US China Tensions Put Taiwan's Chipmakers in a Hard Place 

As rivalry heats up between the US and China, engineers of the semiconductor industry in Taiwan are feeling the pressure as the US has recently imposed restrictions on export of high-level chip technology to China, placing Taiwan chip manufacturers in a very tricky spot. 

Geopolitical Tensions and Taiwan’s Semiconductor Industry 

The semiconductor industry in Taiwan produces nearly 60% of the world’s semiconductor chips and 90% of the most advanced chips, powering everything from smartphones to AI systems. The US is currently working to counterbalance China’s influence in this sector and reduce the risk of a potential invasion of Taiwan, which Beijing claims as part of its territory. 

These geopolitical developments made international business more complex for Taiwan high tech companies, many of which have heavy dependency on the Chinese market for heavy sales. The US’s 2022 Chips and Science Act (CSA) finally forced their hand for adaptation in double quick time, mainly after encouraging domestic chip production and limiting technology transfers to China. 

Against the changing regulatory backdrop, Taiwan’s semiconductor industry has begun to refocus its attentions away from China and further ramp up production capacity in the US and Southeast Asia.  

A Taiwanese engineer at a European multinational chipmaker said, “There is clear direction from the US on the restriction of Chinese development, but the policy is dynamic and inconsistent.” 

Just as Taiwan’s semiconductor industry adapts to current geopolitical changes, the upcoming US presidential election on November 5 introduces further uncertainty. Whether Vice President Kamal Harris or former President Donald Trump wins, analysts predict a new wave of restrictions on Chinese technology that will reach deep into Taiwan’s chip industry. 

Taiwan Semiconductor Manufacturing Competitors 

Major Taiwanese firms, including TSMC, have begun to relocate business as part of compliance with the US rules. After export controls were announced, TSMC stopped taking new orders from Huawei and shifted production to US customers like Apple and Nvidia. It is in line to receive the lion’s share of funding under the CHIPS Act for operations in Arizona, continuing to do some production in China under strict guidelines. 

However, Taiwan semiconductor competitors face a separate set of challenges, especially in the varied “legacy chip” market. As Chinese competitors ramp up their manufacturing, there is increasing concern that it could lead to overcapacity and rising competition. 

Taiwanese firms need to act fast given the uncertainty over US -China relations and the presidential election. Yachi Chiang, professor in tech law, stated, “Taiwan has to be prepared for possible changes in policy in the US after the presidential election, whoever wins.” 

What Will Happen Depending on Election Results? 

Both candidates increase measures against China, and Taiwanese firms will have to adapt to that. As explained by Chris Miller, “There will be some who benefit and some who will be hurt, but all will need to adapt.” 

Given that both US presidential candidates are likely to pursue technology protection policies, Taiwanese companies are not expecting anything of valuable changes in that direction, thus, preparing for even greater instability in trade relations. 

Taiwan chip manufacturers industry has already been charged by Trump as having “stolen” technology from the US, therefore, goods from China might raise the costs for Taiwanese suppliers. In contrast, Harris may adopt a more consultative approach, and this might help the high-tech industry in Taiwan because of her connections with Silicon Valley. However, both options remain a concern for Taiwan’s semiconductor industry. 

In the light of the US-China tensions, Beijing’s strategic investment in domestic production may hold the key to the future of chip manufacturing in China. China’s work on self-sufficiency and partnership with other nations in its effort to soften the impact of sanctions and hold its competitive edge in the international semiconductor market might balance the situation a little. 

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