Why the U.S. and China are So Interested in Taiwan

10 Aug 202206:21

TLDRTaiwan Semiconductor Manufacturing Company (TSMC) dominates the global market for advanced semiconductor chips, producing 92% of those below 10 nanometers—key components in modern electronics from iPhones to fighter jets. Amidst a global chip shortage, TSMC's strategic importance has intensified U.S.-China tech rivalry, with both nations heavily dependent on its products. The U.S. has incentivized domestic production to mitigate reliance on Taiwan, while China accelerates its own semiconductor capabilities. TSMC's pivotal role in global technology underscores the geopolitical tensions surrounding Taiwan, making its stability crucial to international tech supply chains.


  • 🌐 Taiwan Semiconductor Manufacturing Company (TSMC) is a pivotal player in global technology, producing 92% of the world's most advanced semiconductor chips.
  • 📱 TSMC's products are integral to a variety of devices from consumer electronics like iPhones to critical technologies in F-35 jets and NASA's Mars rover.
  • 🛑 The global automotive industry has faced production delays due to shortages of TSMC's sophisticated semiconductor chips.
  • 🔑 Semiconductors are often described as the new 'oil' for their critical role in modern technology, with TSMC holding a near-monopoly in advanced chip production.
  • 🌎 U.S.-China tech rivalry intensifies over semiconductors, with concerns that a Chinese takeover of Taiwan could disrupt global chip supply.
  • 🏭 Despite the foundational semiconductor technology originating in the U.S., no advanced chips are currently manufactured there, shifting the focus to Asian manufacturers like TSMC and Samsung.
  • 📉 TSMC was founded in 1987 by Morris Chang, leveraging a shift in American companies outsourcing semiconductor production due to competitive pressures.
  • 🇺🇸🇨🇳 Both the U.S. and China are heavily reliant on TSMC's semiconductors, influencing international political and economic strategies around Taiwan.
  • 🚀 TSMC leads in innovation with plans to produce 2-nanometer chips by 2025, promising significant advancements in technology like extended battery life for devices.
  • 🌐 TSMC's geopolitical significance is underscored by international tensions, with its operations being a focal point in U.S. and Chinese foreign and economic policies.

Q & A

  • What is the primary reason for the global significance of Taiwan Semiconductor Manufacturing Company (TSMC)?

    -TSMC is crucial globally because it produces 92% of the world's most advanced semiconductor chips, which are essential components in a wide range of modern technology, from smartphones to military jets.

  • Why did U.S. House Speaker Nancy Pelosi make it a point to meet with TSMC's Chairman during her visit to Taiwan in 2022?

    -Nancy Pelosi's meeting with TSMC's Chairman Mark Liu underscored the strategic importance of TSMC to global technology and the U.S. economy, highlighting the geopolitical stakes involved in Taiwan's semiconductor industry.

  • How has the U.S. responded legislatively to the strategic importance of semiconductors and TSMC's dominance?

    -The U.S. government enacted the CHIPS Act, which provides $52 billion in subsidies to encourage semiconductor manufacturing in the U.S. It also restricts companies receiving these subsidies from producing advanced chips for China that are below 28 nanometers.

  • What impact did the shortage of TSMC's chips have on global industries?

    -The shortage of TSMC's chips, particularly during supply chain disruptions, severely affected various industries, including automotive manufacturing, where it hindered the production of cars due to the lack of chips needed for essential functions like braking.

  • How does the technological edge of TSMC's chips compare to current global competitors?

    -TSMC maintains a technological edge by producing chips as small as 2 nanometers, which is more advanced than any other company globally, including leading Chinese firms.

  • What are the implications of a potential Chinese invasion of Taiwan on the global semiconductor market?

    -A Chinese invasion of Taiwan could potentially disrupt the global supply of advanced semiconductors, as TSMC, the leading producer, is based in Taiwan. This would give Beijing control over a critical technology, affecting worldwide industries.

  • How did the U.S. lose its leading position in semiconductor manufacturing to Taiwan?

    -The U.S. lost its semiconductor dominance due to outsourcing and competition, primarily from Japanese companies in the 1980s, leading American firms to shift production overseas and focus on other aspects of their businesses.

  • What strategic moves did Morris Chang make to establish TSMC as a dominant player in the semiconductor industry?

    -Morris Chang capitalized on the trend of outsourcing by creating TSMC in 1987, a company solely focused on chip manufacturing. He initially priced chips at a loss to capture market share, betting on reducing costs over time, which proved successful.

  • Why has China not banned imports of Taiwanese semiconductors despite political tensions?

    -Despite political tensions and punitive measures like banning imports of certain Taiwanese goods, China has not banned Taiwanese semiconductors due to its heavy reliance on these advanced chips for its technology industries.

  • What future advancements is TSMC planning in semiconductor technology?

    -TSMC plans to further advance its technology by manufacturing ultra-advanced 2-nanometer chips by 2025, which would significantly enhance the performance and energy efficiency of electronic devices globally.



🌐 The Dominance of Taiwan Semiconductor in the Global Market

Taiwan Semiconductor Manufacturing Company (TSMC) is a pivotal player in the global semiconductor industry, producing 92% of the world's most advanced chips. These chips are integral to various technologies from consumer electronics like iPhones to strategic equipment such as F-35 jets and NASA's Mars rover. The shortage of these chips has significantly impacted industries like automobile manufacturing. TSMC's technological edge is highlighted by its ability to produce chips smaller than 10 nanometers, with competition only from Samsung. This capability positions TSMC at the center of global geopolitical tensions, especially between the U.S. and China, highlighting its critical role in modern technology and international relations.


🌏 Geopolitical Impact of TSMC's Technological Advancements

Taiwan Semiconductor (TSMC) remains the leader in the semiconductor industry, now capable of producing 2-nanometer chips, which promises significant advancements in technology, such as longer battery life for devices. Despite rapid progress in Chinese semiconductor capabilities, with firms like SMIC developing 7-nanometer chips, TSMC still maintains a technological lead. The company's strategic importance is underscored by the intense geopolitical rivalry between the U.S. and China, with both nations heavily reliant on TSMC's products amidst rising tensions. This dependency places Taiwan and TSMC at a critical juncture of global tech and geopolitical influence.



💡Taiwan Semiconductor Manufacturing Company (TSMC)

TSMC is a major player in the global semiconductor industry, responsible for manufacturing 92% of the world's most advanced semiconductor chips. It is crucial due to its monopoly on high-tech chip production, which impacts various industries from consumer electronics to aerospace. The script highlights its significant role by noting that its chips are used in everyday devices and high-end technologies like F-35 jets and NASA's Mars Rover.

💡semiconductor chips

Semiconductor chips are tiny devices used to conduct electrical current and are essential for the functioning of virtually all modern electronics. The script compares them to 'oil' to underline their critical importance to global technology infrastructure. The shortage of these chips, as mentioned, has profound effects, such as disrupting car production.


In the context of semiconductor manufacturing, a nanometer is a unit of measurement used to describe the size of transistors within a chip. Smaller transistors allow more to be packed into a single chip, enhancing the chip's performance. TSMC's ability to produce chips below 10 nanometers, as mentioned in the script, places it at the forefront of the industry.

💡geopolitical tensions

Geopolitical tensions refer to the strategic and political rivalry between nations, particularly here between the U.S. and China over Taiwan, which is exacerbated by Taiwan's critical role in semiconductor manufacturing. These tensions are underscored by actions such as Beijing's threats and the U.S.'s legislative moves to limit China's access to advanced chips.


The CHIPS Act is a U.S. law that provides subsidies to encourage semiconductor production within the country and restricts companies that receive these funds from supplying sophisticated technology to China. The act is part of strategic efforts to bolster U.S. semiconductor capabilities amid competition with China, as detailed in the script.


Silicon is a fundamental material used in the manufacture of semiconductor chips, due to its semi-conductive properties. The script references Silicon Valley, named after this material, highlighting its historical significance in chip technology which originated in the U.S. but has since shifted predominantly to places like Taiwan.

💡Morris Chang

Morris Chang is the founder of TSMC and a pivotal figure in the semiconductor industry. Born in China and educated in the U.S., his strategic vision and actions led to the establishment of TSMC in 1987, transforming Taiwan into a global semiconductor hub. His background and impact are elaborated within the script.

💡manufacturing plants

Manufacturing plants are facilities where goods are produced on a large scale. In the context of the script, TSMC's plants are highly specialized for producing advanced semiconductor chips. The upcoming plant in Arizona, as mentioned, signifies a strategic expansion into the U.S., though it will still represent only a fraction of global production.

💡Nancy Pelosi

Nancy Pelosi's visit to Taiwan in August 2022 is highlighted in the script as a significant geopolitical event. Her meeting with TSMC's chairman underscores the strategic importance of Taiwan's semiconductor industry to the U.S., especially in the context of U.S.-China relations.

💡global monopoly

A global monopoly, as described in the script referring to TSMC, occurs when a single company dominates the production or supply of a particular product or service worldwide. TSMC's control over the production of the most advanced semiconductor chips exemplifies such a monopoly, illustrating the high stakes involved in geopolitical and economic terms.


Taiwan Semiconductor Manufacturing Company (TSMC) is pivotal in the global tech economy, producing 92% of the world's most advanced semiconductor chips.

Semiconductor chips, essential in devices from smartphones to fighter jets, are considered the new 'oil' for their critical role in modern technology.

TSMC's dominance in chip manufacturing highlights a significant shift from the U.S., where semiconductor technology originated.

The geopolitical tension over Taiwan is intensifying, with China and the U.S. both highly dependent on TSMC's chip production.

U.S. historical transition from a major chip manufacturer to outsourcing, setting the stage for TSMC's rise.

Morris Chang's strategic foundation of TSMC in 1987 capitalized on the outsourcing trend by U.S. companies.

Nancy Pelosi's visit to Taiwan in 2022 underscored the strategic importance of TSMC amid rising U.S.-China tensions.

China's reliance on Taiwanese semiconductors is so crucial that even amidst political tensions, it did not ban imports from TSMC.

The U.S. CHIPS Act aims to rejuvenate American chip manufacturing by preventing firms that receive subsidies from supplying advanced chips to China.

TSMC is expanding internationally, with a new semiconductor plant scheduled to open in Arizona in 2024.

Despite advances in Chinese chip technology, TSMC remains ahead with plans to produce 2-nanometer chips by 2025.

The technical challenge of semiconductor manufacturing involves intricate processes in a highly controlled environment to avoid defects.

Taiwan's strategic significance is amplified by its control over advanced semiconductor production, essential for global technology.

China's strategic push to enhance its semiconductor industry includes significant incentives to domestic companies.

TSMC's global monopoly on sophisticated chips highlights the high stakes of technological and geopolitical rivalries.