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What the World’s Most Important Company Must Do

With the outlook for Sino-American relations remaining grim, the globally indispensable Taiwan Semiconductor Manufacturing Company (TSMC) is quietly exploring its options. Stuck in the middle of the twenty-first century’s great-power contest, its future will depend on playing a smart long game.

CAMBRIDGE – Often referred to as the “Silicon Shield,” Taiwan produces a staggering 65% of the world’s semiconductors and over 90% of the highest-end chips. As such, no company is more singularly important to the global economy than TSMC (Taiwan Semiconductor Manufacturing Company). TSMC’s advanced microchips are indispensable to iPhones, medical devices, missile launch platforms, and many other technologies, and they are largely unrivaled. Countries and companies that cannot avail themselves of TSMC’s most advanced semiconductors simply cannot develop certain critical technologies. The company’s decisions thus can bear directly on matters of global security.

With the outlook for Sino-American relations grim, TSMC announced plans to invest $40 billion to build a second fabricating plant in Arizona, where it will make three-nanometer chips (the first plant, for four-nanometer chips, is scheduled to be up and running in 2024). The company’s decision to site more production in the United States is understandable now that tensions over Taiwan have taken center stage. Following US House Speaker Nancy Pelosi’s visit to the island in August, China conducted unprecedentedly aggressive military exercises, launching missiles near the island and simulating a blockade in the Taiwan Strait.

Then, in October, US President Joe Biden’s administration announced sweeping new export controls designed to cripple China’s ability to produce advanced chips and pursue other high-tech manufacturing. Although China has invested massively in domestic chip production, the results have been disappointing. Now that President Xi Jinping has secured a third term as China’s leader, his regime could retaliate by terminating US tech firms’ contracts to build data centers for provincial governments.

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