One aspect of Nancy Pelosi’s trip to Taiwan that has been largely overlooked is her meeting with Mark Lui, president of Taiwan Semiconductor Manufacturing Corporation (TSMC). Pelosi’s journey coincided with US efforts to convince TSMC – the world’s largest chip manufacturer, on which the US relies heavily – to establish a manufacturing base in the US and stop making advanced chips for Chinese companies.
US support for Taiwan has historically been based on Washington’s opposition to Communist rule in Beijing and Taiwan’s opposition to China’s inclusion. But in recent years, Taiwan’s autonomy has become a vital geopolitical interest for the US due to the island’s dominance in the semiconductor manufacturing market.
Semiconductors – also called computer chips or simply chips – are an integral part of all network devices embedded in our lives. They also have advanced military applications.
Transformational, super-fast 5G internet has emerged, enabling a world of connected devices of every kind (the “Internet of Things”) and a new generation of networking weapons. With this in mind, US officials during the Trump administration began to realize that US semiconductor design companies, such as Intel, relied heavily on Asia-based supply chains to manufacture their products.
In particular, Taiwan’s position in the world of semiconductor manufacturing is somewhat similar to Saudi Arabia’s standing 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 an additional 10% of the market.
As a result, the Biden Administration’s 100-Day Supply Chain Review Report says, “The United States relies heavily on a single company — TSMC — to manufacture its advanced chips.” The fact that only TSMC and Samsung (South Korea) can make the most advanced semiconductors (known as five nanometers) brings the ability to [US] national security and critical infrastructure needs”.
This means that China’s long-term goal of reunification with Taiwan now poses a greater threat to US interests. In the Shanghai Communiqué of 1971 and the Taiwan Relations Act of 1979, the US recognized that people in both mainland China and Taiwan believed that there was “One China” and that they both belonged to it. But for the US, it is inconceivable that TSMC could one day be in Beijing-controlled territory.
For this reason, the US has been trying to lure TSMC to the US to increase domestic chip production capacity. In 2021, with the support of the Biden administration, the company purchased land in Arizona to build a U.S. foundry. This should be ready in 2024.
The US Congress just passed the Chips and Science Act, which provides $52 billion (£43 billion) in grants to support semiconductor manufacturing in the US. But companies will only receive funding from the Chips Act if they agree not to produce advanced semiconductors for Chinese companies.
This means that TSMC and others may have to choose between doing business in China and the US because production costs in the US are considered too high without government subsidies.
This is all part of a broader “tech war” between the US and China, in which the US seeks to limit China’s technological development and prevent it from playing a global technology leadership role.
In 2020, the Trump administration imposed crushing sanctions on Chinese tech giant Huawei designed to cut the company off from TSMC, on which it relied to manufacture high-performance semiconductors needed for its 5G infrastructure operations.
Huawei was the world’s largest supplier of 5G network equipment, but the US feared that its Chinese origin posed a security risk (although this claim has been questioned). The sanctions are still in place as both Republicans and Democrats want to prevent other countries from using Huawei’s 5G equipment.
The British government had initially decided to use Huawei equipment in certain parts of the UK’s 5G network. The Trump administration’s sanctions forced London to reverse that decision.
A key US goal appears to be ending reliance on supply chains in China or Taiwan for critical technologies, including advanced semiconductors needed for 5G systems, but possibly other advanced technology in the future.
Pelosi’s trip to Taiwan was about more than just Taiwan’s pivotal place in the “tech war.” But the dominance of its main company has given the island a new and crucial geopolitical importance that is likely to heighten existing tensions between the US and China over the status of the island. It has also stepped up US efforts to “reshore” its semiconductor supply chain.
Author: Maria Ryan, Associate Professor of American History, University of Nottingham
(Disclosure Statement: Maria Ryan receives funding from the British Academy.)
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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