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

Summary

The video highlights the dominance of Taiwan Semiconductor Manufacturing Company (TSMC) in the global chip industry. TSMC produces 92% of the world's most advanced semiconductor chips, essential for various technologies from iPhones to fighter jets. Despite its importance, TSMC is caught in the geopolitical rivalry between the U.S. and China. The video discusses the origins of TSMC, its critical role in tech innovation, and the challenges posed by China's growing semiconductor capabilities, emphasizing the company's strategic significance in global politics.

Takeaways

• 💡 Taiwan Semiconductor Manufacturing Company (TSMC) dominates global semiconductor production, especially in advanced chips.
• 📱 TSMC's chips are essential in various technologies, from smartphones and computers to cars and NASA's Mars rover.
• 🚗 The global car production slowdown is partly due to a shortage of TSMC's sophisticated semiconductor chips.
• 🛠 Semiconductor chips are as crucial as oil in today's tech-driven world, with TSMC producing 92% of the world's most advanced chips.
• 🌍 TSMC is one of only two companies, alongside Samsung, that mass-produces chips smaller than 10 nanometers.
• 🇺🇸 U.S. reliance on TSMC highlights the shift from domestic chip manufacturing; in the 1990s, the U.S. made a third of the world's chips, but now makes none of the most advanced ones.
• 🤝 House Speaker Nancy Pelosi's 2022 visit to Taiwan underscored TSMC's importance in global geopolitics and tech rivalry between the U.S. and China.
• ⚖️ TSMC finds itself caught in a geopolitical struggle as the U.S. and China vie for dominance in semiconductor technology.
• 🏭 The U.S. CHIPS Act aims to boost domestic semiconductor production, offering $52 billion in subsidies, with TSMC set to open a plant in Arizona in 2024.
• 🇨🇳 Despite China's progress in semiconductor innovation, it still lags behind TSMC, which plans to produce ultra-advanced 2-nanometer chips by 2025.

Q & A

What is Taiwan Semiconductor Manufacturing Company (TSMC) and why is it significant?

TSMC is the world's leading manufacturer of advanced semiconductor chips, producing 92% of the most sophisticated chips used in a wide range of devices, from smartphones to military hardware. Its dominance makes it a critical player in global technology and geopolitics.

How do semiconductor chips compare to oil in terms of global dependence?

Semiconductor chips are often referred to as the new 'oil' due to the world's heavy reliance on them for technology. Just as oil powers economies, chips power modern devices, making them essential to global industry and security.

Why did House Speaker Nancy Pelosi meet with TSMC’s Chairman during her visit to Taiwan in 2022?

Nancy Pelosi's meeting with TSMC's Chairman Mark Liu underscored the company's strategic importance. TSMC's dominance in chip manufacturing is critical to both the U.S. and global technology industries, making it a key point of interest during high-level diplomatic visits.

What are the potential geopolitical risks associated with TSMC's dominance in semiconductor manufacturing?

TSMC's dominance creates geopolitical risks, particularly the possibility of China invading Taiwan. Such an event could disrupt the global supply of advanced chips, potentially giving China control over this critical technology.

How did TSMC come to dominate the semiconductor industry?

TSMC was founded by Morris Chang, who capitalized on the trend of American companies outsourcing chip manufacturing in the 1980s. By focusing solely on manufacturing and pricing chips competitively, TSMC grew to dominate the industry.

Why is semiconductor manufacturing so challenging?

Semiconductor manufacturing is highly complex, involving the production of chips packed with billions of transistors on silicon wafers. The process requires extreme precision, as even a tiny speck of dust can ruin an entire batch of chips.

What role does the CHIPS Act play in the U.S. semiconductor industry?

The CHIPS Act, signed by President Biden, aims to boost U.S. semiconductor manufacturing by providing $52 billion in subsidies. It also restricts companies receiving these subsidies from manufacturing advanced chips for China, aiming to curb China's technological advancements.

How is China advancing its semiconductor industry?

China is rapidly advancing its semiconductor capabilities, with companies like SMIC making significant progress in reducing chip sizes. The Chinese government supports these efforts through various incentives, including tax exemptions for firms producing the most advanced chips.

What makes TSMC's chips superior to those made by other manufacturers?

TSMC's chips are superior due to their smaller transistor size, with the company producing chips as small as 2 nanometers. Smaller transistors allow more to be packed into a chip, improving performance and energy efficiency.

Why is TSMC's planned plant in Arizona significant, and what limitations does it have?

TSMC's Arizona plant, set to open in 2024, is significant because it represents an effort to diversify semiconductor manufacturing outside Taiwan. However, it will still only account for a small portion of global chip production, limiting its impact on the broader industry.

Outlines

00:00

💻 The Global Dominance of Taiwan Semiconductor Manufacturing Company

Taiwan Semiconductor Manufacturing Company (TSMC) may not be a well-known name, but it plays a crucial role in global technology. TSMC produces chips used in various devices, from iPhones to F-35 fighter jets and NASA’s Perseverance Rover. The company's advanced semiconductor chips are essential in modern technology, likened to the new 'oil' due to our reliance on them. TSMC has a near-monopoly on these sophisticated chips, producing 92% of the world's most advanced chips. The significance of TSMC is evident in the global impact it has on industries like automotive manufacturing, where a shortage of these chips has led to production delays.

05:02

🌍 Geopolitical Significance of TSMC in US-China Relations

TSMC’s importance extends beyond technology, affecting geopolitics. When U.S. House Speaker Nancy Pelosi visited Taiwan in 2022, she met with TSMC’s chairman, highlighting the company's global importance. China views Taiwan as a breakaway province and has threatened to invade it, raising concerns that a Chinese invasion could disrupt the global supply of advanced chips. Despite sanctions on other Taiwanese goods, Beijing continues to rely on TSMC’s chips, underscoring their critical role in the U.S.-China tech rivalry.

🇹🇼 The Rise of Taiwan Semiconductor and Its Impact on Global Tech

TSMC’s dominance stems from its innovative approach, which began with technology developed in America. In the 1980s, U.S. companies struggled against Japanese competition, leading to the outsourcing of chip manufacturing. Morris Chang, born in China and educated in the U.S., founded TSMC in Taiwan in 1987, seizing the opportunity to focus exclusively on chip manufacturing. His strategy of initially pricing chips at a loss to capture market share paid off, making TSMC the preferred supplier for tech giants like Apple and Nvidia. The complexity of semiconductor manufacturing, involving up to 50 billion transistors on a chip the size of a fingernail, underscores TSMC's edge in the industry.

🛠️ The Challenges and Strategic Importance of Semiconductor Manufacturing

Manufacturing semiconductor chips is a highly complex process, requiring precision and advanced technology. TSMC’s chips are made from silicon wafers and involve etching tiny patterns across layers, connected by copper wires. The process is delicate, with even a speck of dust potentially ruining an entire batch. Despite these challenges, TSMC maintains a leading position in the industry. However, the company is caught in a geopolitical tug-of-war, especially with the U.S. and China vying for control over advanced technology. The U.S. has passed the CHIPS Act to incentivize domestic production, but even with new plants in the U.S., TSMC's dominance will remain significant.

🚀 The Future of Semiconductor Innovation and Global Power Dynamics

While TSMC continues to lead in semiconductor technology, China is rapidly advancing its capabilities. In 2020, Chinese firms struggled with 40-nanometer chips, but by 2022, SMIC, a leading Chinese company, produced a 7-nanometer chip. China prioritizes boosting its domestic semiconductor industry, offering significant incentives to companies. However, TSMC remains at the forefront, producing chips two nanometers smaller than China’s and aiming for 2-nanometer chips by 2025, which could significantly enhance device performance. As tensions rise, TSMC’s role on the global stage becomes even more critical, serving both the U.S. and China in this strategic industry.

Keywords

💡Taiwan Semiconductor Manufacturing Company (TSMC)

TSMC is a Taiwanese multinational semiconductor contract manufacturing and design company, playing a crucial role in global technology. It produces 92% of the world's most advanced semiconductor chips, which power everything from smartphones to fighter jets. The company's dominance in the industry is central to the video’s theme, highlighting its significance in global supply chains and geopolitical tensions.

💡Semiconductor Chips

Semiconductor chips are essential components used in various electronic devices, functioning as the brains of these gadgets. The video emphasizes their critical importance, likening them to 'oil' in terms of global dependence. TSMC's role in producing these advanced chips makes it a vital player in the global tech industry, with implications for industries ranging from consumer electronics to defense.

💡Nanometer

A nanometer is a unit of measurement equal to one billionth of a meter, used in the context of semiconductor manufacturing to describe the size of transistors on a chip. The video explains that smaller nanometer measurements allow for more transistors to be packed into a chip, making it more powerful. TSMC's ability to produce chips at the 7-nanometer scale and its future goal of 2-nanometer chips underscores its technological leadership.

💡Transistor

Transistors are tiny switches within semiconductor chips that control electric currents, crucial for the functioning of electronic devices. The video explains that the number and size of transistors directly influence a chip's power and efficiency. TSMC's advanced manufacturing capabilities allow it to produce chips with billions of these transistors, demonstrating its technological prowess.

💡Geopolitical Tensions

Geopolitical tensions refer to the strained political relationships between countries, particularly between the U.S., China, and Taiwan in this context. The video discusses how TSMC, located in Taiwan, is at the center of these tensions due to its critical role in semiconductor production. The potential for conflict over Taiwan and its semiconductor industry could have far-reaching consequences for global technology supply chains.

💡CHIPS Act

The CHIPS Act is a U.S. federal law aimed at boosting domestic semiconductor manufacturing by providing $52 billion in subsidies. The video explains that the Act prohibits companies receiving these subsidies from producing advanced chips for China, reflecting the strategic importance of semiconductors in U.S.-China relations. TSMC's involvement in building a plant in Arizona as part of this initiative highlights its global influence.

💡Silicon Valley

Silicon Valley is a region in California known as a global center for technology and innovation, historically linked to semiconductor development. The video mentions that the fundamental technology for semiconductors, which gave Silicon Valley its name, was originally developed in the U.S. However, the shift of advanced chip manufacturing to Asia, particularly to TSMC, underscores a major shift in global tech leadership.

💡Morris Chang

Morris Chang is the founder of TSMC, credited with recognizing the potential to focus solely on semiconductor manufacturing. The video describes how his strategy of initially pricing chips at a loss to capture market share allowed TSMC to become the world's leading chipmaker. His vision and leadership were instrumental in establishing Taiwan as a dominant force in the global semiconductor industry.

💡China's Semiconductor Industry

China's semiconductor industry is a rapidly growing sector, with significant investments aimed at reducing dependence on foreign technology. The video highlights China's progress in chip manufacturing, such as producing 7-nanometer chips, and its strategic priority to boost domestic capabilities. Despite this, China still lags behind TSMC, particularly in producing the most advanced chips, illustrating the competitive landscape.

💡Global Supply Chain

The global supply chain refers to the interconnected system of production and distribution that supplies goods and services worldwide. The video discusses how TSMC's chips are integral to numerous products across various industries, making it a linchpin in the global supply chain. Any disruption in TSMC’s production, especially due to geopolitical conflicts, could have significant ripple effects across the global economy.

Highlights

Taiwan Semiconductor Manufacturing Company (TSMC) is a global leader in chip production, manufacturing 92% of the world’s most advanced semiconductor chips.

TSMC's chips are found in various essential technologies, including iPhones, cars, fighter jets, and even NASA’s Perseverance Rover.

The global shortage of semiconductor chips has significantly impacted industries, particularly automotive production.

Semiconductor chips are now considered as crucial as oil due to their pervasive role in modern technology.

TSMC, along with Samsung, is one of the only two companies capable of mass-producing chips smaller than 10 nanometers.

Nanometer technology is crucial as smaller transistors allow for more powerful and efficient chips.

TSMC’s importance was underscored by U.S. House Speaker Nancy Pelosi’s visit to Taiwan in August 2022, highlighting its geopolitical significance.

Beijing responded to Pelosi's visit with sanctions on Taiwanese imports but notably excluded semiconductors, highlighting China's dependence on TSMC.

The tech rivalry between the U.S. and China is heavily centered around semiconductor technology.

TSMC’s dominance stems from strategic decisions made by its founder, Morris Chang, who capitalized on the outsourcing trends of American firms in the 1980s.

TSMC's chips are made through a highly complex process that involves etching tiny patterns onto silicon wafers in a dust-free environment.

The U.S. is attempting to reduce reliance on foreign chip manufacturing through the CHIPS Act, which provides subsidies for domestic production.

Despite the U.S. efforts, TSMC’s planned plant in Arizona will only cover a small fraction of global chip production.

Chinese semiconductor firms, while advancing, still lag behind TSMC, with the most advanced Chinese chip currently at 7 nanometers.

TSMC is on track to start producing 2-nanometer chips by 2025, promising even greater efficiency and power for devices like smartphones.

Transcripts

Did you know that the world is ruled by one company?

Taiwan Semiconductor Manufacturing Company may not be a household name.

But its chips are everywhere.

In iPhones, air conditioning units, smart doorbells, computers, cars, F-35 fighter jets,

and even NASA’s Perseverance Rover that landed on Mars.

The reason automakers haven’t been making enough cars is because of a shortage of these

sophisticated chips that power functions like braking.

Semiconductor chips are the new “oil” in terms of our dependence on them.

One company pretty much has a global monopoly.

Nestled on the northwest coast of Taiwan, TSMC produces 92% of the most advanced chips

in the world.

It’s one of only two companies that mass produces chips below 10 nanometers, the other

being Samsung.

Nanometer refers to the length of a transistor - TINY switches 10,000 times thinner than

a human hair that control electric currents.

One nanometer is equal to one billionth of a meter.

The smaller the transistor, the more that can be crammed together.

The more transistors you have, the better the chip, and the more powerful your computer

will be.

When House Speaker Nancy Pelosi visited Taiwan in August 2022, she made it a point to meet

with TSMC Chairman Mark Liu - a sign of just how important the company is.

Beijing spent weeks telling Pelosi not to go to Taiwan, an island that Chinese President

Xi Jinping believes is a breakaway province and has threatened to invade.

In light of Pelosi’s visit, Beijing sanctioned Taiwan by suspending imports of citrus fruits

and fish.

Of course, Beijing did NOT ban Taiwanese semiconductors because it relies on them like everyone else.

Semiconductors have become a key part of the tech rivalry between the U.S. and China.

There are concerns that an invasion of Taiwan by China could choke off the supply of these

cutting-edge chips to the rest of the world and give Beijing control of this essential

technology.

So, how did Taiwan Semiconductor become so dominant?

The fundamental technology was actually invented in America and gave Silicon Valley its name

- as most chips are created with silicon.

In the nineties, the U.S. manufactured a third of the world’s chips.

Today?

None of the advanced chips is made in the USA.

Companies like Intel used to build and design chips in-house.

But beginning in the 1980s, American firms started to struggle against competition from

Japanese companies, so they outsourced some parts of their business that were draining

their profits, including the expensive factories that produce semiconductor chips.

Morris Chang noticed this trend and took advantage of it.

He was born in China and in 1949, he moved to the States where he eventually earned a

Ph.D. in electrical engineering from Stanford.

He spent 25 years rising through the ranks of Texas Instruments before the Taiwanese

government offered him a chance to develop its semiconductor industry.

Chang realized that there was a great opportunity to create a new company focused solely on

making chips that could supply all needs.

In 1987, TSMC was born.

Chang initially priced the chips at a loss to capture a larger market share in the hopes

that costs would eventually be reduced enough to generate a profit.

His strategy paid off, big time.

The world’s largest tech companies all rely on TSMC: Apple, Intel, Qualcomm, AMD, Nvidia,

Chinese tech giant Huawei, and Tesla.

Manufacturing semiconductor chips that are the size of a fingernail is crazy difficult.

Each tiny chip is packed with as many as 50 billion transistors.

The process begins by cutting silicon wafers - thin slices of semiconductors that kind

of look like shiny mirrors - into individual chips.

Employees must wear protective gear when handling them.

If even a speck of dust falls onto a wafer, the entire batch risks being ruined.

The chips are made by etching tiny patterns across the wafer, layer upon layer.

To create the layers, the wafer is coated with a light-sensitive chemical.

It’s kind of like layering a cake, except in this case the cake has 75 layers and takes

three months to make.

The layers are connected by copper wires that carry electrical power.

The entire process is daunting and TSMC has the undisputed edge.

But things are getting complicated as it finds itself caught in the middle of a tug of war

between the two superpowers.

In August, President Biden signed the CHIPS Act into law which bans companies that receive

American subsidies from manufacturing sophisticated chips for China, any that are below 28 nanometers.

Washington is offering $52 billion in subsidies to encourage manufacturers like TSMC to build

semiconductors plants in the U.S.

One is scheduled to open in Arizona in 2024, which TSMC previewed on its LinkedIn page.

But it will still represent only a small sliver of global chip production.

At the same time, Chinese chip innovation is growing by leaps and bounds.

In 2020, Chinese firms were still struggling to get below 40 nanometers.

Today, leading Chinese chip company SMIC is said to have successfully made a 7-nanometer

chip.

Researchers at a firm called TechInsights say the chip was made for crypto mining.

China has made it a strategic priority to boost its domestic semiconductor industry,

showering Chinese chip firms with incentives, including exempting them from paying corporate

income tax for ten years if they make the most sophisticated chips.

Still, for now, Taiwan Semiconductor is the most important chip manufacturer in the world.

It’s producing chips that are 2 nanometers smaller than China and vows to start manufacturing

ultra-advanced 2-nanometer chips by 2025.

That means your iPhone would last four days without needing a charge.

China needs TSMC just as much as the United States does.

As geopolitical tensions rise, Taiwan Semiconductors' importance on the world stage may be the island’s

Thanks for watching.

For Newsthink, I’m Cindy Pom.