Written by: Sophie Andrew
Edited by: Bérénice Louveau
In recent years, particularly since Russia’s invasion of Ukraine, talks about a potential Chinese military invasion of Taiwan have intensified. It is generally agreed that, standing alone, a full military capture of Taiwan would be swift, though the possibility of American intervention has complicated the debate. Regardless, Taiwan is still well protected by its chip industry, which is the most advanced in the world. It currently produces 60% of the world’s semiconductors and 90% of the world’s advanced chips. To conceptualize its necessity in the modern world, a modern car runs on between 1,000 and 3,500 chips. They are used in almost everything, from phones to coffeemakers to even electric toothbrushes. Taiwan’s unrivalled semiconductor capabilities, vital to AI and global tech investment, form the basis of the “Silicon Shield” theory: the idea that its chip industry protects the island from a Chinese invasion.
Indeed, Taiwan’s rise to the forefront of chip innovation began in the 1970s, when Taiwanese and Chinese engineers educated in the U.S. brought their innovations back to the island. A famous example is Morris Chang, founder and former CEO of Taiwan Semiconductor Manufacturing Company (TSMC), the company which represents the ‘nucleus’ of the silicon shield. The drive to mass-produce the smallest and most efficient chips, now at the 2-nanometer scale, underscores a widespread political recognition that semiconductors, though indispensable, also risk vulnerability from dependence. The possibility of a chip shortage can have reverberating consequences, as seen during the COVID-19 pandemic.
The consequences of overreliance on chip exports, combined with a correlating and increasing demand for AI and chips, are why governments have consistently kept semiconductor manufacturing investments on the agenda. In 2022, Joe Biden introduced the CHIPS and Sciences Act, a USD 53 billion investment in semiconductor chip manufacturing. Furthermore, in Asia, even South Korea is contemplating a USD 3.06 billion investment as part of the race. Only recently, the European Commission approved a EUR 623 million grant to support Germany in setting up two new semiconductor manufacturing facilities. In a world whose neoliberal era is contracting, the investment in chips to support the digital and AI technological world is no longer left to the rules of competitive advantage; everyone wants to onshore and derisk.
However, the nature of chip innovation is such that imitating more advanced chips is a constant game of “catch-up”. Right now, TSMC is at the forefront of the race, producing the most advanced chips (2 nm in mass production and expected to reach 1.6 nm). Korean company Samsung is estimated to be about 2 years behind TSMC and Intel by about 1 year. Because TSMC is the most advanced, it also has the most important customers: NVIDIA and Apple.
Taiwan’s absolute advantage in the chip industry, however, has some nuances. For example, they still depend on countries such as the Netherlands to import machinery to manufacture chips. Even if the ‘shield’ is intrinsically dependent on globalized trade, it is still fostered by the high demand for chips from global consumers. TSMC is not just an ordinary manufacturing company; it is a calculated politial entity that challenges China’s capacity to become the dominant world power, as well as invade Taiwan. Until every country unties their complex and intrinsic dependence on advanced chips, Taiwan will remain a protected pillar of the modern digital world.