Other than air force exercises and training on the high seas, tensions between China, Taiwan, and the US are also a part of the conflicts. The technological field is likewise playing a role in the dark issue.
Dominance over global semiconductor supply stores is one of the main causes of the growing political rifts between Taiwan and the US on the one hand and China on the other. Because semiconductors, or microchips, provide everything from smartphones and business applications to sophisticated military hardware and critical infrastructure.
As the demand for advanced microchips rises globally, not least because of the explosive growth of artificial intelligence, so does their proper value to the advancement of individual countries and the world market. Currently, China imports computers for twice as much as it does oil.
This growing emphasis on electronics around the world adds a new layer of complexity to the raging China-Taiwan tensions. Now, Taiwan is the nation’s largest and most innovative microchip maker, and China is the civilization’s biggest consumer of electronics.
We as geopolitics and advanced systems researchers see the struggle to control device supply chains as one of the fundamental struggles of the twenty-first century. The US, which announced a new influx of export controls on silicon items on September 6, 2024, might use Taiwan’s experience as an example.
Taiwan did not emerge as the country’s silicon superstar by accident. Due in large part to its versatile production system and world-class executive talent pool, the self-governing area has been producing high-quality computers for years.
Taiwan must find a delicate balance in order to maintain its position of dominance in the semiconductor industry, especially when it comes to exporting cutting-edge solutions to China.
For one, Japanese policymakers are rightly determined to protect the island’s intellectual property while avoiding social friction with a nation that views the isle as its own territory. Also, Taiwan wants to keep computers from powering Chinese missiles now pointed at the money, Taipei.
The path to governing bits
Japanese law forbids the shift of systems to China up until the early 1990s. But laws were poorly enforced. As a result, Chinese businesses usually evaded previous sanctions by moving their business through then-British Hong Kong. The island’s device market was actually a beneficial source of income.
Taiwan’s approach to regulating the movement of systems started to change in 1993 when President Lee Teng-hui implemented the” no haste, get patient” plan. A program that added extra layers of oversight to very developed technologies, deals valued at more than US$ 50 million, and specialized vital infrastructure projects was put in place of the tight ban.
Crafted over years, this “outbound purchase testing” system features many checks intended to safeguard Taiwan’s primary chip technologies. Chinese government are actively involved in monitoring and overseeing funding decisions made by the region’s semiconductor firms in China.
Authorities are also concerned about ensuring that native chipmakers are in line with Taiwan’s corporate goals while reducing political ties to its neighbor.
During the verification process, Chinese companies are required to post comprehensive expense plans to government-appointed reviewers for acceptance. For instance, when a Chinese semiconductor company, such as the world’s largest chip manufacturer TSMC, considers establishing a fresh facility in China, it must first conduct a thorough approval process.
Changing calculations
Even though the cautious policy change, which is still being pursued today given rising geopolitical tensions, was thought to be out of step with the development of more open global trade relations with China.
After years of intensive lobbying by US corporations, the restrictive human rights restrictions that had hampered Western trade with China were lifted in the 1990s. China’s permanent normal trade relations were established in 2000 by US President Bill Clinton, paving the way for its accession to the World Trade Organization a year later.
Trade with China, including of advanced technologies, exploded thereafter.
However, over the past ten years, Washington’s strategic decisions regarding trade with China have changed significantly.
China was identified as a strategic rival in the US in 2018, naming several Chinese hackers as national security threats and the government as national security threats. President Joe Biden ordered the Treasury Department to create regulations to establish an outbound investment security program to safeguard semiconductor, quantum, and AI technologies by August 2023.
A few months later, the US imposed severe restrictions on China’s trade of advanced chips and chipmaking equipment. The European Union published a white paper in the early 2024 that suggested doing the same.
Taiwan, of course, has its own particular political concerns in China. Given Beijing’s long-standing ambition to, as Chinese leaders put it, “reunify” Taiwan with the mainland, local officials are particularly aware how doing business with China might have unpredictable and damaging political ramifications.
The Taiwanese National Security Bureau has long warned that Beijing is using business to covertly advance its political ambitions, including by using Taiwanese money to establish proxies and influence in Taiwan.
And Taiwan’s National Science and Technology Council made a list of over 20 core technologies that it wanted to prevent Beijing from acquiring, including know-how and raw materials to make chips smaller than 14 nanometers in late 2023.
New challenges for Taiwan’s regulations
In order to counteract Chinese influence, Taiwanese authorities and businesses have relied on the outbound screening system. Additional guidelines have been developed to defend Taiwan’s position in the semiconductor industry, including mandating that Taiwanese investors keep a controlling stake in all Chinese subsidiaries.
Nonetheless, Taiwan’s outbound investment screening system is facing multiple tests. It has to supervise financial investments from Taiwan into China’s rapidly expanding chipmaking industry, but it also has to curtail the transfer of advanced Taiwanese technologies to China.
For instance, Foxconn, a Taiwanese technology company, made an investment in Tsinghua Unigroup through its Chinese subsidiary in 2022. The National Integrated Circuit Industry Investment Fund, a Beijing-based private equity firm, supports Tsinghua Unigroup.
The Taiwanese government fined Foxconn for failing to submit a preapproval application to the outbound investment screening authorities, which ultimately withdrew its investment.
China’s expanding chip industry is also extending its local supply chain, which raises the question of whether Taiwan should impose restrictions on other suppliers to semiconductor manufacturers.
Huawei, a Chinese company, aggressively expanded its chip production network by leveraging its affiliates and Taiwanese suppliers after the US tightened export controls on China in late 2023.
Four Taiwanese semiconductor companies were later accused of aiding Huawei in developing its own domestic chip supply chain.
Confronting China’s ambition
China has aggressively pushed for greater technological autonomy as Taiwan’s semiconductor industry is becoming more restricted. It has done so by lowering its reliance on imported high-tech goods and supplies from the US, Japan, the Netherlands, and Taiwan.
There are legitimate concerns in the West that enforcing international export restrictions on microchips and relevant suppliers may unintentionally help China’s resolve to advance domestic semiconductor production development.
Official data appears to corroborate this view, China’s overall imports of microchips in 2023 were below 2017 levels. In 2023, Taiwanese chips were exported to China, a decline of 18 %.
In addition, the National Bureau of Statistics of China reported that domestic chip production overall increased by 40 % in the first quarter of 2024. By 2032, its share of the world’s capacity to produce logic chips at 10 to 22 nanometers could increase from 6 % to 19 %.
However, these data points do not necessarily indicate that China is on the verge of technological autonomy. Instead of the most advanced chips needed to increase AI computing power, the majority of domestic chip production is based on “mature” chips for household appliances and electric vehicles.
Meanwhile, China is still dependent on Taiwan for its semiconductors. The most cutting-edge semiconductors needed for high-end smartphones and other AI-driven, high-performance computing products may have been subject to international export restrictions due to the decrease in overall chip imports.
Coordinating international efforts
Restricting China’s access to the global superconductor supply chain is challenging. In addition to making China dependent on Taiwanese chips, which may act as a temporary protective shield against invasion, it may also serve as a heightened level of insecurities, causing President Xi Jinping to push his efforts to accelerate their technological self-reliance on advanced chips manufacturing.
China can still produce a range of semiconductors using foreign capital and technology despite the outright ban on these chips.
Taiwan’s screening mechanisms must continue to be nimble and vigilant in order to overcome this challenge, as well as be supported by a coordinated international strategy. Only then will it be possible to halt authoritarian regimes ‘ expansion in the AI race.
Robert Muggah lectures at Pontifical Universidade Católica do Rio de Janeiro ( PUC-Rio ), while Min-Yen Chiang is a PhD student at Georgia State University.
The Conversation has republished this article under a Creative Commons license. Read the original article.