For decades, the United States tech industry has relied almost entirely on Taiwan for the production of advanced computer chips — a dependency that officials warn could cripple the global economy if disrupted. Despite repeated warnings from Washington, including financial incentives and even threats of tariffs, Silicon Valley has largely failed to diversify its supply chain away from the island nation.
The Core Problem: Extreme Concentration
Taiwan currently manufactures approximately 90% of the world’s high-end computer chips, the essential components powering everything from smartphones and laptops to AI data centers. This concentration of production in a single, strategically vulnerable location represents an unprecedented point of failure for the global economy.
The risk isn’t theoretical. China views Taiwan as a breakaway province and has conducted military exercises, including live-fire drills, near the island’s waters, signaling its willingness to use force. A Chinese blockade or military action targeting Taiwan’s chip foundries would immediately halt production, triggering a cascading crisis across the tech sector.
Failed Attempts at Diversification
Two U.S. administrations have attempted to address this vulnerability. The Biden administration offered billions in subsidies to encourage domestic chip production, while the Trump administration considered tariffs to force a shift in sourcing. Neither approach has yielded significant results; Silicon Valley continues to prioritize cost-effectiveness over geopolitical stability.
This inaction is not simply a matter of inconvenience. As Treasury Secretary Scott Bessent stated at the World Economic Forum in Davos, a disruption in Taiwanese chip production would be an “economic apocalypse,” cutting off the supply of essential components and destabilizing global markets.
Why This Matters Now
The situation is particularly urgent given China’s increasingly assertive stance towards Taiwan. The island’s democratic government, combined with its critical role in global chip manufacturing, makes it a flashpoint for geopolitical tension. The tech industry’s refusal to address this risk leaves the U.S. and the world dangerously exposed to potential economic shock.
The reliance on Taiwan is not just a matter of convenience; it’s a fundamental flaw in the current global supply chain that demands immediate attention. Until Silicon Valley diversifies its chip sourcing, the threat of economic disruption will continue to loom large.
