The Silicon Shield is real, but it’s also overrated. Both Washington and Beijing have a strong interest in TSMC continuing to function. Neither side wants to be cut off from advanced chips. China has spent enormous sums trying to build a domestic alternative, with limited success at the leading edge. The U.S. passed the CHIPS Act and is subsidizing TSMC fabs in Arizona and elsewhere. But Taipei has banned TSMC from making its most advanced chips abroad, so the bleeding edge stays on the island for the foreseeable future. That mutual dependence does create a deterrent against the most catastrop
Taiwan’s chips power the global economy. China holds the leverage… A full halt to Taiwan’s chip exports would knock multiple percentage points off global GDP and ripple through every advanced manufacturing sector for years. The 2020 pandemic chip shortages — empty car lots, delayed appliances — would look minor by comparison. …
… The one counterweight to the United States’ AI dominance, of course, is China , whose AI industry has been heavily subsidized by the government. Even so, U.S. export controls on the most advanced chips have thwarted even China’s ability to match the raw computing power of U.S.-based rivals. …