Trump accuses Taiwan of 'Taking' US Chip Sector: History suggests otherwise
This week, Taiwan’s semiconductor industry found itself in the spotlight once again as former US President Donald Trump resurrected an old accusation that Taiwan had taken over the US chip sector. In a recent interview with Bloomberg, Trump questioned whether the United States should continue its longstanding support for Taiwan if he were to become president again in November.
“They took almost 100% of our chip industry,” Trump asserted. “We should have never let that happen.”
Trump's comments were met with sharp reactions in Taiwan, where some likened them to a mobster’s demand for protection money. Taiwan heavily relies on the US as its principal security partner against China's threats of annexation.
What’s more, Trump’s claims are unsubstantiated as Taiwan never forcefully took over the semiconductor market.
Taiwan produces about 90% of the world’s most advanced semiconductors which makes it a Chip powerhouse. But as political scientist Raymond Kuo explains, “Taiwan simply outcompeted other countries.”
How Taiwan Became a Chip Powerhouse
Taiwan's ascension to semiconductor dominance is a story of strategic foresight and relentless innovation. Its origin goes back to the 1970s when the global demand for electronics was on the rise. It was then that the Taiwanese government made a concerted effort to cultivate a domestic semiconductor industry, recognizing its potential to transform the economy.
A pivotal moment came in 1976 when the Taiwanese government convinced RCA, a leading American electronics company, to transfer its chip-making technology to Taiwan. This transfer of knowledge laid the groundwork for Taiwan's future industry.
Building on this foundation, the Taiwanese government established dedicated science parks, offered financial incentives, and fostered a culture of innovation. These efforts culminated in the creation of the Taiwan Semiconductor Manufacturing Company (TSMC) in 1987. The rest as they say is history.
TSMC quickly grew to become the world's largest contract chip manufacturer, producing chips for tech behemoths like Apple, Nvidia, and Qualcomm.
Unlike its competitors, TSMC adopted a unique business model. Instead of designing and selling its own chips, TSMC focused solely on manufacturing chips designed by other companies—a concept known as "foundry" manufacturing. This specialization enabled TSMC to invest heavily in cutting-edge manufacturing technologies, consistently pushing the boundaries of chip miniaturization and performance.
The final piece in the puzzle was the miniaturization revolution in electronics. Demand for high-performing “small” chips increased making TSMC the preferred partner for many leading tech companies.
The future
Taiwan’s dominance is undisputed and reports suggest that the gap may actually be widening. Trump’s comments aside, this has been a major concern for many governments looking to reduce their reliance on foreign chips.
The UK and US have already developed Chip-related legislations that aim to promote their local semiconductor industry. Whether these efforts pay off remains to be seen.
