As China pushes the world to avoid official dealings with Taiwan, leaders across the globe are realizing just how dependent they've become on the island democracy.
Taiwan, which China regards as a province, is being courted for its capacity to make leading-edge computer chips. That's mostly down to Taiwan Semiconductor Manufacturing Co., the world's largest foundry and go-to producer of chips for Apple Inc. smartphones, artificial intelligence and high-performance computing.
Taiwan's role in the world economy came to recent prominence as the auto industry suffered shortfalls in chips used for everything from parking sensors to reducing emissions. With carmakers, including Germany's Volkswagen AG, Ford Motor Co. of the U.S. and Japan's Toyota Motor Corp., forced to halt production and idle plants, Taiwan's importance has suddenly become too big to ignore.
U.S., European and Japanese automakers are lobbying their governments for help, with Taiwan and Taiwan Semiconductor being asked to step in.
The auto industry's pleas illustrate how Taiwan Semiconductor's chipmaking skills have handed Taiwan political and economic leverage in a world where technology is being enlisted in the great power rivalry between the U.S. and China -- a standoff unlikely to ease under the administration of President Joe Biden.
Taiwan's grip on the semiconductor business -- despite being under constant threat of invasion by Beijing -- also represents a choke point in the global supply chain that's giving new urgency to plans from Tokyo to Washington and Beijing to increase self-reliance.
By dominating the U.S.-developed model of outsourcing chip manufacture, Taiwan "is potentially the most critical single point of failure in the entire semiconductor value chain," said Jan-Peter Kleinhans, director of the technology and geopolitics project at Berlin-based think tank Stiftung Neue Verantwortung.
The Trump administration exploited that pinch point to deny Beijing access to technology. By banning access to all U.S. chip technology, including design, it was able to cut off the supply of semiconductors from Taiwan Semiconductor and other foundries to Huawei Technologies, hobbling the advance of China's biggest tech company.
It also negotiated with Taiwan Semiconductor to establish a $12 billion chip fabrication plant in Arizona. South Korea's Samsung Electronics Co. is set to follow, with a $10 billion facility in Austin, Texas.
The Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act introduced to Congress last year aims to encourage more plants to be established in the U.S. Rep. Michael McCaul, R-Texas, plans to reintroduce the bipartisan bill this year with a view to securing $25 billion in federal funds and tax incentives.
The European Union aims to bolster the bloc's "technological sovereignty" through an alliance armed initially with as much as $36 billion of public-private investment to raise Europe's share of the global chip market to 20% (without a target date) from less than 10% now.