Within the last 3-5 years, the word “semiconductor” has been one of the forefront resources of concern for virtually every global power. Smaller than a postage stamp, thinner than a strand of hair, and made of 40 billion components, semiconductors control and manage the flow of electric current in electronic equipment and devices. Unlike the oil wars of the 20th century, semiconductors have more importance than energy resources. Semiconductor chips are the basic building blocks of electronics like microprocessors, GPUs, and health, communication technologies. And with such dependencies, it’s become apparent now more than ever that electronic industries need semiconductors to manufacture products.
China and the US consider semiconductors a vital strategic resource. Oil can fuel engines, but modern vehicles and aircraft cannot function without semiconductors. Furthermore, semiconductors are the limiting factor for better internet, weaponry, and aircraft. Semiconductors are also necessary to build advanced AI models and quantum computers. This doesn’t even include domestic products, as semiconductors are in smart devices, appliances, and commercial graphics cards.
While U.S. companies lead chip industry production, accounting for around 48% of the global market share, Taiwan Semiconductor Manufacturing Company (TSMC) leads the semiconductor world. Founded by Chinese-American Morris Chang in 1987 using funding from the Taiwanese government, TSMC makes around 65% of the US’s semiconductors, exporting 22% of all chips compared to the 12% from the US. As a result, Taiwan holds a near monopoly over global chip development. Nearly 30% of Taiwan’s exports are semiconductors alone.
China is heavily reliant on foreign chip imports, especially from the U.S. In 2020 alone, China imported around $350 billion worth of chips. However, in recent years, China has heavily invested in companies like Huawei, Semiconductor Manufacturing International Corporation (SMIC), and Hua Hong Semiconductor. However, China’s chip autonomy will likely occur 10-20 years from now, making Taiwan a likely target.
But China isn’t alone in this international race to internally source semiconductors; the U.S. isn’t that far ahead either. While TSMC has historically collaborated with the U.S. and broke ties with Huawei in 2020, it’ll be years, if not decades, until the U.S. can compete with Taiwanese semiconductors. In November, Nvidia’s CEO Jensen Huang commented that the U.S. is at least a decade away or more from supply chain independence. This dependency was especially apparent in April when Taiwan suffered a severe drought and suffered from hindered chip factory production, contributing to elevated GPU prices this year.
The U.S. has also attempted to slow intellectual and economic development in China by limiting Americans from investing in cutting-edge chip research. In September of last year, National Security Advisor Jake Sullivan announced a change from the U.S. goal of being “only a couple of generations ahead” of China in key technologies to maintaining “as large of a lead as possible.” (From Foreign Policy) In response, Congress approved $52 billion in American semiconductor manufacturing in August to start moving the U.S. in a pro-semiconductor direction. The Chinese embassy has decried American chip restriction policies as a blatant attempt to bully technological development and prevent free market competition. In reality, these restrictions only slow down China’s progress, and a solution to maintain a competitive advantage is yet to be found. Though the U.S. holds the advantage, China is growing exponentially and will soon outpace the U.S. The U.S. Government’s attempts to hinder foreign chip development are becoming less and less effective.
In the meantime, Taiwan remains at the forefront of U.S.-China tensions. China and the U.S. are still reliant on Taiwanese semiconductors, and a Chinese invasion would shatter the status quo. Just 80 miles from the Chinese mainland, the U.S., Korea, and Japan eye Chinese warships along the Taiwan Strait with apprehension. When the U.S. is no longer reliant on Taiwan semiconductors, the U.S.’s vigilance on the country comes into question.
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