Taiwan’s global AI role pivotal, US analyst says

Taiwan's position in the global artificial intelligence supply chain is indispensable for the foreseeable future, but a lack of investment in asymmetric defense capabilities poses a significant concern, according to David Feith, a senior fellow at the Washington-based Hudson Institute and former senior director for Technology and National Security at the White House National Security Council.

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Taiwan’s pivotal role in the global artificial intelligence (AI) supply chain is irreplaceable for the foreseeable future, but underinvestment in asymmetric defense would be concerning.

Feith spoke at a forum hosted by the Research Institute for Democracy, Society and Emerging Technology in Taipei, emphasizing that both Taiwan and the US must collectively enhance deterrence to safeguard their critical technological lifelines. He addressed misconceptions within the US regarding semiconductor supply chain "relocation," clarifying that while Taiwan Semiconductor Manufacturing Co. (TSMC) has established facilities in Arizona, the US will remain heavily reliant on Taiwan's advanced packaging and manufacturing ecosystem for many years to maintain its AI global leadership.

"The US-made wafers need to be sent to Taiwan for advanced packaging and other manufacturing processes," Feith explained, countering claims that US self-sufficiency is imminent. He warned that expectations for "onshoring" speed and advancement are often overly optimistic. Feith highlighted strategic risks stemming from "underinvestment" in two key areas: the onshoring of manufacturing in the US and Taiwan's defense capabilities.

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The US-made wafers need to be sent to Taiwan for advanced packaging and other manufacturing processes.

While acknowledging the positive tone set by recent Taiwan-US diplomatic engagements, Feith pointed out that domestic challenges in the US, such as factory permits and labor restrictions, could impede Taiwanese firms' efforts. He stressed the need to accelerate supply chain relocation beyond advanced manufacturing to include packaging, printed circuit boards, and mature processes, thereby preventing China from weaponizing control over foundational chips, similar to its actions with rare earth elements.

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Expectations regarding the speed and advancement of “onshoring” are sometimes overly optimistic, which masks the fact that the US will remain immensely reliant on Taiwan’s hardware manufacturing ecosystem for many years to come to maintain its AI global leadership.

Feith also urged Taipei to avoid underinvesting in its national defense, noting that current investments in its defense budget, overall spending, and asymmetric capabilities, such as drones, have yet to reach a satisfactory level. He stressed the importance of bolstering these areas to ensure Taiwan's security and regional stability.

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Taiwan and the US face the strategic risks of “underinvestment” in two main areas: onshoring in the US and defense capability in Taiwan.