One firm, Taiwan Semiconductor Manufacturing Company (TSMC), produces more than 90% of the world’s most advanced semiconductor chips. These chips are essential for smartphones, artificial intelligence, high-performance computing and cutting-edge military systems.

Taiwan’s dominance of advanced chips acts as a chokepoint for the global economy. Days or weeks without their manufacturing would affect the supply and price of numerous products around the world. This is comparable to how the current disruption to shipping in the Persian Gulf due to the Iran war is affecting oil-dependent markets globally.

Taiwanese semiconductor manufacturing supremacy has transformed the island nation into what I have described in my research as a “niche superpower”. It wields outsized global influence by commanding a strategically indispensable industry.

Taiwan did not stumble into this position. In the 1970s, Taiwanese technocrats recognised that the nation could not immediately compete at the world’s electronics frontier. One of them was Kwoh-Ting Li, then minister of economic affairs, who is often referred to as the “father of Taiwan’s economic miracle”.

At that time, Taiwan lacked the financial capital and technological skills to compete with industry leaders such as Japan and the US. So rather than trying to dominate the entire semiconductor industry from design through to production, Taiwanese policymakers focused on building capabilities in precision manufacturing. This is the most operationally demanding part of the semiconductor value chain.

Established in 1973 by the Taiwanese government, the Industrial Technology Research Institute carefully acquired semiconductor process technology through licensing agreements with the now defunct US firm Radio Corporation of America (RCA). It then trained a generation of Taiwanese engineers.

https://theconversation.com/how-taiwan-came-to-dominate-the-global-chip-industry-276939