China Taiwan US Chip Market
Highlights
- US with Taiwan against China
- America getting chip from Taiwan
- Taiwanese company’s dominance in the market
China Taiwan: One aspect of Nancy Pelosi’s visit to Taiwan that has been largely overlooked is her meeting with Mark Louis, the president of the Taiwan Semiconductor Manufacturing Corporation (TSMC). Pelosi’s visit is part of US efforts to prevent TSMC—the world’s largest chip maker on which the US is heavily dependent—from setting up a manufacturing base in the US and making advanced chips for Chinese companies. US support for Taiwan has historically been based on Washington’s opposition to communist rule in Beijing and its resistance to Taiwan’s absorption by China.
But Taiwan’s autonomy has become an important geopolitical interest for the US in recent years due to the island’s dominance of the semiconductor manufacturing market. Semiconductors, also known as computer chips or just chips, are integral to all the network equipment that has become embedded in our lives. They also have advanced military uses. The emergence of transformative, super-fast 5G Internet is enabling a new generation of connected devices (the ‘Internet of Things’) and networked weapons of all kinds. With this in mind, US officials began to realize during the Trump administration that US semiconductor design companies, such as Intel, relied heavily on Asian-based supply chains to manufacture their products.
TSMC holds 53% stake
Notably, Taiwan’s position in the world of semiconductor manufacturing is somewhat like Saudi Arabia’s position in OPEC. TSMC has a 53% market share in the global foundry market (factories contracted to manufacture designed chips in other countries). Other Taiwan-based manufacturers claim 10% of the market. As a result, the Biden Administration’s 100-Day Supply Chain Review report says, “the US is heavily dependent on a single company—TSMC—to produce its state-of-the-art chips.”
The fact that only TSMC and Samsung (South Korea) can make the most advanced semiconductors (known as five nanometers) jeopardizes its ability to meet current and future national security and critical infrastructure needs. put’. This means that China’s long-term goal of reconnecting with Taiwan now poses a greater threat to US interests. In the Shanghai Communic of 1971 and the Taiwan Relations Act of 1979, the US recognized that people in both mainland China and Taiwan believed it was ‘One China’ and that they were both part of it. But it is unimaginable for the US that the TSMC could one day be in territory controlled by Beijing.
Both countries on the side of technical war
For this reason, the US is trying to attract TSMC to the US to increase its domestic chip production capacity. In 2021, with the support of the Biden administration, the company purchased a site in Arizona on which to build an American foundry. It is planned to be completed in 2024. The US Congress has just passed the Chips and Science Act, which provides $52 billion in subsidies to support the manufacture of semiconductors in the US. But companies will receive Chips Act funding only if they agree not to manufacture advanced semiconductors for Chinese companies.
This means that TSMC and others may have to choose between doing business in China and the US because the cost of manufacturing in the US is considered too high without government subsidies. It is all part of a broader ‘technological war’ between the US and China, in which the US aims to stifle China’s technological development and prevent it from playing a global technological leadership role. In 2020, the Trump administration imposed tough sanctions on Chinese tech giant Huawei, part of a plan to separate the company from TSMC, which it relied on to produce advanced semiconductors needed for its 5G infrastructure business.
America was afraid of risk
Huawei was the world’s leading supplier of 5G network equipment, but the US feared its Chinese origins could pose a security risk (although this claim has been questioned). The restrictions are still in place as both Republicans and Democrats want to block other countries from using Huawei’s 5G equipment. The British government initially decided to use Huawei equipment in parts of the UK’s 5G network. Trump administration sanctions forced London to reverse that decision. A major goal of the US in this regard appears to be to end its reliance on supply chains in China or Taiwan for critical technologies, which include the advanced semiconductors needed for 5G systems, but may include other advanced technologies in the future.
Pelosi’s visit to Taiwan was more than just Taiwan’s important place in the ‘technical war’. But the dominance of its most important company has given the island a new and significant geopolitical importance, which is likely to increase current tensions between the US and China over the status of the island.
Latest World News