Foreign Policy: Chip Wars in a Trump 2.0 World
Alex Benetos, Taiwan Co-Director - 12/12/24
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As the world braces for a second Trump presidency, a key question remains about how the next administration will approach technology competition with China. Semiconductor manufacturing is a component of this competition, which has become a battleground in the race for technological leadership. Semiconductor chips have quickly become the cornerstone of modern technological innovation, used in everyday electronics like smartphones and microwaves and emerging technologies like artificial intelligence (AI) and advanced missile systems.
Foreign Policy’s event, Chip Wars in a Trump 2.0 World, examined the global semiconductor industry's role in international supply chains and geopolitics. Editor-in-Chief Ravi Agrawal sat down with Chris Miller, a Professor of International History at Tufts University’s Fletcher School and author of Chip War: The Fight for the World’s Most Critical Technology. Together, they discussed the competition and vulnerabilities shaping the manufacturing and use of semiconductors internationally, illustrating their geopolitical significance.
The supply chain is heavily concentrated in Taiwan, making it a critical actor in the international semiconductor industry. Taiwan Semiconductor Manufacturing Company (TSMC) produces approximately 90% of the world’s advanced semiconductor chips, including 99% of the chips used for training AI systems. The United States’ and China’s reliance on Taiwan for this critical technology highlights its significant role in great power competition. This dependency raises important questions over global supply chain security, as potential disruptions could significantly cripple technological production. At the same time, access to semiconductor technology could also allow state access to networks and devices for espionage and attacks on cyber infrastructure, jeopardizing data security.
Reducing these vulnerabilities has been a key goal for US policymakers across administrations. The Trump administration took initial steps to restrict China’s access to advanced semiconductor technology through export controls and adding Chinese companies, such as Huawei, to the US Department of Commerce’s Entity List. Efforts have also been made to pressure TSMC to reduce business ties with Chinese firms and increase manufacturing investment stateside. The Biden administration built on these restrictions, expanding export controls on chips, manufacturing equipment, and other AI-related technologies. The CHIPS and Science Act, which allocated US$52 billion to kickstart US domestic manufacturing in semiconductors, is also spurring investment. TSMC’s new Arizona plant’s early production yields have allegedly surpassed their counterparts in Taiwan by approximately 4%.
Trump 2.0 will likely continue the trend of economic de-risking and insulating US supply chains from potential disruptions. As the US continues its efforts to reshore manufacturing capacity, Taiwan may feel increased pressure on its “silicon shield,” the deterrent power of its semiconductor industry that has tied cross-strait stability to dependence on Taiwanese semiconductor manufacturing. As the US and China attempt to bolster technological self-sufficiency, Taiwan’s strategic leverage as a critical node in international technology supply chains could wane.