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Taiwan could become the next flashpoint in the global tech war

August 1, 2020. Summarized by summa-bot.

A logo sign outside of a facility occupied by the Taiwan Semiconductor Manufacturing Company (TSMC) in San Jose, California, on February 18, 2017. Photo by Kristoffer Tripplaar *** Please Use Credit from Credit Field ***(Sipa via AP Images)

The world is becoming increasingly dependent on a Taiwanese company for the most advanced semiconductors, after a stumble by rival Intel. But TSMC is trying to pull-off a high-wire act by keeping both China and the United States happy at a time of rapidly escalating geopolitical tensions.

There are only three companies that can manufacture super-advanced chips in the world: Taiwan Semiconductor Manufacturing Company (TSMC), California-based Intel and South Korea's Samsung.

This week, TSMC (TSM) shares soared to new heights in Taiwan after Intel (INTC) warned it was behind schedule on manufacturing 7 nanometer chips, and may outsource production of them.

Samsung (SSNLF) is producing 7 nanometer chips, but its manufacturing business is small relative to TSMC.

The United States and China are locked in a battle over who can more rapidly develop the technologies of the future, and both countries have partnerships with TSMC to supply them with the chips they need to power advanced technology such as artificial intelligence, 5G and cloud computing.

TSMC announced earlier this year that it is building a $12 billion manufacturing facility in Arizona that will be able to produce 5 nanometer chips by 2024.

"There has been concern in Taiwan about the potential for Beijing to nationalize TSMC fabs [plants that fabricate chips] in Nanjing and Shanghai," said Paul Triolo, head of global tech policy at Eurasia Group.

"Beijing could argue that if TSMC is willing to [build] advanced fab in Arizona, it should be willing to do the same in China," Triolo said.

Even though TSMC is a Taiwanese company, it relies on American tech to manufacture chips.

Companies like Apple (AAPL), Amazon (AMZN AMAZON), Qualcomm (QCOM)and Nvidia (NVDA)can design advanced chips, but they don't have TSMC's costly fabrication manufacturing capabilities to build them.

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