The Cost of Choosing the US Over China: Taiwan’s Chip Alliance

Taiwan's decision to join the US-led Chip 4 alliance has come at a cost. China has retaliated by imposing economic sanctions on the island, and the global chip shortage has made it difficult for Taiwanese companies to get the supplies they need. As a result, Taiwan's economy is suffering, and its semiconductor industry is facing uncertainty.

Introduction:

Taiwan, home to the world’s significant chip player, finds itself in a challenging position amid the intensifying technological rivalry between the United States (US) and China. As a democratic nation claimed by China, Taiwan faces increasing military and political pressure from Beijing. The US, Taiwan’s security ally, has been urging the country to limit high-tech exports to China while forming alliances with other advanced democracies in the semiconductor industry. This blog post explores Taiwan’s delicate balancing act between its top trading partner, China, and its strategic alliance with the US, focusing on its role in the newly formed US-led “Chip 4” group.

Taiwan’s Inseparable Ties with China:

Taiwan’s economy cannot decouple from its biggest trade partner, China. In 2021, the mainland accounted for 28.21% of Taiwan’s total exports, with integrated circuits (chips) making up 62% of those exports, valued at US$155 billion. Furthermore, the mainland imported US$79 billion worth of chips from Taiwan in the first half of 2022. Taiwan’s economic relationship with China is tightly intertwined, making it challenging for the island to sever ties despite geopolitical pressures.

Export Controls and the “Chip 4” Alliance:

To strike a balance, Taiwan plans to implement “very firm” export controls to prevent advanced technologies from reaching China’s military. It seeks to collaborate with like-minded countries through the newly formed US-led “Chip 4” group, which includes representatives from Taiwan, the US, South Korea, and Japan. Taiwan’s Deputy Economy Minister, Chen Chern-chyi, emphasized that chipmaking requires collaboration to ensure a resilient supply chain, as semiconductors play a crucial role in various industries worldwide.

Safeguarding Taiwanese Interests and Supply Chain Resilience:

Taiwan’s participation in the “Chip 4” alliance is driven by the need to safeguard the interests of Taiwanese companies and ensure supply chain resilience. With Taiwan’s position as a leader in semiconductor production vulnerable, the alliance aims to secure the global semiconductor supply chain, synchronize policies, and promote joint research and development (R&D) projects. President Tsai Ing-wen has also urged allies to strengthen collaboration amid heightened threats from China.

Read more: Unskilled American Workers : Fact or Excuse?

The High Stakes of Taiwan’s Semiconductor Leadership:

The stakes are high for Taiwan’s semiconductor leadership. The US National Security Council estimates that a Chinese invasion and the loss of Taiwan Semiconductor Manufacturing Company (TSMC) could disrupt the world economy by over $1 trillion, double the value of the entire semiconductor industry’s annual global sales. As a result, Taiwan’s role in the “Chip 4” alliance takes on even greater significance in securing critical technology and maintaining stability in the global semiconductor market.

Conclusion:

Taiwan finds itself caught in the middle of the US-China tech rivalry, balancing its economic ties with China and its strategic alliance with the US. The island’s leadership in semiconductor production makes it a critical player in securing the global supply chain. By joining the US-led “Chip 4” alliance, Taiwan aims to protect its interests, promote supply chain resilience, and contribute to a stable and secure global semiconductor industry. As geopolitical tensions continue to shape the landscape, Taiwan’s ability to navigate this delicate balancing act will be crucial in shaping the future of the semiconductor market.

Kumar Priyadarshi
Kumar Priyadarshi

Kumar Priyadarshi is a prominent figure in the world of technology and semiconductors. With a deep passion for innovation and a keen understanding of the intricacies of the semiconductor industry, Kumar has established himself as a thought leader and expert in the field. He is the founder of Techovedas, India’s first semiconductor and AI tech media company, where he shares insights, analysis, and trends related to the semiconductor and AI industries.

Kumar Joined IISER Pune after qualifying IIT-JEE in 2012. In his 5th year, he travelled to Singapore for his master’s thesis which yielded a Research Paper in ACS Nano. Kumar Joined Global Foundries as a process Engineer in Singapore working at 40 nm Process node. He couldn’t find joy working in the fab and moved to India. Working as a scientist at IIT Bombay as Senior Scientist, Kumar Led the team which built India’s 1st Memory Chip with Semiconductor Lab (SCL)

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