Roving Periscope: In the tech-war, China, and the US play seesaw on Taiwan

Virendra Pandit 

New Delhi: Controlling global grain production and trade for food security was one of the chief reasons behind Russia’s invasion of Ukraine in February this year. Together, the two countries control a quarter of the world’s grain production. It now emerges that Taiwan’s huge semiconductor industry is the main reason both the largest economies—the US and China—want to keep Taipei in their tent.

According to media reports, during her recent Taipei visit, US House of Representatives Speaker Nancy Pelosi also met Mark Lui, Chairman of the Taiwan Semiconductor Manufacturing Corporation (TSMC), as the US has been trying to convince the world’s largest chip maker on which America depends heavily, to set up a manufacturing base in the US and to stop making advanced chips for China.

Semiconductors, also known as computer chips or just chips, are integral to all the networked devices embedded in our lives. They also have advanced military applications.

Taiwan’s position in the world of semiconductor manufacturing is like Saudi Arabia’s status in the Organization of Petroleum Exporting Countries (OPEC). For, TSMC alone has a 53 percent share of the global foundry market (factories contracted to make chips designed in other countries). Other Taiwan-based manufacturers claim a further 10 percent of the market.

That explains why China’s long-term goal of reunifying with Taiwan is now more threatening to US interests. In the 1971 Shanghai Communique and the 1979 Taiwan Relations Act, the US recognized that people in both mainland China and Taiwan believed that there was “One China” and that they both belonged to it.

“But for the US, it is unthinkable that TSMC could one day be in territory controlled by Beijing,” a report said.

That is why, in 2021, with the support of the Biden administration, TSMC bought a site in Arizona to build a US foundry by 2024.

Interestingly, the reports said, the US Congress’s recently passed Chips and Science Act provides US$52 billion (£43 billion) in subsidies to support semiconductor manufacturing in the US but only to those companies refraining from manufacturing advanced semiconductors for Chinese companies.

So, TSMC and others would have to choose between doing business in China and in the US because the cost of manufacturing in America is too high without government subsidies.

The report said this is part of a broader “tech war” between the US and China, in which the US aims to restrain China’s technological development and prevent it from exercising a global tech leadership role.

This technology war began in 2020 when the Trump administration imposed severe sanctions on the Chinese tech giant Huawei to cut it off from TSMC, which was reliant on producing high-end semiconductors needed for its 5G infrastructure business.

Huawei was the world’s leading supplier of 5G network equipment. The US feared it posed a security risk. The sanctions are still in place because both Republicans and Democrats want to stop other countries from using Huawei’s 5G equipment.

The British government had initially decided to use Huawei equipment in certain parts of the UK’s 5G network, but the US sanctions forced London to reverse the decision.

So, neither China nor the US would like to see Taiwan destroyed.

Of course, they would continue to flex military muscles, continue armed drills, threaten and abuse each other, perform diplomatic acrobatics, and do everything short of engaging in a mutually destructive war.