Taiwanese factories produce much of the world’s computer chip and semi-conductor supplies that are used in a variety of products from smartphones to medical equipment. Taken without context, that may not seem cause for concern, but when you consider Chinese President Xi Jinping’s recent push for his country to make progress toward reunification with Taiwan, and China’s aggressive military stand toward Taiwan over the past several months, a different national security picture emerges; one with serious implications for the U.S.’ critical supply chain.
The Cipher Brief recently focused on Where Taiwan’s Military Buildup is Headed and this week, we’re focusing on Taiwan’s strategic role in the manufacturing of semi-conductors and how that is impacting future investment by both the U.S. and China in diversifying their supply chains.
The Cipher Brief reached out to Susan M. Gordon, former Principal Deputy Director of National Intelligence (PDDNI), to talk about why Taiwan’s strategic importance when it comes to the U.S. supply chain.
Gordon also served as Deputy Director of the National Geospatial-Intelligence Agency (NGA) and spent 27 years at CIA, where she served in a number of senior roles.
The Cipher Brief: As a leader in high-end manufacturing of semiconductors, how important is Taiwan for the future of both the U.S. and China’s technology development?
Gordon: Taiwan is incredibly important over the next five years. The U.S. and China have both under-invested in their manufacturing capabilities and are hugely dependent on Taiwan—the advanced capabilities of both go through Taiwan’s semiconductors. That said, beyond five years, the situation should change for both. The U.S. has a decision to make about addressing this dependency. It seems to be moving toward rebuilding the manufacturing capability to match its design superiority. If it does, the situation will change for the positive. If it doesn’t, this supply chain vulnerability becomes more problematic. Expect China to face and address this situation as well.
The Cipher Brief: How do you see the balance of power evolving as it relates to the global supply chain for advanced semiconductors?
Gordon: The balance of power will evolve based on our national decisions, and those of China. Interestingly, if both nations decide to invest in advanced manufacturing, expect their capabilities to diverge as each will have more insular design and manufacturing approaches. What that situation will demand is more effort to understand the other’s capabilities and vulnerabilities because “mirror-imaging” won’t carry the day.
The Cipher Brief: How critical is Taiwan’s role in the manufacture of semiconductors to the United States ability to maintain its qualitative military advantage in the future?
Gordon: In the near team, Taiwan’s role is critical, because they have such an advantage in the high-quality manufacturing that yields the semiconductors upon which our capabilities rely. If this supply chain were degraded—either in capacity or availability—we would struggle in the short term. In the long term, if we invest in domestic manufacturing capability, then Taiwan’s role will move to the provision of commodity products—important, but not critical.
The Cipher Brief: Is enough attention being paid to China’s push for tech independence?
Gordon: China’s capabilities writ large are getting significant attention—a bit late, perhaps, but it would be disingenuous to suggest our focus is not there now. What we might not be thinking about is the impact of a more independent, more isolated China that has acquired sufficient insight through its intelligence and IP-theft to pair with internal investment. Not only are they poised to have peer-level capabilities, but as they diverge in approach, we will have to invest to make sure we don’t lose touch with them.
The Cipher Brief: What would be the significance of China implementing export controls on rare earth minerals?
Gordon: Any supply chain vulnerability that impacts areas in which we have had, or must have, either independence or superiority must be addressed. Certainly, export controls on China with respect to rare earth minerals would have impact—and should drive us to find ways to ameliorate, whether investing in our production or that in Africa. Good to remember, however, that China would feel the impact of restrictive export controls, providing an opening to other avenues to ensure continued availability. Re-energizing interaction and alliance with allies and partners will provide some insulation against disruptive acts by any single actor.
The Cipher Brief: What worries you the most in terms of the future of digital infrastructure security?
Gordon: My greatest worry remains that we will find ourselves relying on infrastructure whose security we cannot ensure. This is just not a situation where we will be able to dictate the technology choices of a world hurrying to connect but limited in wherewithal to do so securely. Open systems and zero-trust seem to be important areas of investment if we want to make sure our communications can be trusted and true.
The Cipher Brief: What events could prove disruptive for the future of advanced semiconductors?
Gordon: There are near infinite permutations and combinations of events that could prove disruptive, but I’ll chose two ends of the spectrum: conflict in the Indo-Pac region that goes beyond message-sending and tactical mischief-making and U.S. domestic decision making that doesn’t take into account our need for, and tenuous hold-on, technological advantage. Without USG governmental investment in foundational, secure capability we will be vulnerable to disruption.
Read also Where is Taiwan’s Military Buildup Headed exclusively in The Cipher Brief
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