Transcript for:
The plan to secure Taiwans AI chips

(gentle music)

• This is Nvidia's H100 chip. It takes thousands of them to train just one AI model, and each chip is worth more than $25,000. Almost all of the world's supply comes from one small island, Taiwan. And the vast majority are made by only one chip maker, TSMC. It's arguably one of the most important companies in the world, so any disruption to its operations could affect the global economy. A recent earthquake briefly stopped production, prompting a number of questions about what a prolonged shutdown could do to the world's supply of chips. Its geography poses a more complicated problem than earthquakes, though. TSMC has 15 factories in Taiwan, mostly clustered along its West Coast, less than a hundred miles from China, and that makes the U.S. very uncomfortable. (military speaks in foreign language) China has been clear about its intention to eventually take control of Taiwan, which could have devastating consequences for the current AI revolution. Here's what the U.S. is doing to secure the chip supply chain before it's too late. - Today, we mark one of the largest investments ever in our nation's history in semiconductor manufacturing. - [Narrator] So how did all of that power wind up so concentrated in the first place? Taiwan saw the potential in chip making early in the game, investing billions back in the 1980s. TSMC pioneered the business of producing the chips, instead of designing them. That focus on manufacturing gave it a scale nobody could match. - Taiwan Semiconductor Manufacturing Company produces around 90% of the world's most advanced chips. And that level of concentration in Taiwan in the hands of a single company is vastly greater than you see in the oil industry with Saudi Arabia or with OPEC. - [Narrator] Some defense analysts believe the company's remarkable value serves as a deterrent to a Chinese invasion. With TSMC, often referred to as Taiwan's. so-called "Silicon Shield." - Nobody can control TSMC by force. If you take a military force or invasion, you will render TSMC factory non-operable. - [Narrator] In the past few years, China has grown more aggressive in its stance on Taiwan. It has stepped up military drills around the island, driving up fears that an invasion could come soon. Last year, Warren Buffett sold billions of dollars worth of TSMC shares within a few months of buying the stock. He later said geopolitics was one of the reasons for the sell-off. Even with the increasing concerns, the world has very few options when it comes to high-end chip makers. - TSMC is extraordinarily difficult to replicate. A single new chip making facility can cost $20 billion. They're the most expensive factories in human history. And so simply finding the funds to build a new chip plant is itself an extraordinary challenge. - [Narrator] The company is crucial to global supply chains, so the impact of an invasion of Taiwan could be disastrous. - TSMC, the manufacturer of semiconductor chips on Taiwan. If that is blocked, it will have an enormous global financial impact that I think runs somewhere between 600 billion to over a trillion on an annual basis for the first several years. - [Narrator] There are suggestions that the U.S. could take drastic actions to prevent China from taking control of TSMC. Robert O'Brien, the principal National Security Advisor to former President Trump, has implied that the U.S. would destroy the factories. - The United States and its allies are never gonna let those factories fall into Chinese hands even if there was a successful invasion of Taiwan. I mean, you're looking at something similar to what happened with the French fleet when Vichy France surrendered to Germany, the Brits didn't allow the French fleet to remain intact. - They bombed that fleet. - That fleet was destroyed. - Brian Cavanagh served alongside Robert O'Brien on the National Security Council, working to protect critical infrastructure, including chips. - When you hear somebody like Ambassador O'Brien say, they just assumed destroy the fabs before allowing China to take over the fabrication plants as indicative of the commitment the United States has to ensuring that Taiwan is able to remain independent. If those chips, the manufacturer of those chips were to fall into the wrong hands, you would lose the assurance of security that we have today from TSMC, and that's something that would erode the national security in a way that is almost insurmountable. (audience applauding) - [Narrator] To reduce the risks, the U.S. is investing billions of dollars to shift the supply chain back home. - We're gonna make sure the supply chain for America begins in America. (audience cheers and applauds) - [Narrator] President Biden's Chips Act includes subsidies to encourage TSMC and other chip makers to expand production outside of Taiwan, and onto U.S. soil. TSMC recently announced a factory expansion in Arizona, raising its investment in the U.S. chip economy to $65 billion. Two factories are already under construction, but the company is grappling with a number of issues. - TSMC has faced some real challenges in learning to operate in very different environments. Finding the right types of workers that are needed in constructing these ultra complex facilities and managing the construction process has, I think, been more difficult and more time-consuming than TSMC initially expected. - [Narrator] The company is trying to get U.S. visas for hundreds of skilled Taiwanese workers, but American unions say this is an excuse to hire cheap foreign labor. Beyond the U.S., TSMC is building its first factory in Europe with the support of the German government. It's also opened its first plant in Japan. The factory in Japan won't be operational anytime soon, and it will not produce the cutting-edge chips that it makes in Taiwan. With delays at the Arizona plants, the race to secure the supply chain is getting extremely tight. - Speaking about the threat to Taiwan, the timeline was becoming actually contracted quite dramatically in real time. And people were looking at a 2027 event horizon for action on Taiwan, and a potential blockade in the Taiwan Straits. - [Narrator] For the U.S., de-risking the supply chain of a key technology with a single choke point is an urgent priority, but there are limits to what can be done outside of Taiwan. - There's no plausible scenario under which Taiwan isn't a absolutely central player, even under the most dramatic scenarios of de-risking. The reality is that the entire world, including the United States, will be highly reliant on Taiwan for a very long time to come. - [Narrator] The fight to control the chip supply chain has only just begun. The bottom line, is that while it may be easy to take the chips out of Taiwan, it's hard to take Taiwan out of the chips. (air whooshing) (dramatic music)