“The Fragile Nexus: Taiwan’s Central Role in Global Microchip Dynamics and the TSMC Dilemma”


Taiwan’s Vital Role in Chips

They power everything from smartphones to electric cars microchips, the brains behind the tech revolution. And one small island has become the center of the world’s microchip industry. Taiwan makes over 60% of global chips, including over 90% of the most advanced ones. This outsized role has made chips both Taiwan’s economic engine, accounting for 15% of its GDP, as well as its security blanket against potential Chinese aggression.

TSMC’s Control

Behind Taiwan’s dominance is a single company – Taiwan Semiconductor Manufacturing Corporation (TSMC). TSMC pioneered a dedicated manufacturing model to become the world’s leading chip founder. Its cutting-edge fabrication facilities (“fabs”) produce chips that are years ahead of rivals in accuracy and efficiency.

Stuck Between US-China Chip Fight

But TSMC’s success has left Taiwan caught in the crossfire of the US-China chip fight. The race for chip supremacy is now reshaping global supply chains built on access to TSMC’s advanced capabilities.

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In December, TSMC started construction on a new $40 billion fab in Arizona. Yet at the ceremony, TSMC’s founder Morris Chang gave a dire warning globalization and free trade for chips now looks “almost dead.” Both the US and China are attracting away Taiwan’s chip talent and trade secrets while maneuvering to cut off access to the other.

Effect on Taiwan

TSMC’s new overseas fabs have also caused alarm across Taiwan. Some fear the company will change into “USMC.” Officials insist overall capacity keeps growing in Taiwan. But the direction seems clear – basic links in the chip supply chain are breaking along US-China lines.

Supply Chain Shakeup

And even industry leaders agree – forcing chip supply chains closer to home will come with sharp efficiency losses. Yet this is the harsh new norm. Taiwan now sits at the heart of a global chip fight that threatens to divide the world once again along ideological lines. The silicon shield that once protected Taiwan’s vital role now appears increasingly fragile.

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