Despite open threats from China, US House Speaker Nancy Pelosi became the highest-profile elected American official to visit Taiwan in 25 years, triggering a diplomatic showdown and prompting China to announce military exercises around the island and warn that “those who play with fire will perish by it.”
China considers Taiwan its territory and has not ruled out the possible use of force for a “reunification.” China has been putting diplomatic pressure on other countries not to recognise Taiwan. Or to do anything that may imply recognition. For China, Pelosi’s visit does that.
While many reasons are being attributed to the rising US-China tension, logic chips made in Taiwan seem to be at the centre of it. These chips power much of the world’s daily-use electronic equipment, such as laptops, watches and games consoles.
ALSO READ | What is China’s position on foreign interference in Taiwan?
The US, other western nations and the Taiwan Semiconductor Manufacturing Corp (TSMC) have been worried about the eventualities if China goes for an invasion and cuts off supplies of chips that are crucial to the global economy. TSMC has plans to build foundries in Japan and the US. But that may not suffice.
America’s posturing through Pelosi’s visit has a lot to do with this worry. On Wednesday, the US said it wouldn’t abandon Taiwan. As part of her Taiwan visit, Pelosi was also to meet TSMC officials.
TAIWAN POWERS TECH WORLD
This is primarily because Taiwan is, by virtue of TSMC, one of the key manufacturers of logic chips.
-All processors that power Apple iPhone and MacBooks are fabricated in Taiwan by TSMC.
-TSMC-made chips are used in almost 60 per cent of smartphones.
-TSMC fabricates almost all of the graphics and general-purpose computer processors made by AMD (a US company) plus almost half of what Nvidia makes.
-TSMC also fabricates most of the chips made by Qualcomm (a US company) and MediaTek (a Taiwanese company). Almost 100 per cent of Android smartphones use chips made by Qualcomm and MediaTek.
IMPACT OF CONFLICT
-If there is a disruption in TSMC’s operations, the world may end up losing supply of around 60 to 70 per cent of phone and computer chips.
-Apart from TSMC, only Intel, Samsung — and up to an extent Global Foundries — possess cutting-edge silicon chip manufacturing processes.
-United Microelectronics Corporation is another Taiwanese foundry making silicon chips. However, along with SMIC (which is China-based), UMC is more into manufacturing silicon chips that are not cutting-edge and are meant to be used in smart appliances, cameras, printers, cars and vehicles, or in components like storage disks.
SCRAMBLE FOR CHIPS
The US is increasingly looking to reduce its dependence on Taiwan for silicon chips. It is encouraging TSMC to set up foundries in the US, as well as is pushing Intel to invest more in chip manufacturing.
At the same time, China is trying to prop up SMIC as a key foundry that may help China avoid the worst in case TSMC stops supplying chips to Chinese companies. However, the key technologies that power a foundry are in the hands of Western companies — ASML of Netherlands, for example — and Japanese firms like Nikon. The silicon chip designing is almost entirely in the hands of US and British companies like Intel, AMD, Nvidia, Apple and ARM.
The US recently banned ASML from selling equipment to Chinese companies. In other words, China relies on TSMC and Taiwan as much for its silicon chip supply as the US.
ALSO READ | US won’t abandon Taiwan, says Pelosi as angry China holds military drills in protest
— ENDS —