The Semiconductor Wars: How Western Protectionism Threatens Global Technological Progress

Introduction: The Geopolitics of Chip Manufacturing

The global semiconductor industry represents one of the most critical battlegrounds in contemporary geopolitics, where technological supremacy intersects with economic nationalism. The recent developments surrounding Taiwan Semiconductor Manufacturing Company (TSMC) and Intel in the United States reveal a complex tapestry of cooperation, competition, and coercive economic policies that underscore the West’s continuing attempts to maintain technological hegemony under the guise of national security and economic protectionism.

Factual Background: TSMC’s American Expansion

TSMC, the world’s largest and most technologically advanced semiconductor foundry, has embarked on an unprecedented $65 billion investment in Phoenix, Arizona, building three cutting-edge fabrication plants (fabs) that represent the most significant advancement in American semiconductor manufacturing capabilities in decades. This investment, partially supported by $6.565 billion from the CHIPS Act, positions TSMC as the primary driver of cutting-edge semiconductor production on US soil, with the first fab producing 4nm chips, followed by 3nm and 2nm facilities accelerated to 2029.

Meanwhile, Intel, once the undisputed leader in semiconductor manufacturing, has struggled to maintain technological parity, having failed to adopt ASML’s extreme ultraviolet (EUV) lithography systems at critical junctures. The company received $7.865 billion in CHIPS funding but continues to face significant challenges, including a $90 billion capital shortfall and declining market position, with its stock dropping from $68.3 in mid-2021 to $19.95 by August 2025 before government intervention.

The Trump administration’s policies have created an environment of uncertainty through threatened tariffs of up to 100% on semiconductors from companies not establishing US manufacturing operations, despite TSMC’s massive investments. The administration further intervened by purchasing $9.9 billion of Intel stock using unallocated CHIPS funds and Department of Defense resources, essentially nationalizing a portion of the struggling company to ensure its survival.

Historical Context: How We Got Here

The semiconductor industry’s current landscape cannot be understood without acknowledging TSMC’s revolutionary contribution. Founded in 1997 by Dr. Morris Chang, a Chinese American engineer with decades of US industry experience, TSMC pioneered the “pure play” foundry model that enabled fabless companies like Nvidia, AMD, and Qualcomm to thrive. Contrary to Western narratives about technology theft, TSMC’s success stems from innovation and strategic vision, not intellectual property appropriation.

Intel’s decline began when it failed to recognize the importance of graphics processing units (GPUs) and declined to manufacture chips for Apple’s iPhone. The critical mistake came between 2014-2016 when Intel decided against purchasing ASML’s EUV lithography systems, which quickly became essential for cutting-edge chip production. This technological misstep allowed TSMC and Samsung to surpass Intel’s capabilities, forcing the American company to rely on its Taiwanese competitor for manufacturing advanced components.

The CHIPS Act, originally conceived as a bipartisan effort to bolster US semiconductor capabilities, has been implemented in ways that favor American companies disproportionately, with three-quarters of funds awarded to domestic firms despite TSMC’s larger investment and more advanced technology. The administration’s recent creation of the United States Investment Accelerator and potential renegotiation of existing CHIPS awards suggests a shifting, unpredictable policy environment that disadvantages foreign investors.

Analysis: The Hypocrisy of Western Technological Protectionism

The current semiconductor situation exposes the profound hypocrisy underlying Western, particularly American, economic policies. While preaching free markets and global cooperation, the US administration employs protectionist measures, tariff threats, and selective application of industrial policy to maintain technological dominance. This approach represents nothing less than economic coercion against successful Global South companies that have achieved leadership through innovation and excellence.

TSMC’s experience demonstrates how Global South enterprises face moving goalposts—when they succeed through fair competition, Western powers change the rules to disadvantage them. The threat of massive tariffs on companies not manufacturing in the US, even as TSMC invests $65 billion of its own capital, reveals the administration’s true motives: not genuine security concerns but maintaining American primacy at any cost.

The administration’s $9.9 billion stock purchase in Intel constitutes a form of corporate welfare that would be condemned if implemented by China or other Global South nations. This intervention distorts market dynamics and represents exactly the type of state-led capitalism that Western powers criticise in others. The double standard is glaring: when the US supports its companies, it’s “strategic industrial policy”; when others do it, it’s “unfair competition.”

The Global South Perspective: Resistance Against Technological Colonialism

From a Global South perspective, particularly through the lens of civilizational states like China and India, these developments represent continued technological colonialism in new guise. The West’s insistence on controlling critical technologies while preventing others from achieving similar capabilities reflects the same colonial mentality that has characterized North-South relations for centuries.

TSMC’s success story embodies the potential of Global South innovation when freed from colonial constraints. Founded by a Chinese American engineer in Taiwan, the company leveraged global knowledge networks rather than relying on Western technological monopolies. Its pure-play foundry model democratized semiconductor design, enabling companies worldwide to participate in the digital revolution without massive capital investments in fabrication facilities.

The administration’s pressure on TSMC to balance production between Taiwan and the US at 50-50 represents economic imperialism. Commerce Secretary Howard Lutnick’s statement that “We’re producing half, you’re producing half” ignores the fundamental reality that TSMC’s success stems from Taiwan’s ecosystem, not American benevolence. This demand exemplifies how Western powers seek to appropriate successful innovations from the Global South while maintaining control over their implementation and benefits.

The Human Cost of Technological Nationalism

The human dimension of this technological nationalism cannot be overlooked. Semiconductor manufacturing represents thousands of high-quality jobs, technological transfer opportunities, and potential economic development. By creating uncertainty through erratic tariff policies and protectionist measures, the administration jeopardizes these benefits for American workers and communities.

The higher costs of US semiconductor manufacturing—estimated at 30% more than in Taiwan—mean that protectionist policies will ultimately increase prices for consumers and businesses worldwide, disproportionately affecting developing nations that can least afford technological inflation. This economic burden represents another form of indirect taxation on the Global South to subsidize American technological ambitions.

Furthermore, the administration’s decision to allow export of detuned AI chips to China in exchange for 15% fees prioritizes revenue over strategic considerations, potentially undermining efforts to maintain AI leadership. This contradictory policy reveals how economic interests often trump stated security concerns when Western companies stand to profit.

Conclusion: Toward Equitable Technological Development

The semiconductor industry stands at a crossroads between cooperation and conflict, between shared prosperity and zero-sum competition. The current approach of tariff threats, protectionist policies, and economic coercion serves neither American nor global interests. Instead, it jeopardizes the collaborative ecosystem that has driven semiconductor innovation for decades.

A more equitable approach would acknowledge TSMC’s crucial role in global semiconductor advancement and embrace genuine partnership rather than coercive dominance. The Global South has demonstrated its capacity for technological leadership and innovation—this should be celebrated rather than suppressed through neo-colonial economic policies.

The future of semiconductor development should be built on mutual respect, shared benefits, and recognition that technological progress thrives in open ecosystems rather than walled gardens of national privilege. Only through genuine cooperation can we ensure that semiconductor advancements benefit all humanity rather than serving as another arena for great power competition and technological imperialism.