Here’s what’s on our plate today:

• 🇹🇼 Taiwan’s tech power: How one island keeps the global AI race running (and both superpowers guessing)

• 🗳️ Would the world’s AI grind to a halt without TSMC?

• ⚡️ AI-powered fashion goes “Clueless,” Hollywood battles generative art, and Microsoft’s nostalgic sound swap

• 💡 Imagine building your own Silicon Shield—what’s your move?

Let’s dive in. No floaties needed…

The Laboratory

How Taiwan is playing the role of kingmaker in the AI era

As Big Tech works to develop new foundational AI models and streamline its adoption by businesses, another battle in the AI space is rapidly intensifying competition among nations to lead in artificial intelligence research, development, deployment, and regulation.

The AI race is driven by broader ambitions: economic competitiveness, military power, and technological sovereignty. At the core of this race is the belief that AI leadership will determine global power dynamics in the 21st century, much like nuclear or space technology did in earlier eras.

In this escalating global contest to develop advanced artificial intelligence, one nation has quietly emerged as a pivotal power broker: Taiwan.

The small island nation recently added China's Huawei Technologies and Semiconductor Manufacturing International Corp (SMIC) to its export control list, which includes organisations like the Taliban and al-Qaeda. This means that Taiwanese companies will need government approval before exporting any products to the companies. The list includes a total of 601 entities, including Huawei and SMIC, along with entities from Russia, Pakistan, Iran, Myanmar, and China.

While this may not look like much, when viewed through the lens of AI and geopolitics, the move signifies straining relations between the U.S., which backs Taiwan,  and China.

Let us take a closer look at the role Taiwan plays in the global AI race and why it has become the flashpoint for China and the U.S.

Taiwan: the engine behind the World’s AI ambitions

While much of the AI revolution focuses on software, models, and cloud services, the reality is that cutting-edge AI breakthroughs depend on state-of-the-art hardware, particularly semiconductors.

Taiwan, through its chip titan TSMC and a thriving technology ecosystem, has become an indispensable hub for AI chip fabrication. Its role is increasingly that of a kingmaker, determining which nations and companies can lead in AI and shaping the battlefield lines between the U.S., China, and beyond.

Taiwan Semiconductor Manufacturing Company (TSMC) now produces more than 90% of the world’s most advanced chip nodes, namely 3 nm and 5 nm, that underpin today’s AI accelerators and data center CPUs. These chips are not only complex in design but also require extreme ultraviolet (EUV) lithography and cutting-edge packaging tech that only TSMC and its ecosystem can deliver reliably.

In May 2025, TSMC reported a 40% year-over-year revenue jump, an unprecedented $10.7 billion for the month, driven largely by AI-related demand.

And it is not just TSMC that makes Taiwan such an integral part of the supply chain that makes AI possible. The country’s semiconductor industry presents such a strong front due to the foundries, equipment manufacturers, chip packagers, and testing firms. All of which, when combined, provide a comprehensive ecosystem uniquely suited for AI chip development.

As the global demand for AI chips increases, Taiwan’s tech-driven economy is growing in parallelly. In May 2025, Taiwan’s exports hit a record $51.7 billion, a 38.6% increase year-on-year, backed by  AI demand across the globe.

As such, it would not be incorrect to say that nearly all modern breakthroughs in chip production and packaging, which have enabled the development of large language models, AI-powered video, or autonomous systems, rely fundamentally on chips made in Taiwan.

The U.S.-Taiwan tech alliance

A key pillar of Taiwan’s strength is its unique relationship with the United States. The relationship between the two nations plays a pivotal role in shaping the U.S.–China technology rivalry.

TSMC’s chips are central to U.S. industries powering AI data centers, AI accelerators (like NVIDIA’s), and military systems. Major US companies like Apple, NVIDIA, AMD, and Intel collaborate deeply with TSMC in chip design and manufacturing. This co-development model ensures Taiwanese firms benefit from cutting-edge R&D and maintain global leadership in fabrication.

The U.S. is also one of Taiwan’s largest export markets. In 2025, Taiwan’s exports to the U.S. grew 87% year-over-year, largely due to surging AI chip demand.

In return, the U.S. supplies the island nation with all-important weapons systems, which help it deter aggression from China. Taiwan’s ability to maintain its self-defense directly protects its chip infrastructure, which is seen as critical to global tech supply chains.

Taiwan, meanwhile, continues to toe the U.S. line and has been adding Chinese tech companies to its export control lists, which reflects the broader US policy of denying China access to high-end microprocessors.

TSMC is also expanding its base of operations to the U.S., representing the largest foreign direct investment in a greenfield project in American history. The plant is expected to play a crucial role in increasing U.S. production of advanced semiconductor technology and elevate the state of Arizona as an American center of innovation.

Geopolitics and the global AI supply chain

As artificial intelligence becomes a defining force of economic and military power in the 21st century, the global supply chain that fuels its development has emerged as a new domain of geopolitical contest. At the heart of this supply chain lies Taiwan, TSMC, making it not just an economic phenomenon but also a geopolitical asset.

Recognizing the risks of this concentration, the United States has spearheaded efforts to diversify and protect AI-related supply chains. One such initiative is the “Chip 4 Alliance”, an informal alliance among the U.S., Taiwan, South Korea, and Japan aimed at safeguarding access to critical chip-making technologies and materials. The alliance is designed to counter China’s growing ambitions in semiconductor self-sufficiency, particularly as Beijing accelerates its investments in domestic champions like SMIC and Huawei to boost its domestic capabilities.

Through this alliance, the four countries are sharing best practices, coordinating export controls, and reinforcing the stability of supply chains. Taiwan’s participation, while delicate due to its political status, reinforces its central role in the AI hardware ecosystem.

South Korea, home to memory chip leaders Samsung and SK Hynix, and Japan, which supplies vital semiconductor chemicals and tools, also play indispensable roles in this fragile but highly integrated architecture.

Export controls have become key instruments of techno-nationalist statecraft.

The U.S. Commerce Department has imposed sweeping restrictions on the export of advanced AI chips and chip-making equipment to Chinese entities, including bans on sales of NVIDIA’s H100 and A100 GPUs.

Can Taiwan sustain its AI chip dominance?

Taiwan’s chip capacity is both a source of geostrategic strength and a point of acute vulnerability.

Dubbed the “Silicon Shield,” this doctrine suggests Taiwan’s importance could deter military action, disruption of Taiwan’s fabs would cripple global AI infrastructure and shake the economic foundations of democracies the world over. Yet that same geographic concentration also poses a systemic risk: a regional conflict, even an accident, could paralyze data centers, cloud services, and defense systems worldwide.

Additionally, while the move of TSMC looking to expand operations to the U.S. does lower the risk of disruptions, it weakens the island nation’s “security shield" and could weaken it against China.

So, until there is an alternative to Taiwan’s dominance in the AI chips market,  it will continue to tug at the global AI order. Its policy decisions over who to supply, what controls to implement, and which alliances to deepen will reverberate across commerce, security, and technological leadership.

For policymakers, industry leaders, and technologists alike, recognizing Taiwan’s central role is not merely academic; it is essential.

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