Gabriel LinandLi Mingjiang

Opinion | How the US-China chip war is dismantling Taiwan’s silicon shield

The 2021 chip shortage pushed great powers to take back control of the semiconductor industry, attempting to redraw supply chains concentrated in East Asia

This is eroding Taiwan’s geostrategic importance and bargaining power, and forcing companies there – and elsewhere – to make difficult choices

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Taiwanese chip giant TSMC holds a ceremony to start mass production of its most advanced 3-nanometer chips in the southern city of Tainan, Taiwan, on December 29, 2022. In 2021, the company began building a factory in Phoenix, Arizona. Photo: Reuters

Gabriel LinandLi Mingjiang

Published: 10:00pm, 3 Jun 2023

The geoeconomic role of Taiwanese semiconductor companies has garnered increasing attention from academia and the public. Some analysts regard companies such as Taiwan Semiconductor Manufacturing Company (TSMC) as crucial players or even super predators in the global production network.

But this view of the agency of Taiwanese semiconductor corporations is seriously flawed because it does not take into account their geopolitical quagmire.

The myth of Taiwanese chip makers’ outsize agency emerged during the 2021 chip shortage, which was projected to cost the global automobile industry US$210 billion in revenue that year in addition to impeding the economic recovery in many countries. Taiwanese semiconductor foundries were expected to be the economic saviours because they accounted for more than 60 per cent of global contract chip-making.

Germany, Japan and South Korea approached the Taiwanese authorities, asking them to urge the island’s semiconductor foundries to increase the supply of automotive chips. US President Joe Biden invited Taiwanese entrepreneurs to join virtual meetings to deliberate on issues related to the microprocessor shortage.

The Taiwanese companies equivocated in response to politicians’ requests, refusing to prioritise the orders of carmakers at the expense of other clients and their shareholders. At the time, state actors seemed unable to command the big tech companies; yet what ensued in subsequent years would not bode well for Taiwan’s chip sector.

In hindsight, the 2021 chip shortage was indeed a critical juncture for the transformation of the state-tech relationship – not until then did the great powers fully realise that semiconductors could be the chokehold of the world economy.

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