How the US Lost Its Silicon Edge to Taiwan in 3rd Chip war

In 1990, the US controlled 40% of the global market, but by 2020, this share had fallen to 12%. Taiwan, on the other hand, has seen its share of the global market increase from 10% in 1990 to 24% in 2020.


In the world of technology, the race for dominance in semiconductor manufacturing has never been more intense. For decades, the United States held the coveted position of being at the forefront of innovation in the semiconductor industry. However, a series of crucial missteps and overlooked trends paved the way for Taiwan to claim the Silicon edge, giving rise to what is now known as the third phase of Chip War.

In 1990, the US controlled 40% of the global market, but by 2020, this share had fallen to 12%. Taiwan, on the other hand, has seen its share of the global market increase from 10% in 1990 to 24% in 2020.

In this blog post, we delve into the events that led to this seismic shift, exploring the rise of fabless models, the significance of smartphones, and the critical role played by Taiwan’s Taiwan Semiconductor Manufacturing Company (TSMC).

Read More; The PC Revolution: How the US Beat Japan in the second Chip War

The Emergence of Fabless Models and Smartphones

As the semiconductor industry evolved, a significant transformation was underway in the form of fabless integrated circuit (IC) companies.

These companies separated chip design from chip fabrication, allowing them to focus on innovation and design, while outsourcing the manufacturing process to dedicated foundries.

This model proved to be incredibly effective, as it enabled rapid development of cutting-edge chips without the need for massive fabrication facilities.

Simultaneously, the explosion of mobile technology ushered in a new era of computing with the advent of smartphones.

These devices were not only becoming increasingly powerful but also demanded chips that were highly energy-efficient.

As a result, there was a growing need for more sophisticated process nodes that could deliver enhanced computational capabilities while consuming less power.

This demand set the stage for the rise of the foundry model, with companies like TSMC leading the charge.

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TSMC’s Foundry Model and the iPhone Disruption

Taiwan’s Industrial Technology Research Institute (ITRI) recognized the potential of the foundry model and spun off the Taiwan Semiconductor Manufacturing Company (TSMC) in 1987.

This move marked the birth of a company that would play a pivotal role in the future of the semiconductor industry. TSMC’s focus on superior process research and development (R&D) and effective customer relationship management allowed it to emerge as a dominant force in the foundry market.

The turning point came with the introduction of the iPhone in 2007. The software-centric design of smartphones, epitomized by the iPhone, triggered a surge in demand for advanced mobile processors.

While some American integrated device manufacturers (IDMs) like Intel continued to focus on other areas, they underestimated the significance of the smartphone revolution.

A telling example was Intel’s rejection of Apple’s request to manufacture the processor for the first iPhone. This decision proved to be a costly mistake, as Apple turned to Samsung for its chip, using older technology while Intel was working with more advanced nodes.

The Decline of American Silicon Edge

Intel’s rejection of the iPhone opportunity was just one among a series of missed chances for American semiconductor companies.

The rapid growth of smartphones necessitated the development of increasingly sophisticated foundry capabilities.

TSMC, with its relentless pursuit of innovation and customer-centric approach, outshone its competitors by consistently delivering cutting-edge process nodes.

While TSMC was powering devices for Apple, AMD, and other major players using its 5nm process node, Intel was grappling with challenges in transitioning from 10nm to 7nm.

This struggle, combined with the absence of a strong foothold in the smartphone landscape, caused Intel to fall behind significantly. In the second quarter of 2022, Intel reported losses, while TSMC’s profits and revenue soared.

Read Part 4- How China became a factory of electronics


The rise of Taiwan TSMC and the decline of the USA’s silicon edge were not the result of tax differences or subsidies, but rather a series of critical decisions and overlooked trends. The emergence of fabless models, coupled with the smartphone revolution, redefined the semiconductor landscape.

TSMC’s commitment to process innovation and customer satisfaction propelled it to the forefront of the industry, while some American companies failed to seize the opportunities presented by these transformative shifts.

The Chip War serves as a stark reminder that in the world of technology, overlooking key trends and failing to adapt can have far-reaching consequences.

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Editorial Team
Editorial Team
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