3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
Individual Investors in UK
You are viewing this site
as Individual Investors
in UK, you can change
this setting at any time
right here.
Home Insights The Firms Behind the World’s Most Critical Technology
October 2024 Article 7 minutes
The Firms Behind the World’s
Most Critical Technology
Hamish Maxwell – Investment Specialist
• Chris Miller’s book Chip War reveals how economic, geopolitical and
technological forces shape the semiconductor industry.
• TSMC has become a pivotal player, thanks to its early decision to
solely make others’ chips.
• Other Scottish Mortgage holdings at the forefront include ASML and
NVIDIA.
As with any investment, your capital is at risk.
In 1985, Taiwan effectively gave Morris Chang, an American
businessman of Chinese birth, a blank cheque to establish the island’s
semiconductor industry.
He bet on a revolutionary idea, a business dedicated to building others’
chips, not its own.
Today, Scottish Mortgage has 10 per cent of its portfolio invested in the
semiconductor industry, and its holding TSMC is one of the world's
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 1/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
most valuable firms. Several other portfolio companies, including
NVIDIA, Tesla and Amazon, depend on it, while another investment,
ASML, is one of its closest partners.
As part of Scottish Mortgage’s inaugural digital conference, Chris Miller
spoke about the semiconductor chip industry’s development and the
economic, geopolitical and technological forces that continue to shape
it.
Miller is associate professor of international history at the Fletcher
School of Law and Diplomacy at Tufts University and the author of the
2022 book Chip War: The Fight for the World’s Most Critical Technology.
TSMC: from zero to hero
Miller describes TSMC as “indispensable and the world’s most
important chipmaker”. Before its founding, it was the norm for
companies to design and physically produce their own chips. The few
who didn’t had to risk exposing their intellectual property to a rival.
However, Chang realised that “specialisation was key” to creating the
efficiencies that would counteract the increased cost of making the
ever-smaller transistors (tiny on-and-off switches) required to make
more complex chips. So, he focused on pioneering the foundry – a
factory dedicated to manufacturing others’ designs.
That paid off. Today, TSMC is one of the world’s 10 most valuable listed
companies, and it is critical to progress in smartphones, electric
vehicles, AI and more. Only Samsung has been able to keep up with
making the most advanced architectures, but it lags far behind in
market share.
TSMC recently said it produces 99 per cent of the chips used to train
artificial intelligence, known as AI accelerators or graphics processing
units (GPUs).
“[That’s] about as close to the definition of monopoly as you can get,”
says Miller.
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 2/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
“It's striking that some of the commentary from Wall Street was
confusion about why TSMC hadn't hiked prices more. But TSMC's
leadership would say they're not thinking about this contract or the
next.
“They're thinking about relationships that have already lasted decades
and that they hope will last decades into the future. That requires a
level of trust in manufacturing and, I think, trust in pricing with their
customers.”
From the Cold War to national priority
National interests have been central to the semiconductor industry’s
evolution. Miller’s initial interest in semiconductors was sparked by
“their central position in competition between countries for national
power”.
Some of the US’s first commercially produced chips were used in
nuclear missiles’ guidance systems during the Cold War against Russia.
Today, China’s access to high-end technology preoccupies much of the
US’s defence thinking.
China is the largest importer of semiconductors, spending more
money each year on them than on oil over the past decade, and the US
has been trying to limit its access to the most advanced technology.
“Both China and the US have identified artificial intelligence as… a
general-purpose technology that each government believes will have
broad economic, technological and strategic ramifications.
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 3/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
Machine checking silicon wafers in clean room laboratory. Source: Cultura RF
“Indeed, we already see both governments beginning to use AI, … to sift
through intelligence that their spy satellites are collecting, … or to
guide drones more accurately as they fly through the air.
"Everyone has access to algorithms that are largely open-sourced.
Talent disperses widely across the world. But computing power is
produced by a tiny number of companies.”
The US has prevented TSMC from building state-of-the-art chips for
Chinese clients, including limiting sales to Chinese customers, such as
Huawei.
“But that only underscores the extent to which TSMC is a company
with unique capabilities that no one, in China or anywhere else, can
match,” says Miller
ASML: betting on the long term
No country or company can do it alone, but one company may come
close to being indispensable.
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 4/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
Today, the most complex chip-making tools are photolithography
machines. The Dutch firm ASML produces the most advanced
equipment capable of “carving the most intricate patterns in silicon.” It
has a 100 per cent market share of the leading equipment and
harnesses a complex supply chain to do so.
Miller puts its dominance down to management’s long-term mindset.
In the 1990s and 2000s, the company made a strategic “bet on
producing the next-generation [extreme ultraviolet lithography (EUV)]
tool that today is central for advanced chipmaking.”
The company persevered despite EUV being seen “as harder than
bringing a man to the moon.”
According to Miller, the machines “require the flattest mirrors humans
have ever made and one of the strongest lasers ever deployed in a
commercial device”.
Inside every machine, “a tiny ball of tin is pulverised into a plasma. The
temperature of this explosion is 40 times hotter than the sun's surface.
“Humans have made no tools more complex than these. You can
understand why it seemed highly implausible for a long time that a
machine with an explosion like this inside would be usable in a factory
context.”
ASML succeeded. Its latest machines cost over $300m per machine
and contain hundreds of thousands of components; each must be
extraordinarily reliable and precise. Misplacing even a single atom can
disrupt the process when manufacturing at the nanometre (billionths
of a metre) scale.
Miller suggests it will be almost impossible for anyone to catch up with
the company in the foreseeable future.
“By the time you’ve learned to replicate it, ASML will have already
produced its next-generation tool, and so [its competitors] will still be
behind.”
NVIDIA: all-in on GPUs
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 5/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
Miller views technology leadership as critical for establishing longevity:
"Ultimately, the only way you’ve got a defensible market position is by
having better technology than your competitors.”
NVIDIA has done this through the foresight of its chief executive,
Jensen Huang, who invested heavily in the developing technology and
software now critical to AI models.
The first large-scale generative AI tool to capture widespread public
attention was OpenAI’s generative AI chatbot, ChatGPT. About a month
after Chip War’s publication, ChatGPT launched, and demand for
NVIDIA's graphics chips soared as others rushed to build and train their
own AI models.
But over a decade prior, Huang had realised his firm’s graphics
processing unit (GPU) chips could be used for more than just
rendering computer graphics. He understood that their parallel
processing capabilities could be used to solve complex scientific
problems and accelerate computational tasks.
Chief Executive Office of NVIDIA, Jensen Huang © NVIDIA
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 6/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
His company invested deeply in building software tools called CUDA to
make GPU programming more accessible to developers. When AI
researchers adopted the technology, NVIDIA seized the opportunity,
giving CUDA extra functionality and optimising the GPUs’ architectures
to help.
At the time, AI was seen as “far out and implausible”, at least as a
business for NVIDIA.
Miller highlights Wall Street’s discomfort on: “first, building chips for an
industry that didn't exist, and second, giving away the software for
free.”
Huang understood that repurposing NVIDIA’s chips would make them
“vastly more efficient than the existing class of processors, called CPUs
(central processing units)”.
“NVIDIA bet that if it could make its chips efficient for AI, it would drive
down the costs of AI and, therefore, blow up in a much larger market
than anyone else foresaw.”
Miller contrasts that with Intel, which was once the world’s largest
chipmaker and still plays a dominant role in the design and
manufacture of the CPUs that are still important for personal
computing and data centres.
He points out that it “flirted” with AI in various formats but “could never
really convince itself to dive in in a way that Jensen bet the company
on AI being its future.
“He deserves much credit for NVIDIA's decisions,” says Miller of one of
the Fortune 500’s longest-serving chief executives.
“Significant bets were taken, not based on short-term profit, but
instead on long-term technological shifts that, it's now quite clear,
NVIDIA bet correctly.”
Patience is a virtue
It’s a reminder that technology moves fast, but perhaps not as quickly
or clearly, nor always in the same direction, as we might anticipate.
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 7/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
As Miller highlights, companies need to determine “the proper use
case, the correct form factor and the suitable business model” and that
can take decades.
He points out that it was a decade from the invention of the first
transistor to the first integrated circuit. Then, it took another decade for
mainframe computers to become widespread in large corporations.
Two decades later came the first personal computer, and another
couple of decades later, the first smartphone.
“Each of these steps was ‘transformative’ and produced companies
that were among the most valuable in the world at the time,” Miller
says, suggesting that AI still has a long road ahead.
"We have yet to conceptualise [its] application in many spheres
because we’re in the very earliest stages of a technological shift that
will take decades to play out.”
Progress will not be a straight line, but we can be confident that the
advances in artificial intelligence and other emerging industries, such
as space travel and the energy transition, will demand more advanced
chip designs and complex chip manufacturing.
For that to happen, companies need access to capital from patient
investors prepared to back visionary companies and leaders through
the ups and downs of change. That is Scottish Mortgage’s forte.
Risk factors
The trust invests in overseas securities. Changes in the rates of
exchange may also cause the value of your investment (and any
income it may pay) to go down or up.
The Trust invests in emerging markets, which includes China, where
difficulties with market volatility, political and economic instability
including the risk of market shutdown, trading, liquidity, settlement,
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 8/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
corporate governance, regulation, legislation and taxation could arise,
resulting in a negative impact on the value of your investment.
About the author - Hamish Maxwell
Investment Specialist
Hamish joined Baillie Gifford in 2017 and is an investment specialist. He
joined the Scottish Mortgage Team in 2024 and works closely with the
managers, meeting with portfolio companies and conducting in-depth
portfolio discussions with shareholders. Alongside this, he creates
engaging content which makes the Scottish Mortgage portfolio
accessible to all its shareholders. Prior to Scottish Mortgage, Hamish
worked on Baillie Gifford's international equities strategies alongside
Lawrence Burns. Before Baillie Gifford, Hamish served in the Royal
Navy as a Commissioned Officer, including time as a leader in aircraft
carriers, mine-hunters, and nuclear submarines. During training, he
was awarded top-of-class by HRH Prince Edward. Hamish is a CFA
Charterholder, and he achieved an MBA from City, University of London
where he received the EU Award.
Important information
This communication was produced and approved at the time stated
and may not have been updated subsequently. It represents views
held at the time of production and may not reflect current thinking.
This content does not constitute, and is not subject to the
protections afforded to, independent research. Baillie Gifford and its
staff may have dealt in the investments concerned. The views
expressed are not statements of fact and should not be considered
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-tec… 9/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
as advice or a recommendation to buy, sell or hold a particular
investment.
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised
and regulated by the Financial Conduct Authority (FCA). The
investment trusts managed by Baillie Gifford & Co Limited are listed
on the London Stock Exchange and are not authorised or regulated
by the FCA.
A Key Information Document is available by visiting our Documents
page.
Any images used in this content are for illustrative purposes only.
Related insights
October 2024 Article 4 minutes October 2024 Article 4 minutes
Private Companies: Embracing A Wise Move: Saving When
Change, Driving Growth Sending Abroad
Tom Slater and Lawrence Burns A written summary of Lawren
share the latest on the private Burns in discussion with found
companies held in the Scottish and CEO of Wise Kristo Käärm
Mortgage portfolio.
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-te… 10/11
3/30/25, 4:32 PM The Firms Behind the World’s Most Critical Technology
Useful links Legal
Frequently Asked Legal
Questions
Terms and Conditions
How to Invest
Accessibility
Events
Cookie Policy
Podcast
Important Disclosures
Modern Slavery Statement
Connect with us
Email Sign Up
Contact Us
Copyright © Baillie Gifford &
Co. 2025
https://www.scottishmortgage.com/en/uk/individual-investors/insights/ic-article/sm-articles-2024-q4-the-firms-behind-the-world-s-most-critical-te… 11/11
