U.S. Treasury Secretary calls Taiwan 'world's biggest single point of failure' — Lion's share of advanced chips are made in Taiwan

(Image credit: Future)

This week, U.S. Treasury Secretary Scott Bessent warned about the over-reliance of global high-tech industry on Taiwan, calling the nation 'world's biggest single point of failure' as the lion's share of the most advanced processors are made in Taiwan, he told Fox Business (via SemiVision). He urged urgent action to distribute chip production across multiple friendly regions to avoid a catastrophic collapse if disruptions occur. However, in his rhetoric Bessent seems to forget about Intel.

"The single greatest point of failure for the world economy is that 99% of the high-performance chips are produced in Taiwan," Bessent said, according to Reuters. "They do a great job, they have a wonderful ecosystem, but in terms of risk management, I do not know whether it is 30%, 40%, 50% of our needs, we have got to bring back to the U.S. or our allies, whether it is Japan or the Middle East, and we are working on that every day."

Bessent emphasized the sheer concentration of such a vital industry in one geographic area presents a dangerous scenario: if Taiwan's fabs were forced to stop — whether due to geopolitical tensions or natural disasters — the ripple effects would severely impact the global economy and technological infrastructure.

Bessent noted that efforts are underway to bring more fabrication capacity back to the United States. While Trump's government does not exactly endorse CHIPS and Science Act, the government is obliged to pay the already allocated grants. Meanwhile, the current U.S. government seems to believe that encouraging chipmakers with a stick — such as a 100% import tariff, or the recently discussed 1:1 policy — is more efficient than Biden's encouragement using the CHIPS Act grants as a carrot.

The Treasury Secretary framed the issue as not just economic but strategic, saying that developing chipmaking infrastructure on U.S. soil is now a daily focus of policy and planning. However, Bessent has perhaps forgotten that Intel — makers of Xeon processors that power the lion's share of servers around the world — produces most of its processors in the U.S. using its existing fabs and supply chain.

While Bessent's comments highlight a growing awareness in the Trump administration that modern economies are critically dependent on a narrow segment of the global supply chain and the fact that TSMC is now the world's biggest advanced logic chipmaker, forgetting Intel, which produces its most advanced chips in the U.S., and Samsung, which operates in America and South Korea, perhaps shows that the current U.S. government may miss the whole picture.

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Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

11 Comments Comment from the forums

rluker5

Bessent is forgetting about Samsung and Intel, but does have a point that it would be a disaster if TSMC no longer delivered chips to many markets and that relying less on that one provider mitigates this.
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logainofhades

The lion's share of the highest end chips come from TSMC. Intel and Samsung aren't making AMD and Nvidia wafers. With the US in a race in AI vs China, akin to the space race of the US and USSR decades, and Nvidia being the dominate chip maker for it, it is a point of concern should a natural disaster or a conflict of some sort shut that production down.
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Constellar

"The current administration may be missing the whole picture..."

Ya think?!

The current administration has been missing just about every picture.
As it currently stands, everything is going swimmingly in the world of semiconductor foundries. There's no need to disturb the cart; we also know that Intel is convalescing (strangely enough, it's not really being reflected in the company's stock price. It's rare that when there is optimism swirling around a company that's turning itself around, it's rare for the turnaround attempts to return the company to its former status as an industry leader if the stock price doesn't reflect the optimism. As it currently stands, Intel stock price isn't reflecting the optimism. Rarely, however, I've seen cases where the company does a successful turnaround and the stock price follows quite some time later. If this is the case with Intel, then there is a tremendous buy opportunity here, since the stock has years of poor performance priced in with none of the optimism. Or, it's possible that Intel continues down the path of failure, which would indeed explain the lack of interest in its share price..
Watch for a slow and steady climb upwards, which is the telltale sign of institutional buying, and the strongest buy signal.
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blppt

Sometimes I get the feeling that this entire administration is just throwing a bunch of economic brainstorming at the wall and hoping something sticks. Like that other article where they just came up with the 1-to-1 or 100% tariff idea. It would be fine if we already had the manufacturing capacity up and running or would be in the VERY near future. But not now.

That's why you give notice and give time to build the factories/infrastructure. If that is even economically feasible onshore anymore.

"I got an idea---lets wing it!"

LOL
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blppt

logainofhades said:
The lion's share of the highest end chips come from TSMC. Intel and Samsung aren't making AMD and Nvidia wafers. With the US in a race in AI vs China, akin to the space race of the US and USSR decades, and Nvidia being the dominate chip maker for it, it is a point of concern should a natural disaster or a conflict of some sort shut that production down.
That I agree with them on. It was a very bad idea for decades to put so much importance on critical chips being made 100 miles off the coast of China in a land that they have wanted to invade for 75 years.

Just really, really insane when you think about it.
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hmm53

blppt said:
That I agree with them on. It was a very bad idea for decades to put so much importance on critical chips being made 100 miles off the coast of China in a land that they have wanted to invade for 75 years.

Just really, really insane when you think about it.
You're looking at this in a vacuum. When Taiwan offered Morris Chang resources to build his own company in the 80s (after he found himself hitting a ceiling at TI), the state of geopolitics was very different. The US (Nixon administration to be precise) had chosen to switch its official recognition of China to the PRC basically just 15 years earlier (1971) and began opening up trade with the PRC in 1979. The US simply didn't consider China a threat at that point, and Taiwan happened to start investing into its own semiconductor industry at that time. The US did not set up TSMC obviously, Taiwan did that.
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hmm53

blppt said:
Sometimes I get the feeling that this entire administration is just throwing a bunch of economic brainstorming at the wall and hoping something sticks. Like that other article where they just came up with the 1-to-1 or 100% tariff idea. It would be fine if we already had the manufacturing capacity up and running or would be in the VERY near future. But not now.

That's why you give notice and give time to build the factories/infrastructure. If that is even economically feasible onshore anymore.

"I got an idea---lets wing it!"

LOL
I honestly sometimes wonder if we are now being partially governed by ChatGPT. Or is that an insult to ChatGPT?
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zsydeepsky

I actually agree with that, that's why I hold a generally neutral view towards the "tech war" between China and the US.

I would even elaborate his point: there are way too many single points of failure. For example, what would happen if Neitherland experienced social unrest or a natural disaster that led to the complete halt of the supply of ASML photolithography machines? Or anything happens to the only company that provides the laser source?

And in reality, the secret knowledge of those "companies" might be held only by a handful of people. What would happen if they encountered car accidents or plane crashes?

The pursuit of the most efficiency and the most profits, the ultimate proprietary knowledge protection, has its own side effects too, and those single points of failure are exactly that. Humans have just been entering the high-tech era for a century, and our entire economic system is not built upon risk management, but profit max.

You know what it looks like? The early banking system when it hasn't experienced a financial crisis yet; it has the natural tendency to keep overreaching till meeting an inevitable collapse.

So, a good thing out of the ongoing US-China tech war is that it has vastly extended the total tech capability pool of the entire human civilization. Which, in the long run, might be one of the most beneficial decisions we can make nowadays.
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Flayed

The guys got a point. China is massively encouraging and subsidising its homegrown chipmakers and has been sabre-rattling about Taiwan for years.
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zsydeepsky

Flayed said:
The guys got a point. China is massively encouraging and subsidising its homegrown chipmakers and has been sabre-rattling about Taiwan for years.
Not only "sabre-rattling for years", the People's Republic of China (mainland China) & Republic of China (Taiwan) have been legally retaining the civil war status since 1945, never having signed a ceasefire treaty. The danger is consistently clear as daylight.

Think about it, it's actually surprising that the US allowed Taiwan's semiconductor industry to reach its current level. Like...the US has screwed the Japanese semiconductor industry for far less advantage back in 1980s, thus you never heard of Japan as a single point of failure.
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