Taiwan Redefines Chip Sovereignty

Not just about defense, but also "economic addiction"

A recent interview between Taiwan’s deputy foreign minister, Francois Chih-chung Wu, and AFP could turn Western chip ideas on their head.

Discussing Taiwan’s role in democratic chip initiatives, Wu said that his nation will “try” to keep its most advanced technology at home. Even fabs located overseas with Taiwanese expertise will be “linked” to the island-nation, according to the deputy minister.

This has been carried by global headlines more bluntly: Taiwan will keep advanced chip production within its borders.

So far, this has not ignited a firestorm, particularly with the White House. But Wu’s comments are likely to give Western governments pause. A new line of questioning could soon emerge: exactly what kind of chips will be produced in the US, Europe, and Japan if Taipei sets limits? Put differently, will the West have to rethink reliance on Taiwan for semiconductors?

Taiwan’s Logic

For Taiwan, there is logic behind what it is saying. Why would Taiwan outbuild itself? This is akin to Chinese firms, like BYD or CATL, building their most advanced products in Western markets. This would drive the West-China decoupling, and hand China’s biggest innovations to its chief adversaries. The Chinese government would not allow this. Of course, Taiwan and China are not in the same boat. But it is the exact same principle. Why would Taipei hand the West its most prized technology, and in the process, sever reliance on Taiwan?

This is about using technology to achieve triple objectives: enhance sovereignty against China, establish economic security in the West, and maintain geopolitical relevance globally.

Western Outlook

However, the West is likely to view the situation much differently.

At a moment when alarm bells ring that China could make a play for Taiwan within the next 24 months (in 2027), and as new friction emerges within the Western alliance, especially around economic and technology flows, Western governments are in a race against time to shore up their technology muscle. AI and chips are the core of this. If Taiwan is not willing to give its best, it could permanently change the West-Taiwan relationship.

America First

The US could return to its old position of threatening to withdraw protection unless certain conditions are met. Already, Washington had previously proposed that Taiwan build 50% of its chips in the US in exchange for security from China, an idea that Taipei rejected.

Yet now, with Wu’s public remarks, the US may not leave room for any negotiation. Either Taiwan builds its most advanced chips in America, or it may lose its privilege. Adding to the pressure is that the TSMC Arizona plant is producing chips that are on average 5% to 20% more expensive than the same chips produced in Taiwan, a gap that could make MAGA unhappy.

Redefining Chip Sovereignty

All of this redefines chip sovereignty, which used to be about nations producing the chips they need to secure their economies and militaries within their borders. The only “exemption” was reliance on allied states. Yet, the situation in Taiwan redefines chip sovereignty. Now it is about keeping certain tiers of production at home and away from allied nations. Suddenly, sovereignty is about keeping others “hooked” on the country, not just defense against somebody else.

Strangely, the only other nations to act with such logic are the US, which said it will not allow its best chips to be used by non-US companies, and China, which cut off critical mineral supplies earlier this year to make it clear how hooked the world was on Chinese supply chains.

Whose Next?

The question now is not just what happens next between the West and Taiwan, but who else employs this new definition of sovereignty. From commodities to high-tech exports, other governments could strike with the same logic as Taiwan (and the US and China).

Why should they export their best and make themselves irrelevant? This kind of thinking only points to more economic barriers and walls on the horizon, as governments hesitate to commit themselves to each other, taking the role that sovereignty plays on the world stage to new heights.

ABISHUR PRAKASH AKA. MR. GEOPOLITICS

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