U.S. House Speaker Nancy Pelosi’s meeting with Mark Liu, chairman of the Taiwan Semiconductor Manufacturing Corporation (TSMC) during her trip to Taiwan has not received much attention. This is said to be one of the causes of the current serious crisis between the United States and the Chinese Communist Party.

According to Fortune, Pelosi’s trip coincided with U.S. efforts to convince TSMC – the world’s largest chip maker to set up a manufacturing base in the U.S. and stop supplying Chinese companies.

In recent years, Taiwan’s autonomy has become an important geopolitical interest for the U.S., as the island dominates the semiconductor manufacturing market.

Semiconductors used to produce chips – are indispensable components in all modern technological devices. More importantly, they are an indispensable component in advanced military applications. Therefore, chips play a very important role in America.

Taiwan: Unique position

In particular, Taiwan’s position in semiconductor production is somewhat similar to that of Saudi Arabia in OPEC. TSMC holds a 53% share of the global chip market. The Biden administration’s 100-day supply chain assessment report also said, “The U.S. is heavily dependent on single company – TSMC for producing its leading edge chips.”

In fact, only TSMC and Samsung can make the most advanced semiconductors (5 nanometers in size), and if this supply is disrupted, it will risk the ability to provide current and future [U.S.] national security and critical infrastructure needs.

This means that if the CCP is determined to achieve its goal of unification with Taiwan, it will pose a greater threat to U.S. interests.

In the past, when establishing formal diplomatic relations with the CCP in 1979, the U.S. had to cut ties with Taiwan and close its embassy in Taipei. But that same year, it also passed the Taiwan Relations Act, which requires the U.S. to help Taiwan defend itself– which is why the U.S. continues to sell weapons to Taiwan.

So at this point for the U.S., it is inconceivable that TSMC that supplies the top chips to the U.S. will one day be in territory controlled by the CCP.

Technology War

For this reason, the United States has been trying to attract TSMC to the country to increase its chip production capacity. In 2021, with the Biden administration’s support, the company purchased a site in Arizona to build a manufacturing plant in the United States. It is expected to be completed in 2024.

According to Bloomberg, the Congress has just passed the Chips and Science Act, which provides $52 billion in subsidies to support semiconductor manufacturing in the U.S. But these companies will only receive Chip Act funding if they agree not to produce advanced semiconductors for Chinese companies.

This means TSMC and other companies may have to choose between doing business in China or the U.S., as production costs in the U.S. are considered too high without government subsidies.

This is part of a broader “technology war” between the U.S. and CCP, in which the U.S. is aiming to limit China’s technological development.

The Biden administration canceled many China policies and added sanctions under Donald Trump. The main U.S. goal seems to end reliance on supply chains in China or Taiwan, including semiconductors.

On the Chinese side, the war is also going on quietly, and the CCP using its familiar method: Copying TSMC’s technology and bribing its people.

The shady story of “China chip”

Chiang Shang-yi, was executive vice president and co-chief operating officer at TSMC and later he joined SMIC – a Chinese semiconductor company. He recently resigned and in an interview in “Computer History Museum” (CHM) in the U.S. this past March revealed that joining SMIC was “a mistake,” and one of the stupidest things he has ever done.

SMIC is an official government-backed semiconductor factory of the CCP, and also a competitor of TSMC. Therefore, the fact that Chiang joined SMIC once attracted great attention.

Three days after he joined SMIC, the U.S. imposed further sanctions on China, and China was unable to purchase any equipment that can carry out advanced manufacturing processes, “specifically it’s impossible to make a 7 nanometer (nm) chip.” In addition, Chiang is a U.S. citizen. He was both an American citizen and was considered a Taiwanese, so he was not trusted by China, which made him feel very uncomfortable. He resigned and returned to the United States to retire.

In fact, TSMC sued SMIC for copying its process technology in 2002 and 2006. TechInsights also pointed out that TSMC suspects SMIC of copying its 7-nanometer process and this could lead to litigation between the two companies.

In recent years, the U.S. government has accused SMIC of serving the Chinese military. In September 2020, SMIC was added to the list of entities subject to export control, and in December of the same year, SMIC was added to the prohibited investment blacklist of “Chinese military-industrial enterprises” of the United States. At the same time, under pressure from the U.S. and Dutch governments, SMIC was unable to obtain the ASML ultraviolet (EUV) machines needed to manufacture the most advanced chips.

Regarding the development of SMIC’s chip technology, some in the industry said that SMIC currently does not have an ultraviolet lithography (EUV) device, although SMIC can make 7 nanometer chips, processing is complex and its hard to match TSMC productivity. Industry insiders also rate that SMIC is an OEM manufacturer of mining chips, first casting the chip on TSMC’s 7-nanometer chip process, and then transferring it to SMIC for reverse engineering.

The outside world has noticed that SMIC’s leap forward in “cloning” the manufacturing process is very low. Even on the official website, as in any official SMIC documents, most don’t mention 7nm.

According to Caixin, China’s integrated circuit research and development funds have made continuous and intense investment in integrated circuit development. But the fact is that the two wheels of “finance” and “technology” in China’s integrated circuit industry are not in sync, so it is difficult to achieve outstanding development.

Meng Wei, a spokesman for the CCP’s National Development and Reform Commission, once said that he found that some “three no’s” companies – no experience, no technology, and no talent – had involved in the microchip industry, and some places are still pushing blindly planning and even building individual projects. Stagnation and vacant factories make for a waste of resources.

On the Taiwanese side, they fear that Nancy Pelosi’s recent visit will spur a Chinese invasion, leading to the closure of the company’s chip factories.

TSMC President Mark Liu said: “No one can control TSMC by force … because it is a sophisticated manufacturing facility depending on real-time connectivity to the outside world such as Europe, America and Japan in terms of materials, chemicals and engineering softwares.”

Meanwhile, Economy Minister Wang Mei-hua said that if the CCP invades, Taiwan will not supply chips to the world and that will cause serious economic problems.

“That’s why we say if something happens to Taiwan, the world will suffer the consequences,” Wang said.

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