The chips inside your phone, your car and the world’s AI systems are very likely made in Taiwan. Here’s why one company there has become one of the most important businesses on Earth.
Semiconductors, usually called chips, are the tiny electronic brains inside phones, computers, cars, medical equipment and AI data centres.
The most advanced chips contain billions of microscopic switches called transistors, some smaller than a virus. Making them requires some of the most precise manufacturing ever developed.
Designers and makers
Many of the world’s best-known chip companies, including Nvidia, Apple, AMD and Qualcomm, design their chips but don’t make them. They rely on specialist manufacturers, known as foundries.
The biggest by far is Taiwan Semiconductor Manufacturing Company, or TSMC. It was founded in 1987 by Morris Chang, with backing from the Taiwanese government, and pioneered the idea of making chips designed by other companies.
Today, TSMC makes the large majority of the world’s most advanced chips, including the processors in iPhones and the AI chips that power ChatGPT and other services.
Its lead is extremely hard to catch. A single advanced chip factory costs tens of billions of U.S. dollars, depends on machines that only Dutch company ASML can make, and needs years of experience to produce chips reliably at scale. Rivals including Samsung and Intel have struggled to keep up.
Why it worries governments
Taiwan is a self-governing democracy, but Beijing claims it as part of China and has not ruled out using force to take control. That has made the concentration of chipmaking in Taiwan a major concern for governments around the world.
A conflict, blockade or natural disaster affecting Taiwan could halt production of the chips the global economy relies on, with consequences far beyond the technology industry.
Supporters of Taiwan sometimes describe its chip industry as a “silicon shield”, arguing the world’s dependence on it gives other countries a strong reason to help keep the peace.
The race to build elsewhere
The U.S. has offered tens of billions of dollars in subsidies to bring chipmaking home, and has restricted the sale of advanced chips and chipmaking equipment to China.
TSMC has committed about US$165 billion to build factories in Arizona, and is also building plants in Japan and Germany, although its most advanced manufacturing remains in Taiwan.
For Australia, which makes very few chips, the issue is mainly about supply. Shortages during the pandemic showed how quickly a lack of chips can delay everything from cars to appliances.
