Semiconductors and the Great Power Game: How Taiwan Finds Its Footing Amidst U.S.-China Tech Rivalry

Abstract

Taiwan's semiconductor industry has become a focal point in the escalating U.S.-China tech rivalry. At the center stands Taiwan Semiconductor Manufacturing Company (TSMC), the world’s top contract chipmaker, strategically positioned amid global tensions. As the competition intensifies, Taiwan has emerged as a key player in the international semiconductor supply chain. To mitigate geopolitical risks, global firms are adopting diversification strategies such as “China + 1” and “Taiwan + 1,” reshaping the foundry and packaging landscape. TSMC’s business model reflects this interdependence, with major revenue from U.S. clients while maintaining links to China. This balance illustrates Taiwan’s careful navigation of geopolitical risks. Given the strategic value of semiconductors for both military and civilian applications, any conflict would be highly disruptive. In response, Taiwan has adopted a multifaceted strategy—strengthening international partnerships, fostering innovation, and engaging in policy dialogues—to safeguard its chip ecosystem and maintain supply chain stability. By maneuvering through these complexities, Taiwan seeks to sustain its technological edge and economic security. Growing global interest, such as Italy’s pursuit of chip partnerships, underscores Taiwan’s expanding role in the tech world. Taiwan’s semiconductor story encapsulates broader global tensions, illustrating how it balances economic goals with strategic necessity in an interconnected age.