What are the implications of the rising tensions between China and Taiwan for the chip making sector? Discuss its significance.

Taiwan is the major producer of semiconductor chips used in everything from cars and smartphones to data centers and fighter jets. The rising tensions between Taiwan and China are creating serious challenges for the chip manufacturing industry.

Implications on Chip-making sector:

• The chip manufacturing sector is mostly dominated by the United States and its ally Taiwan.
• The rising tensions between Taiwan-China and US-China will create supply issues in the sector, which is already facing the impacts of COVID-19.
• The US recently put the chips and science act for the creation of domestic chip manufacturer.
• The Taiwanese companies have also signalled that they would comply with the new US export controls that aim to hobble China’s chip industry.
• It is creating a technology cold war.

Significance of Chip manufacturing sector:

• All the technological advances of nowadays depend upon semiconductor chips.
• The security of nations including nuclear weapons, submarines, missiles, fighter jets, cyber security and many more, rely upon semiconductor chips.
• Establishing new supply chains and manufacturing plants will require a very huge capital investment, high technical expertise and long gestation period.

Way Forward:

India has embarked on a journey to develop domestic chip fabrication facilities. As the world’s fifth-largest economy seeks to boost its domestic chip sector, India could play a significant role in the semiconductor industry.

Topics: GS-II: Bilateral Regional and Global Groupings and Agreements • GS-III: Indigenization of Technology and Developing New Technology