The Chinese Communist Party, led by President for Life Xi Jinping, has created what amounts to a policy of supply chain warfare against the United States.
Smart hedging by the U.S. and our allies to restrict access to next generation technologies with dual military uses like telecommunications infrastructure, and advanced artificial intelligence and semiconductors, has been met in Beijing with baseless retaliatory efforts in kind.
Much like access to energy, the free world needs secure access to advanced semiconductors to power its national and economic security. The CHIPS Act was directionally a good start, but it is not enough. The U.S. needs to lead a multilateral effort to reshore and “friendshore” semiconductor manufacturing.
China’s goal is to have an advanced, self-reliant semiconductor industry to supplant Western, and particularly American, technology. It does this with its typical cocktail of international espionage, theft of intellectual property (IP), massive state support, domestic quotas, endless state lines of credit, and access to an increasingly advanced domestic workforce.
Concerningly, 90% of semiconductors overall are manufactured in fabrication plants or fabs in East Asia – the domain of our foremost geopolitical adversary. 90% of advanced chips are manufactured in Taiwan mostly by Taiwan Semiconductor Manufacturing Company (TSMC). Advanced chips are critical to power such technologies as AI, autonomous vehicles, quantum computing and robotics.
At this point, due to its market share dominance of high-end chips, TSMC is a de facto international monopoly with no U.S. counterpart to match its size and scope of production. This could cause U.S. and potentially European regulators to take a close look at TSMC for potential antitrust violations.
TSMC chips have been found in Huawei AI devices even after strong U.S. export controls were adopted and 12 years after the House Intelligence Committee identified Huawei and ZTE as a national security threat.
TSMC also operates manufacturing facilities in mainland China. This exposes them to forced technology transfer to Chinese entities, IP theft and even sabotage. Even if manufactured outside of Taiwan or China, the chip's intellectual property and likely the fabs’ operational capability is still directly tied to Taiwan.
According to U.S. intelligence, Xi Jinping has told the Chinese military to be prepared to take Taiwan by 2027 – just a mere two years from now. Putting all our eggs in the Taiwan basket for advanced semiconductors presents an unacceptable risk. A Chinese takeover of Taiwan would mean control over this critical sector. Having both the manufacturing and IP based outside of China or Taiwan would be the best way to secure a reliable supply chain for the United States and our allies into the medium- and long-term future.
While U.S.-leader and global semiconductor pioneer Intel Corporation saw its stock go down by more than 40% last year, TSMC’s share price doubled.
Despite the best efforts of the CHIPS Act and its supporters in Congress, America needs to elevate a robust, domestic competitor with long-term viability. Without it, we stand woefully vulnerable to China’s supply chain warfare.
Editor’s Note: Andy Keiser is a Senior Principal at Navigators Global, a Senior Advisor to the National Security Institute and a former Senior Advisor to the House Intelligence Committee.
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