various goods. So, TSMC announced that they’re just not going to take orders from the Chinese for anything that is at seven nanometers or less.

Ten is generally considered to be the line where you get the really high-quality stuff, and all the really good stuff that goes into things like artificial intelligence tends to be four to three nanometers or even less. So, we’re not just talking about the top tier here but even the second tier.

Within 48 hours, the Biden administration announced they would lean heavily on TSMC to make sure no Chinese orders were ever even successfully placed. The Taiwanese announced compliance before the American order even came down, giving you an idea of how willing they are to cooperate on this issue. I’m sure that order was being drafted before TSMC made their decision, but TSMC beat them to the punch.

A couple of things come from this.

  1. Foreign Policy Implications
    We have our first foreign policy crisis for the incoming Trump administration. The Biden administration is setting Trump up for a pretty good success with relations with TSMC. However, we’ve had a difference in style when it comes to Trump versus Biden regarding China.

    • Trump’s approach has been tariffs, tariffs, tariffs, but with little meaningful enforcement. This has allowed China to find creative ways around the tariff structure—like mislabeling, exploiting NAFTA’s rules, or rerouting products through third countries like Vietnam.
    • The Biden administration, by contrast, has taken a surgical approach, identifying specific sectors and building tech walls to prevent tech transfer. This requires much more technocratic oversight to evaluate thousands of supply chain steps and ensure restricted products don’t end up where they shouldn’t.

Neither strategy is inherently “correct.” Each has strengths and weaknesses. Biden’s requires more ally cooperation and bureaucratic expertise, while Trump’s is more about making bold statements. A hybrid approach might be the best path forward. Regardless, Trump now has to decide on a course of action.

  1. Technological Thresholds
    The technological barrier TSMC is enforcing is in the seven-nanometer range. To understand why that matters, let’s break it down.

    • How Semiconductors Are Made:

      • The process starts by growing a crystal about the size of a Volkswagen. This is done by placing a seed crystal into melted silicon oxide and drawing it up slowly over days to form a massive ingot.
      • The ingot is then sliced into wafers, which are doped, baked, and etched under lithography machines repeatedly until the final chip is created.

    • Deep Ultraviolet (DUV) vs. Extreme Ultraviolet (EUV):

      • DUV, the older technology, uses UV radiation to etch chips. It can’t achieve atomic precision and involves manual adjustments, leading to inefficiencies and errors.
      • EUV, developed by the Dutch company ASML, uses a much tighter focus and automation to achieve sub-seven-nanometer precision. This results in fewer errors, more consistent chips, and better performance.

DUV can still produce chips between 10 and 90 nanometers, but getting below seven is a stretch. Huawei recently released a phone using a seven-nanometer chip made through brute-forcing DUV. The result was an expensive, inefficient chip with high energy consumption.

This prompted a coalition of nations—including the Dutch, Japanese, Koreans, Americans, and Taiwanese—to draw a hard line at EUV. If China can’t access EUV technology, they’ll be locked out of cutting-edge tech for years to come.

  1. Labor and Machinery
    China lacks the capability to produce or maintain DUV and EUV machines, much less develop them. EUV machines are exclusively made by ASML in the Netherlands. Without these machines or the skilled labor and software to operate them, China can’t produce high-end semiconductors.

The only way China can acquire these chips now is by hijacking shipments meant for someone else. However, doing so at the scale required to meet technological needs is improbable.

So, this situation lands squarely on Trump’s desk. How he chooses to pursue this technological blockade—and whether he combines it with tariffs or another approach—will set the tone for U.S.-China relations moving forward.

And I, for one, am curious to see how it all shakes out.

Photo from Wikimedia Commons

The Geopolitics of…Gaming

Photo of a gamer in front of a personal computer

PC or console? Yes, I’m talking about gaming preferences…and if you answered PC, then we all owe you a big thank you. Today’s episode is all about the geopolitics of gaming (specifically, the advancements its caused in computing capabilities).

If the terms ping or lag mean anything to you, then you have likely experienced the frustration that has plagued gamers for ages. That very frustration is what helped to advance processing power and high performance chips (GPUs, aka graphics processing units) when most others’ computer needs were satiated. Since gamers needed top-tier graphics and a very responsive system, GPUs were developed to handle multiple processes simultaneously. And guess what those chips were also pretty damn good at? Running AI models.

Without those gamers pushing the boundaries and driving technological progress in this sphere, we would be at a loss for how to handle the AI buildout. Which require being able to handle massive amounts of data simultaneously. So, a tip of the hat and raise of the glass to all the nerds out there.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey, everybody. Peter Zeihan here coming to you from snowy Colorado, where we just got our first nine inches, and there’s another 13 inches on the way. Boy howdy. Today, we are going to take an entry from the Patreon page’s Ask Peter Forum. The question is the GOP politics of video games, which I know, I know, I know some of you are like, “What?” Now, this is actually quite planned to become one of the most important economic sectors in the world in the last five years.

I’m not sure whether or not it’s going to continue, but let me kind of lay it out for you. For the period of roughly 2010 to 2021—roughly that window—we had everything we needed for computing power. I mean, yeah, yeah, yeah, you’d upgrade your laptop every 2 or 3 years to get the newest chip.

But we had digitized most things that could be digitized. We’d moved into logistics and communication and information, and all the low-hanging fruit had already been computerized. The question was, “Why do you need ever faster processors and ever more memory if you really don’t have a need for it?” And yeah, yeah, we got Starlink coming up and running, so satellite communications can be an issue. We wanted to build a smart grid. You know, these are all reasonable things, but you only need so good of a chip for that.

As chips got better and better and better and better and better, the number of people who were willing to cash for them got lower and lower and lower and lower and lower. Then the gamers came in because they were solid demand. They always wanted the fastest possible chips with the best graphics processing capacity so they could join larger and larger multiplayer forums and never have drag or lag. It got to the point that they basically kicked off people who didn’t have good enough hardware because they would slow down the process for everybody.

The chip that is at the heart of that, where you had the largest drag and so the highest demand among the gamers for improvement, is something called a GPU—a graphics processing unit.

And they are definitely the most advanced chips in the world today. But a bunch of gamers sitting at home are not exactly what you would call the bellwether of global economic patterns, even in technology. So there was only so much money that could go behind this sort of effort. And then we developed this little thing called large language models and artificial intelligence.

It turns out that the function of the GPU, which is designed to run multiple processes at the same time so that graphics don’t lag, is exactly what you need to run an efficient large language model. And if you put 10,000 or 20,000 of these things running at the same time in the same place, all of a sudden, AI applications become a very real thing.

We would not have AI applications if not for those people who sit at home in the basement and play role-playing games all day. So thanks to the geeks and the nerds and the dorks because it wouldn’t have happened without you. The question is, What happens now? You see, GPUs, because they were designed by dorks for dorks, have some very dork restrictions.

Normally, you only have one GPU in a gamer console, and you have several fans blowing on it because when it runs in parallel, it’s going to generate a lot more heat and use a lot more energy than any other chip within your rig. Well, you put 10,000 of those in the same room, and everything will catch on fire.

So the primary source of electricity demand for data centers isn’t so much running the chips themselves. It’s running the coolant system to keep these banks of GPUs from burning the whole place down.

Now for artificial intelligence, it’s not that the GPUs are perfect—they’re just the best hardware we have. There are a number of companies, including Nvidia, of course, that are now generating designs for an AI-specific sort of chip.

Instead of a GPU, which is like the size of a postage stamp, you would instead have something where there are multiple nodes on the chip. So basically, it’s the size of a dinner plate or even bigger so that you can run billions, trillions—lots of processes simultaneously.

Because the chip is going to be bigger and designed specifically for AI, cooling technologies will be included. It won’t be the power suck per computation—or at least that’s the theory. The problem is the timing. Assuming for the moment that the first designs are perfect (they never are), we don’t get our first prototype until the end of calendar year 2025. It will then be 18 to 24 months before the first fab facility can be retrofitted to run and build these new chips, and we get our first batch.

Now we’re talking about the end of 2027. And if all of that goes off without a hitch (it won’t), we’re not talking about having enough to outfit sufficient server farms to feel the difference until probably 2029 or 2030.

So the gamers have taken it this far. The question is whether the rest of us can take it the rest of the way in an industry with a supply chain that, just to say, has some complications.

So gamers, salute to you. We wouldn’t be in this pickle without you, but we also wouldn’t be able to imagine the future without you.

The Future of Naval Tech & War on the Seas

Photo of a US aircraft carrier on the water

The nature of naval warfare is evolving – with advancing drone tech leading the charge – but not all of the world’s navies and regions will be impacted the same.

Drones are all the rage right now, and they come in all shapes, types, payloads, and ranges. But which countries will struggle with these drones the most? The isolated nature of Russia’s fleets leaves them open to attacks, while the US Navy tends to operate away from coastlines and can unite its fleets if needed. The Persian Gulf and parts of the Mediterranean might be hotter than others, but the US has enough regional allies to keep a strategic advantage. The Chinese navy will face geographical bottlenecks (like the first island chain) that will limit their naval reach and projection power.

The US is stuffing another ace up their sleeve with its Replicator Initiative, which would allow US ships to be converted into drone manufacturing platforms. So again, drones are changing the way in which naval battles are fought, but there will be some obvious winners and losers.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey everyone. Good morning from Colorful Colorado. Today, we’re going to take an entry from the Ask Peter forum. Specifically, do I worry about the primacy of the U.S. Navy in a situation where the drone technology being developed for the Ukraine war becomes more widespread? Well, let’s start by saying they’re going to become widespread. We’re only seeing something that’s barely out of the prototype stage right now.

And it is proven that in close quarters, relatively speaking, it is already more than capable of defeating an old-style surface navy. Now, I don’t want to overplay this because the Russian Navy is not great under normal circumstances, and that’s if they could all sail together into a single mailed fist. And they can’t—look at the Black Sea, the Baltic Sea, the Arctic Sea, and the Pacific Fleet—all of them independent, all of them having to operate under constrained circumstances.

Now, something to keep in mind about the drones. You’ve got two types: air and naval. Your air-launched drones, at the moment, can’t really carry warheads that are more than 100 pounds. And while that can certainly ruin your day or take out a tank or a building, against a ship, it’s going to be more limited in its ability to be successful.

Keep in mind that ships can move, and if you don’t have over-the-horizon visual capability, just getting the drones to where they need to go is going to be a bit of a problem. So most of the assaults that Ukraine has been launching against Russia’s Black Sea Fleet have been naval. Naval drones don’t have as much range, typically, but they can carry a lot bigger payload.

And since they’re in the water, once they get closer, there’s not a lot that the ships can do about it because they’re used to shooting up at air assets, not down at sea-level assets that are well below the angle that they can fire. So the Russians have to basically counter with small arms. And that would be true for any naval asset.

But keep in mind, there’s this geography issue. Not only are Russia’s navies sequestered from one another, but they’re also in relatively limited bodies of water that are highly contested. So, the Black Sea is obviously the issue of the moment, where the Ukrainians obviously have an outlet on the ocean that is adjacent to where the Russians would like their ships to operate.

But you also have NATO members—Turkey, Bulgaria, and Romania—which have significantly more frontage on that body of water than the Russians. So if you marry these new technologies to the assets of NATO and the industrial plants of a country like, say, Turkey, then the Russians simply can’t have anything floating on that body of water at all.

The same holds true to an even greater degree for the Baltic Sea Fleet, where you’ve got NATO members Estonia, Latvia, Lithuania, Germany, Denmark, Sweden, and Finland, basically countering potential naval power. So if we ever get into a situation where there is a fight on the Baltic Sea, every ship that the Russians have will be sunk, probably within the first 72 hours.

It’s a little bit better on the Arctic, but then you’ve got the ice pack. So for a submarine, if you get below the ice pack, you’re probably okay. But Norway’s right there, and anything that’s going to stay on the North Atlantic has to go right by it, and it’s going to get sunk. And then, probably almost as bad as the Baltic, is the Pacific Fleet, which is completely bracketed by Japan.

Anything that’s going to leave from the Vladivostok area—that just leaves one base at a place called Petropavlovsk—but still, in here, which is a sub base where the subs can kind of go off and drop into a trench and hopefully evade detection. That base, which has no road and no rail connection to it whatsoever, could still operate, but that’s just one spot.

And everything basically has to be flown in to support it. So maybe, like, Russia’s—it’s just absolutely hosed. Compare that to the extreme on the other side with the U.S. Navy. We’ve got an Atlantic and Pacific Fleet that can sail through either the canal or around the Americas to unite into a single force if they want to. It tends to also be long-range-based: supercarriers, missile frigates, that sort of thing.

And so they very, very rarely engage a foe that they can see. You’re talking over-the-horizon hundreds of miles away. Well, that pretty much obviates any capability of the air- or sea-based drones in our current imagination of hitting them. Also, they tend to operate in the deep sea. They never go within sight of the coast if they don’t have to.

So there might be some bodies of water that are constrained, where operating there would be heavily restricted, where there are potential foes who could field a drone force. Places that are probably going to be a bit of a problem include, of course, the Persian Gulf. The days of having a carrier there without, you know, having to worry about it are probably gone now.

The Mediterranean could be a little constrained. But keep in mind, the entire northern coast of the Mediterranean are NATO countries, and the entire southern coast are countries that, for the most part, are favorable to the United States: Egypt, Algeria, Morocco, Tunisia. The one holdout is Libya, and it’s not that Libya’s hostile; it’s that Libya has basically fallen into civil war and is falling apart as a government. Everywhere else that I can already see as a possibility.

Not necessarily because there’s a lot of governments there that are hostile, but it’s becoming a stateless zone in its own way. And the Houthis are probably the best example of that. Just keep in mind that the Houthis of Yemen don’t have an industrial plant. So any weapons they fire are something they’ve brought in from somewhere else. Closer to home, the only thing to really worry about would be the Gulf of Mexico and the Caribbean.

And because there are hostile countries there, most notably Venezuela and Cuba. But if, if, if, if, if we ever get to the situation where that is a problem, a couple of things to keep in mind: Number one, most U.S. naval assets aren’t in the Gulf of Mexico, so you don’t have to worry about a base getting closed in.

And second, in the very, very unlikely situation where we have a military conflict in that area, there will be a land invasion of Cuba in a very short period of time. This is not me recommending—let me make this very clear—I think there are much easier ways to get Cuba on our side, if that’s the goal.

But a country with the population and the industrial plant of Cuba could not survive in the face of an American onslaught should it come to it. And really, that’s the only other spot where there’s a constraint. Between geography and allies, the U.S. looks pretty good. That just begs the question of what is the situation for maybe some other countries that have navies.

In the case of the United Kingdom, yes, it’s close to other land borders—the North Sea, the English Channel—they’re not that big of a barrier. But again, Norway, Denmark, France—you know, these are friendly countries, not hostile ones. And in the case of East Asia, things get really dicey. Japan’s okay because all of its ports are on the east side of the island, so they sail out and then come back to wherever they want to.

So they’re pretty much immune to this. But China—China’s got the first island chain, and any vessel that leaves China has to get by Japan or Taiwan or the Philippines or Indonesia or Singapore. Assuming the United States isn’t playing at all, that’s going to be really hard. And one of the things that the U.S. Navy is working on right now is something called the Replicator Initiative, which will turn its ships into not just combat platforms, but manufacturing platforms to produce exactly the sorts of drones that would be needed to sink everything that the Chinese have in a short period of time.

In the case of a war. Hopefully it’ll never come to that, but Replicator is supposed to be operational by the end of calendar year 2027. That’s not that far away.