Despite the fact that U.S. House Speaker Nancy Pelosi has already left Taiwan, her visit has once again brought attention to the importance of the island in the worldwide chip supply chain, particularly the role of Taiwan Semiconductor Manufacturing Co., or TSMC, the world’s largest chip manufacturer.
Pelosi met with TSMC Chairman Mark Liu on the contentious trip, which infuriated Beijing, as a symbol of the crucial importance of semiconductors to American national security and the crucial role that the company plays in creating the most cutting-edge processors.
Semiconductors, which are used in everything from our cellphones to cars and refrigerators, have grown to be a significant point of contention between the United States and China in recent years. The U.S. has recently been motivated to try to catch up with Asia and maintain its lead over China in the industry due to a lack of semiconductors.
“Taiwan’s unresolved diplomatic status will remain a source of intense geopolitical uncertainty. Even Pelosi’s trip underlines how important Taiwan is for both countries,” Reema Bhattacharya, the head of Asia research at Verisk Maplecroft, stated this.
“The obvious reason being its crucial strategic importance as a chip manufacturer and in the global semiconductor supply chain.”
The U.S. can’t do it alone and will need to work with Asian corporations that control the most cutting-edge chips, as Pelosi’s trip to Taiwan and meeting with TSMC demonstrate.

A crucial role of TSMC
It is a foundry, TSMC. That indicates that it produces chips that are created by other businesses. Some of the largest technology businesses in the world, like as Apple and Nvidia, are among TSMC’s numerous clientele.
Over the past 15 years or so, South Korean firms like TSMC and Samsung Electronics have advanced semiconductor production technology while the United States has lagged behind. Even while they still depend on equipment and technology from the United States, Europe, and other countries, TSMC in particular was able to solidify its position as the top chipmaker in the world.
54 percent of the market for foundries worldwide is accounted for by TSMC, according to Counterpoint Research. When taking into consideration TSMC along with other giants like UMC and Vanguard, Taiwan as a nation accounts for around two-thirds of the entire global foundry business. That demonstrates Taiwan’s significance in the global semiconductor sector.
Asia truly rules the chipmaking industry when Samsung is included, which has a 15% market share of all foundries worldwide.
Pelosi made it a point to speak with the chairman of TSMC because of this.
Invasion fears in Taiwan
Taiwan, which is democratically run and autonomous, is seen by China as a renegade province that must be united with the rest of the country. Pelosi received repeated warnings from Beijing not to visit Taiwan.
China conducted military manoeuvres during her visit to up the ante and exacerbate tensions.
There is a worry that any Chinese invasion of Taiwan might significantly alter the global semiconductor market’s power structure and give Beijing access to technology it did not previously possess. The supply of cutting-edge chips to the rest of the globe is also feared to be cut off in the event of an invasion.
“Most likely, the Chinese would ‘nationalize it,’ (TSMC) and begin integrating the company, and its technology, into its own semiconductor industry,” the Center for Innovating the Future consultancy firm co-founder Abishur Prakash informed CNBC via email.
But according to TSMC’s Liu, an invasion of Taiwan would leave the chipmaker “not operable.”
“Nobody can control TSMC by force,” Liu said.
How does the U.S. cope with it?
The reshoring of manufacturing is a major focus in the United States. After trailing behind TSMC for so long, Intel has sought to revitalise its foundry division under CEO Pat Gelsinger.
However, the United States has also tried to persuade other businesses to open offices there.
To produce cutting-edge semiconductors, TSMC is now constructing a $12 billion manufacturing facility in Arizona.
The Chips and Science Act, which includes $52 billion in financing to increase semiconductor production in the U.S. and promote competitiveness with China, was passed by the US House of Representatives last week.
In an effort to restrict China’s access to technology, the U.S.
Foreign businesses using American chipmaking equipment must obtain a licence before they can sell semiconductors to Chinese telecommunications equipment giant Huawei, according to a rule adopted by Washington in 2020. Huawei’s smartphone CPU chips were made by TSMC. But following the U.S. action, TSMC was unable to continue providing Huawei with the chips. Huawei’s smartphone business suffered as a result.
The biggest chip manufacturer in China, Semiconductor Manufacturing International Corporation, was banned from exporting to the United States in the same year, which limited its access to vital technologies.
Where does China stand?
With an emphasis on independence and weaning itself off of American technology over the past few years, China has made growing its semiconductor sector a strategic goal.
SMIC is essential to China’s objectives, but sanctions have prevented it from accessing the essential equipment needed to produce the most cutting-edge chips, like TSMC. SMIC is still years behind its competitors. Additionally, the semiconductor industry in China remains strongly depends on foreign technology.
TSMC does have two chip production facilities in China, but they produce less advanced semiconductors than the Arizona factory does.
Relationships among chipmakers
As a means of securing supply of the essential components and maintaining its advantage over China, the United States has been seeking to build partnerships on semiconductors with allies in Asia, particularly Japan and South Korea.
According to Prakash, TSMC is stuck in the middle of the conflict between the United States and China and may be compelled to choose a side. Its dedication to a cutting-edge semiconductor facility in the United States may already be a hint of which nation it is supporting.
“In fact, a company like TSMC has already ‘picked sides.’ It’s investing in the U.S. to support American chip making, and has said it wants to work with ‘democracies,’ like the EU, on chip making,” Prakash said.
“Increasingly, companies are striking an ideological tone in who they work with. The question is, as tensions between Taiwan and China increase, will TSMC be able to maintain its position (aligning with the West), or will it be forced to recalibrate its geopolitical strategy.”