Cell Phones, Cars, Coffee Makers at Risk: China-US 'Chip War' Over Taiwan Could Change Everything

COVID disruptions to the global supply chain revealed the world's largest tech battle is for semiconductors, the key to dominating international technology and computing power. 

Semiconductor chips are basically the brains of modern electronics. You might be surprised that the United States isn't the world leader in this multi-billion-dollar industry – it's not even second.

The U.S. government's goal is simply to stay ahead of China. Experts are calling it the 'chip war,' and Taiwan is stuck at the center of this fight for the world's most critical technology. 

"When we look at the world's most advanced chips, Taiwan makes 92% of them," said Gordon G. Chang, PhD., author of The Great U.S.-China Tech War. "Matter of fact, one company in Taiwan makes 92%, and the other 8% are in South Korea." 

The small island of Taiwan clearly dominates the world's semiconductor market. The single manufacturer is TSMC, Taiwan Semiconductor Manufacturing Company – and Apple is its biggest customer. Tufts University Associate Professor, Chris Miller authored Chip War, The Fight for the World's Most Critical Technology. He tells CBN News the Taiwanese company's dominance in semiconductors makes OPEC's 40% share of world oil production pale by comparison. 

"So, if it were knocked off-line, we would face a huge economic crisis because of our inability to get the chips we need," Miller said. "Today, China spends as much money importing semiconductors as it spends importing oil – and it buys those chips in large part from U.S. firms that make great business from selling to China." 

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The chip industry is made possible by a symbiotic relationship among key countries that forms a very complex supply chain. America, the world's largest market, also makes up almost 40% of the total value of this international supply machine. 

"Today, if you want the most cutting-edge chips in a smartphone or data center – it's simply impossible to do without using software from the U.S., machine tools from the Netherlands, U.S., and Japan; ultra-purified chemicals from Japan, as well as manufacturing capabilities in Taiwan," Miller says. It's clearly an intertwined international process. 

Just three years ago, China's tech giant "Huawei' was TSMC's number two customer. Then, the Trump administration tightened restrictions preventing the company from getting chips developed by the U.S. due to espionage and national security concerns. 

"If Taiwan was taken over, the shock to the semiconductor supply chain would cause a deep depression in semiconductors worldwide," Miller said. "And the reason is that, today, all types of goods and semiconductors; not just goods like PCs or cellphones. It's your car, which might have hundreds of semiconductors, your coffee maker, your microwave – anything with an on/off switch has a semiconductor in it." 

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More importantly, Miller says the microchip has revolutionized American warfare. Semiconductors made in Taiwan are used in F-35 fighter jets – and a wide range of U.S. military-grade weapons and defense systems. 

Since the world's entire tech ecosystem can't function without these chips, that makes the sovereign island ground zero for a chip war between the U.S. and China. 

"That means that the world's 'made-to-order' chips are made on China's doorstep," said Chang. "Both South Korea and Taiwan are vulnerable. And it's not inconceivable that China could overtake both of them." 

That's what makes the communist government's "Made in China 2025" plan to make the country dominant in global high-tech manufacturing a true threat to the U.S., both economically and militarily. 

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"As China has become stronger, it has become more belligerent, provocative, and aggressive," Chang said. "This is perhaps the greatest mistake America has made throughout its history and it's a mistake we may not survive." 

It's one reason the U.S. finally responded with the Chips Act, pouring out billions of dollars to bring chip manufacturing and research back to the U.S. 

"If you want to build a plant to build chips – it will cost about $20-25 billion for just one plant," Miller said. "These are the most expensive factories in human history."

TSMC has committed at least $12 billion to build a chip fabrication plant in Arizona, starting in 2024. Still, Neither China nor the U.S. can overtake Taiwan's production efforts and achieve self-sufficiency anytime soon.

Nathan Picarsic with Foundation for Defense of Democracies says accessibility and proximity to chips are key in striving towards self-sufficiency and also strengthening national security. 

"We should care about where they're made – we need them to drive our economy," Picarsic said. "It is the case increasingly – things that are further away and at the hand of geopolitical adversaries may not be attainable at all times. And that provides a concern or vulnerability for us and also provides our adversaries a strength that they can use."

While Taiwan has maintained its sovereignty for more than 70 years, China still considers the island nation its property and regularly provokes it militarily. Given China's authoritarian use of technology against its own people and the potential power of semiconductors, the battle to control the world's technology and data is paramount. 

"All of the big data surveillance we see underway in China is enabled because of semi-conductors," Miller said. "It's chips that provide that processing power for facial recognizing algorithms for example. The same capabilities that are technologically done in China could be done here as well and that's why we need legislation to protect us from either the government or private companies from taking on that surveillance because the processing power that chips have is only going to increase."

This evolving technology makes semiconductors even more of a national security concern, especially with progress in artificial intelligence and quantum computing. The chip war is well underway, exactly how hostile this war becomes remains to be seen.

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