Taiwan dominates the world’s supply of computer chips — no wonder the US is worried

Taiwan dominates the world’s supply of computer chips — no wonder the US is worried

Subject :International Relations

Section: Mapping

Context:

• One aspect of Nancy Pelosi’s trip to Taiwan that has been largely overlooked is her meeting with Mark Lui, chairman of the Taiwan Semiconductor Manufacturing Corporation (TSMC). Pelosi’s trip coincided with US efforts to convince TSMC — the world’s largest chip manufacturer, on which the US is heavily dependent — to establish a manufacturing base in the US and to stop making advanced chips for Chinese companies.

Why Taiwan is important for US?

• Taiwan’s autonomy has become a vital geopolitical interest for the US because of the island’s dominance of the semiconductor manufacturing market.
• Transformational, super-fast 5G internet emerged is enabling a world of connected devices of every kind (the “Internet of Things”) and a new generation of networked weapons.
• US semiconductor design companies, such as Intel, were heavily dependent on Asian-based supply chains for the manufacturing of their products.
• In particular, Taiwan’s position in the world of semiconductor manufacturing is a bit like Saudi Arabia’s status in OPEC. TSMC has a 53% market share of the global foundry market (factories contracted to make chips designed in other countries). Other Taiwan-based manufacturers claim a further 10% of the market.
• The United States is heavily dependent on a single company — TSMC — for producing its leading-edge chips. The fact that only TSMC and Samsung (South Korea) can make the most advanced semiconductors (known as five nanometres)puts at risk the ability to supply current and future [US] national security and critical infrastructure needs.
• In 2020, the Trump administration imposed crushing sanctions on the Chinese tech giant Huawei that were designed to cut the company off from TSMC, on which it was reliant for the production of high-end semiconductors needed for its 5G infrastructure business.
• This is all part of a broader “tech war” between the US and China, in which the US is aiming to constrain China’s technological development and prevent it from exercising a global tech leadership role.