On May 15, Taiwan Semiconductor Manufacturing Company (TSMC) — a semiconductor manufacturing behemoth which makes Apple’s A-series chips — announced its plans to build a $12 billion plant in the state of Arizona. On the same day, it was reported that TSMC has stopped taking new orders from Huawei to fully comply with the latest export control regulation imposed by the US.These are significant shifts in the semiconductor industry. We have an analysis of why these changes are happening and more importantly, why are they happening now.

We argue that the economics of semiconductors — turbocharged by efficient and lean global supply chains — has made it a viable geopolitical tool. The US-China confrontation over Huawei is just one manifestation of this confrontation over semiconductors. COVID-19 only exacerbates this contestation. We evaluate four specific risks and write that COVID-19 will change the resilience-efficiency trade-off in the semiconductor industry. National governments and the geopolitical environment will be the key drivers of this transformation.

The full article can be read on South China Morning Post here.