Should the US rely on Taiwan for semiconductor production or stimulate research and development for a new era of domestic production?

Just as oil was the lifeblood of the industrial age, silicon is now the foundation of the digital era, driving advancements in technology and innovation. Every field that defines modern life - from artificial intelligence to defence systems and communications - depends on microchips. As a result, the global contest for control over semiconductor engineering has emerged as one of the major geopolitical struggles of the 21st century. Mastery of chip designing and manufacturing has provided countries with an economic advantage and dominance in a vital sector of the world.

At the fault line of this geopolitical tension is Taiwan, home to the Taiwan Semiconductor Manufacturing Company (TSMC), which produces around 90% of the world’s most advanced chips, with its factories serving as the backbone of technological advancement. This dependence has turned the small island into a global nexus and the spark of conflict between China and the United States. For China, controlling Taiwan would mean historical glory and technological sufficiency, as China remains heavily import-dependent for its supply of advanced semiconductors; for the United States, defending Taiwan safeguards its role as the architects of global innovation and Western technological dominance.

The semiconductor supply chain reveals a complex web of interdependence, which has become a tool of diplomatic power. The Netherlands’ ASML monopolises the production of extreme-ultraviolet lithography machines, which without this no country can build the next generation of chips. Likewise, Japan controls several chemicals critical to chip production, the United States controls the software, and South Korea controls the memory technologies (a major component of AI, cloud computing, 5G, and autonomous vehicles). Each layer of interdependence has transformed dominance in the production of chips into leverage over other countries through export bans, trade restrictions, and investment barriers.

The emergence of the “Silicon Cold War” reflects a crucial shift in geopolitics in the 21st century: from territorial control to technological supremacy. The United State’s CHIPS Act is a survival strategy, which promotes the US’s independence from Taiwan by stimulating research and development in order to boost the domestic supply of semiconductors. Similarly, China's "Made in China 2025" is a strategic plan to increase self-reliance and shift the low-cost China into a high-tech and innovation powerhouse. Together, these strategies represent the shift of power in the 21st century from land to the innovation of technology.

TSMC Arizona

The CHIPS Act represents the start of change, channelling billions into research and development that could restore U.S. technological leadership while creating thousands of skilled jobs in the current saturated market. Replicating Taiwan’s quality and efficiency will take years, and the U.S. should continue to support Taiwan to benefit from its established semiconductor industry. While giving Taiwan the security it needs, they can collaborate through joint ventures and R&D sharing, therefore increasing the flow of innovation domestically while reducing the risk if Taiwan faces a crisis. TSMC is already building semiconductor fabrication plants in Arizona, showing a clear middle-ground strategy between dependence and decoupling.