War, devastation, spiking prices, economic turmoil. No, I'm not talking about the wars currently in Ukraine and the Middle East. But unfortunately, an even more dangerous conflict that may be on the horizon. I'm Dmitri Alperovitch and I have the grim distinction of being 3 for 3 on recent war predictions, starting with Russia's invasion of Ukraine in 2022. I desperately hope I'll be wrong on the fourth, the most consequential of them all, what I believe may be a future conflict with China. You may have noticed that we're now living in a new Cold War, this time with China. It is a conflict that is remarkably similar to the first confrontation with the Soviet Union in the last century. Once again, we have a global competition for supremacy playing out in every single corner of the world. We have a tech race. We have an economic war. We have an arms race, including a nuclear one, by the way. We have an ideological struggle. We have a spy war. And once again, for the first time since the 1960s, another space race where once again, we're trying to land a human on the moon before our main adversary does. But there is one critical difference. During the first Cold War, our territorial differences with the Soviet Union were largely limited to West Berlin, an enclave within East Germany that really had no strategic, economic, or even historic value to either of the superpowers. Things are different now because we have a much more consequential tug-of-war playing out over Taiwan between the United States and China. Taiwan, of course, is the epicenter of semiconductor production, perhaps the most critical resource in our digital economy and essential for AI progress. Taiwan produces over 90% of advanced chips and makes over 40% of world chips, period. And to China, it is viewed as essential to Xi Jinping's ambition for the rejuvenation of the Chinese nation. And to the United States, it is also viewed as a critical place that helps to protect our critical supply chains to South Korea, to Japan, and to the Philippines, and to prevent China's dominance of Asia, perhaps the most vital region in the world, where you have over almost 40% of the world's GDP, most of the supply chains, most of the world's population, and most of the economic growth. Why am I convinced that China is intent on invading Taiwan in the coming years? Well, there are numerous indicators. And in fact, Xi Jinping has himself proclaimed that this problem, quote unquote, of unification with Taiwan can no longer be passed on to future generations. And by the way, the man is in his 70s. In fact, the US intelligence community has determined that he has given an order for the PLA, the People's Liberation Army, the Chinese military, to be ready to invade Taiwan in 2027. But we now have a number of clues that suggest that this is going beyond rhetoric and the Chinese are actively preparing for this confrontation. Clue number one. What you see here is a recent satellite picture of the largest PLA training camp in Inner Mongolia. You can see the road networks and the buildings they've constructed. What is remarkable about this picture is that if you overlay it on the city of Taipei, the capital of Taiwan, it is a one-to-one match. And in fact, in the center is the presidential office building, the center of power in Taipei. They have constructed an exact replica of that building and they're training their special forces for an assault in order to decapitate the Taiwanese leadership. Clue number two. A few years ago, we started noticing really strange ships started to get built all over Chinese shipyards. You can see the satellite image of it on the left. And what they have is these Bailey bridges on them that can be extended and chained together to produce a road over sea that can offload heavy vehicles, armored vehicles, troops, logistics directly onto the beach. In fact, this is a modern version of the Mulberry Harbors that the allies had built in 1944 to facilitate the landings in Normandy. There is only one reason why the Chinese would be building these barges in large numbers, by the way, and very rapidly. And that is to facilitate invasion of a large, very populous landmass. And there's only one that they claim they're very interested in, Taiwan. Clue number three, cyberspace. Over the last 6 years, we have been detecting a relentless assault on our military and civilian networks, both ours and our allies, from a group called Volt Typhoon that US government associates with the Chinese government. This group has been infiltrating our power utilities, our water utilities, our ports, our pipelines, and other critical infrastructure, not just in the Pacific near our military bases like in Guam, but all over the continental United States as well. And what's really interesting about this group is what they do after they break into the network, which is nothing. They sit there and wait, awaiting further instructions. When they get detected and ejected, they work really, really hard to get back in and to maintain persistence within that network. The US government believes that this is done for two reasons. One, in the event of conflict, to disrupt the ability of US military to operate in the Pacific, to flow forces and logistics there, and two, to hold our critical infrastructure at risk in order to deter us from intervening on behalf of Taiwan. So, you can see that the PRC, the People's Republic of China, is spending an enormous amount of effort to build up capability, to prepare the battlefield to ensure success in a possible invasion of the island. So, one day, we may very well wake up to a nightmare scenario. This day may not be even that far off, perhaps as soon as 4 years from now, when the Chinese launch this ruinous invasion, which would be the largest military operation in human history, much larger and much more complex even than the D-Day invasion of Normandy in 1944. But, why is Taiwan so vital beyond just semiconductors? The answer lies in geography. When you look at this map, you can see that Taiwan is at the center of the so-called first island chain, stretching all the way from the Japanese islands to the Philippines. In fact, it is the cork that keeps China bottled up in South and East China Seas, preventing the unfettered access to the Pacific Ocean. Seizing Taiwan would allow them to shatter this containment and flip the tables, now endangering our freedom of navigation all over East Asia and ejecting us from this vital region, and likely making China the hegemon where they can dictate the rules of trade and security order across that region and endanger our allies. But all hope is not lost. China is not yet ready for invasion, and I believe they can be deterred from taking this ruinous action. There are three things that are really important for deterrence. One, we must revitalize our defense industrial base, which has dramatically atrophied since the end of the Cold War. Our munition stockpiles are very low, and in fact, the estimates are that in a potential conflict with China, we'd run out of long-range fires within days. We must invest in additional production lines, use advanced manufacturing to rapidly scale up production of munitions, weapons, and platforms. For the deterrence dilemma is such that in order to avoid war, which is what we all want, we have to convince China that we are ready and capable of defending ourselves should they attack us or our strategic interests. Two, we must reduce our dependencies on Chinese supply chains. Right now, they have a critical choke point in critical minerals, both rare earths and other minerals, as well as a huge dominance in microelectronics, in foundational semiconductors, and precursors to pharmaceuticals. We cannot let China think that we will self-deter ourselves from potential engagement in the Pacific because of the economic pain they might inflict upon us should they deny us access to these goods. Thus, we have to invest in both domestic and allied production to diversify and secure our supply chains. Number three, we have to increase China's own dependencies on supply chains in the West. And there is no better use case for this than the one good, potentially one of the most important ones in the world, that only we and our friends in Taiwan and South Korea can produce, advanced semiconductors. China does not have ability to make machines, they're the most complicated machines humanity has ever produced that can etch a tiny transistor on a piece of silicon that's a fraction of the width of a human hair. Only three countries in the world produce machines that can manufacture advanced semiconductors. They are the United States, the Netherlands, and Japan. By denying China access to these tools, we can constrain their production of advanced semiconductors and by going further and deny them access to the most advanced AI chips made by Nvidia, AMD, and our hyperscalers, we can also ensure that we can win the AI race and lock in dominance in both military and economic spheres for decades to come. This is a dangerous world. It is indeed a world on the brink. But we have the power and the capability and we must have the resolve and the urgency to avoid this catastrophe and make sure that in this century the Chinese Communist Party does not get to call the global shots. 2,100 years ago, Cato the Elder in the Roman Senate would end every speech with the phrase Carthago delenda est. Carthage must be destroyed. Today, my message for you is this. Sina deterrent sunt. China must be deterred. Thank you.
