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The View
OpinionComment
Craig Addison
Craig Addison

Why Taiwan’s role will be crucial in next phase of the US-China tech war

  • Decades ago, Taiwan bet big on semiconductors to keep itself afloat, producing an industry powerhouse in the process
  • Now, as development focuses on AI and 5G – technologies at the heart of the current US-China tech war – chip manufacturers on the island may be forced to choose sides

Reading Time:3 minutes
Why you can trust SCMP
The logo of TSMC is seen at its headquarters in Hsinchu, Taiwan, in August 2018. The company has flourished by acting as the Switzerland of semiconductor manufacturing. Photo: Reuters
Craig Addison

When then-US president Dwight D. Eisenhower visited Taipei in 1960, thousands cheered amid a sea of American flags as the motorcade made its way to the city centre. Ike addressed a crowd of half a million, pledging that America would support Taiwan over the communist-run People’s Republic of China.

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Two decades later, the Taiwanese felt betrayed when then-president Jimmy Carter unilaterally cut diplomatic relations to recognise the PRC. Angry protesters stomped on peanuts – since Carter had a peanut farm before becoming president – and waved placards calling Carter all kinds of names.

Four decades later, the geopolitical climate in the Taiwan Strait is undergoing another dramatic about-face. Taipei is closer to Washington than at any time since Carter, and arguably further from Beijing, which regards the self-ruled island as a breakaway province.
Taiwan may be diplomatically isolated – it has only 15 allies left, mostly impoverished nations – but it is a global powerhouse in a tech sector coveted by Beijing. That could shift the balance of power if the US-China trade war heats up.

Ironically, it was a bold gamble that helped Taiwan get to that position after Carter cut diplomatic ties. The government bet big on semiconductors – the core enabling technology for all consumer and military electronics applications. Taiwanese chip makers now account for one-fifth of global silicon wafer fabrication capacity.

In the wafer foundry segment, where chips are made to order, Taiwan Semiconductor Manufacturing Corp (TSMC) commands 48 per cent of the market, providing silicon wafers to the world’s so-called “fabless” chip makers, which focus their investment on chip design and outsource the manufacturing.

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