TSMC – How a Single Company has Shaped Global Tech Supply Chains and Geopolitical Disputes?
13 January, 2025
TSMC – How a Single Company has Shaped Global Tech Supply Chains and Geopolitical Disputes?
13 January 2025
As consumer electronics and artificial intelligence become ever more relevant to the global economy with every passing day, the race to manufacture semiconductors, the crucial components required for these technologies, has never been more urgent. In the world of semiconductor manufacturing, Taiwan Semiconductor Manufacturing Company (TSMC) is currently unrivalled in its production capacities. However, this dominance has not only positioned Taiwan as an indispensable link of many global supply chains, but also as a focal point in US-China political tensions.
In 2024’s first quarter, TSMC commanded over 60 percent of the global semiconductor foundry market. Samsung, the company’s largest competition, maintained a mere 11 percent market share. TSMC’s dominance is in large part due to its production of highly advanced 3 and 5 nanometer chips, a capability that few other firms share. As such, TSMC is responsible for producing many of the semiconductors required by some of the world’s largest tech firms. In 2023, Apple was the company’s largest customer, accounting for 25 percent of TSMC’s revenue as it produced the chips necessary for the tech giant’s iPhones, iPads, MacBooks, and other such devices. Nvidia, an industry leader in AI chips, is also dependent on TSMC to manufacture its highly advanced GPUs, constituting a further 11 percent of TSMC’s revenue. The increasing global demand for consumer electronics and artificial intelligence has spurred rapid growth in the semiconductor market. November 2024, for instance, saw a 20.7% increase in global semiconductor sales compared to the same month of 2023. This surging demand has made TSMC the most valuable company in East Asia, with a market cap of over USD 870 billion.
Given the tense diplomatic circumstances Taiwan has faced for decades, this global dependence on TSMC has fostered an interesting geopolitical dynamic, colloquially referred to as the “silicon shield”. Believers in this shield argue that TSMC’s vital importance to both the US and China has acted as a significant deterrent to armed conflict on the island. In a July 2022 CNN interview, TSMC Chairman Mark Liu highlighted that any invasion of Taiwan would “render TSMC factories not operable,” and that “our interruption would create great economic turmoil [in China].” Similarly, Taiwan’s former Economic Affairs Minister, Wang Mei-Hua, told Reuters in September 2021 that the country’s semiconductor industry “isn’t just about our economic safety. It appears to be connected to our national security, too.”
Despite this silicon shield theory, many American politicians have expressed concerns that so many of the US’s semiconductors are manufactured in Taiwan, in large part because of these chips’ vital role in the rapidly emerging field of artificial intelligence. Accordingly, the Biden administration has taken measures to boost domestic chip production in the coming years. Central to this effort is the CHIPS and Science Act of 2022, which allocates over $50 billion in subsidies to support semiconductor manufacturing. This push for domestic capacity building has shown some early signs of success. TSMC, for instance, has taken advantage of these subsidies to open a $65 billion semiconductor manufacturing complex in Phoenix, Arizona, which is projected to make the US the second largest manufacturer of semiconductors by 2027, overtaking South Korea. However, Taiwan is expected to maintain its leadership position for the foreseeable future.
While China also hopes to expand its access to these crucial chips, it has faced significant challenges due to US-imposed sanctions, particularly regarding advanced chipmaking technologies. In recent years, the US Department of Commerce has gradually expanded its “entity list” of Chinese companies bound by export controls on semiconductors and chip-manufacturing tools. This list includes Huawei, China’s most popular smartphone brand, and Tencent Holdings, the country’s most valuable company by market cap. TSMC, which received 12% of its revenue from Chinese customers in 2023, is bound by such export controls.
However, recent reports indicate that some Chinese firms have managed to work around these sanctions. In October 2024, TSMC notified American authorities that one of its own semiconductors had been found in a Huawei product, a clear violation of existing sanctions. The Commerce Department believes Huawei obtained the chip through another Chinese tech firm, Sophgo. In response, the Department expanded its semiconductor blacklist in December, restricting a further 140 Chinese companies, including Naura Technology Group, a partially state-owned chip manufacturer. Despite this latest wave of sanctions, Chinese firms are unlikely to waver in their pursuit of these chips given their vast civilian and military applications.
Furthermore, some Chinese tech giants have found ways to “offshore” their use of these semiconductors. ByteDance, for example, has rented some of Nvidia’s most cutting-edge AI chips from the US-based provider Oracle, which they then operated on American soil. Similarly, Alibaba and Tencent have previously approached Nvidia about leasing its chips to operate US-based data centers. This growing field of renting computing resources to Chinese clients further highlights the weaknesses of American sanctions, and China’s willingness to circumvent them.
TSMC’s unflinching dominance over the global semiconductor market has positioned the company as a primary focus of the US and China as the two superpowers compete to expand their artificial intelligence capabilities. Even as the US works to bolster its domestic chip production, and as China finds new workarounds to Western sanctions, Taiwan’s unique position at the heart of tech supply chains and geopolitical tensions has only solidified in recent years. Thus, the future of semiconductor manufacturing, and emerging technologies such as artificial intelligence, will be largely shaped by the US and China’s ongoing economic rivalry.
During the COVID-19 pandemic, when the world was grappling with economic disruptions, including loss of income and employment, a curious phenomenon emerged in Bangladesh – the rise of e-commerce proliferation on social media, led by women. Social media platforms such as Facebook, Instagram and YouTube emerged as a lifeline for many women, especially in urban […]
By: Raul R. Cortez Before we dive into the meat of this discussion, let me give you a brief background of myself. I have been practicing law for three decades now, the bulk of which has been spent working with and in the tech industry. Needless to say, I am a big supporter of the […]
Future Proofing the Philippine BPO Industry in the Age of Artificial Intelligence (AI) 8 January 2025 The Philippine BPO industry is currently one of the biggest drivers of the Philippine economy, contributing 8.12% of the country’s 2023 GDP, according to the IT & Business Process Association of the Philippines (IBPAP). Relative to the world, […]
jQuery(function(jQuery){jQuery.datepicker.setDefaults({"closeText":"Close","currentText":"Today","monthNames":["January","February","March","April","May","June","July","August","September","October","November","December"],"monthNamesShort":["Jan","Feb","Mar","Apr","May","Jun","Jul","Aug","Sep","Oct","Nov","Dec"],"nextText":"Next","prevText":"Previous","dayNames":["Sunday","Monday","Tuesday","Wednesday","Thursday","Friday","Saturday"],"dayNamesShort":["Sun","Mon","Tue","Wed","Thu","Fri","Sat"],"dayNamesMin":["S","M","T","W","T","F","S"],"dateFormat":"d MM, yy","firstDay":1,"isRTL":false});});
var gform_i18n = {"datepicker":{"days":{"monday":"Mo","tuesday":"Tu","wednesday":"We","thursday":"Th","friday":"Fr","saturday":"Sa","sunday":"Su"},"months":{"january":"January","february":"February","march":"March","april":"April","may":"May","june":"June","july":"July","august":"August","september":"September","october":"October","november":"November","december":"December"},"firstDay":1,"iconText":"Select date"}};
var gf_legacy_multi = [];
var gform_gravityforms = {"strings":{"invalid_file_extension":"This type of file is not allowed. Must be one of the following:","delete_file":"Delete this file","in_progress":"in progress","file_exceeds_limit":"File exceeds size limit","illegal_extension":"This type of file is not allowed.","max_reached":"Maximum number of files reached","unknown_error":"There was a problem while saving the file on the server","currently_uploading":"Please wait for the uploading to complete","cancel":"Cancel","cancel_upload":"Cancel this upload","cancelled":"Cancelled"},"vars":{"images_url":"https:\/\/ps-engage.com\/wp-content\/plugins\/gravityforms\/images"}};
var gf_global = {"gf_currency_config":{"name":"U.S. Dollar","symbol_left":"$","symbol_right":"","symbol_padding":"","thousand_separator":",","decimal_separator":".","decimals":2,"code":"USD"},"base_url":"https:\/\/ps-engage.com\/wp-content\/plugins\/gravityforms","number_formats":[],"spinnerUrl":"https:\/\/ps-engage.com\/wp-content\/plugins\/gravityforms\/images\/spinner.svg","version_hash":"c8e6739cc393d67db1a2db79d11eb8af","strings":{"newRowAdded":"New row added.","rowRemoved":"Row removed","formSaved":"The form has been saved. The content contains the link to return and complete the form."}};
var gform_theme_config = {"common":{"form":{"honeypot":{"version_hash":"c8e6739cc393d67db1a2db79d11eb8af"}}},"hmr_dev":"","public_path":"https:\/\/ps-engage.com\/wp-content\/plugins\/gravityforms\/assets\/js\/dist\/"};