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The Geopolitics of AI: Why Taiwan is on the Center Stage

The global race for AI is about who controls the hardware and Taiwan is leading that game. This small island produces the vast majority of the world’s most advanced chips, the kind that power everything from smartphones to AI models and military systems. As a result, Taiwan has become a central player and a potential flashpoint in the growing tech rivalry between the U.S. and China.

Taiwan’s Chip Power: Why It Matters

Taiwan is home to TSMC (Taiwan Semiconductor Manufacturing Company), the world’s top chipmaker. It produces:

• Around 90% of the most advanced chips (used in AI and military applications)

• Over 60% of all semiconductors worldwide

These chips power tools like ChatGPT, cutting-edge smartphones, medical devices, and defense systems. Taiwan’s dominance gives it outsized influence in the global tech economy.

Taiwan's overwhelming dominance in semiconductor production, especially in advanced chips critical for AI.

For the United States

Taiwan is both an economic and security asset. U.S. tech giants depend on its chips, and so does the Pentagon.

Taiwan now accounts for over $64 billion in trade surplus with the U.S. with Taiwan Semiconductor Manufacturing Company (TSMC) commanding 64% of the global contract chipmaking market. Moreover manufacturing virtually all cutting-edge AI chips for companies like Nvidia, AMD, and Apple. So these aren't just any chips, they're the 3-nanometer and 5-nanometer processors that power everything from ChatGPT's training infrastructure to autonomous weapons systems.

For China

China faces an even tougher challenge when it comes to semiconductors. Despite pouring tens of billions of dollars into building up its domestic chip industry, it still relies heavily on foreign-made chips. Right now, China produces only about 16% of the semiconductors it uses, far below its goal of reaching 70% self-sufficiency by 2025. Each year, it imports more than $400 billion worth of chips, many of which come from Taiwan.

For both nations, Taiwan isn’t just a supplier, it's the missing piece in their tech sovereignty strategies.

The Silicon Shield: Power and Vulnerability

Taiwan’s dominance in semiconductor manufacturing has led to what many call the “Silicon Shield”, the idea that the island’s critical role in global tech makes it less likely to be attacked by China. This theory works in two key ways:

• Economic Deterrence: If Taiwan’s chip production were disrupted, the global economy would take a massive hit. Some estimates say a Chinese blockade could cost the world around $2.7 trillion, and an all-out war might push that number to $10 trillion. Even China wouldn’t be spared; its economy could shrink by 7% in just the first year of a blockade.

• Alliance Reinforcement: Since Taiwan produces so many of the chips that power everything from smartphones to military tech, the U.S. and its allies have a strong reason to step in if the island is threatened. A disruption would cripple their own industries, so protecting Taiwan also means protecting their technological edge.

Chip Access Is Now a Global Divide

The U.S. has restricted China’s access to AI chips, creating a three-tier global system:

• Tier 1: U.S. allies (full access)

• Tier 2: Other nations (limited, licensed access)

• Tier 3: China and adversaries (restricted access)

This divide is shaping a world of AI haves and have-nots, with lasting impacts on global development and diplomacy.

Taiwan’s role in AI and semiconductor production is only becoming more critical. As AI continues to evolve, Taiwan’s strategic importance will grow alongside the risk that comes with it. The semiconductor supply chain is fragile with more than 50 key points in the chain that are highly concentrated, meaning disruptions could destabilize industries worldwide.

Co-authored with Jasmin Garcia

// WHATS NEXT

STEP SF 2025
August 20–21 | San Francisco https://lu.ma/StepSF25

Step SF returns to Silicon Valley with a global lens on innovation. Bringing together 2,000+ attendees and 150+ companies, this event spotlights AI agents, GenAI, and cross-border scaling strategies. Founders, operators, and investors from across emerging ecosystems will convene to share insight and forge new partnerships.

Bay Area Startups Collectively Secured $6.3B in July MTD

$6.3B went to Bay Area startups so far in July, with $5B of that going to xAI. There was a bevy of megadeals to start the month; $305M went to AI companies Genesis AI, Harmonic and LangChain. Also., a spinoff from Rivian, closed a $200M megadeal, while MaintainX got $150M.

Decile Group, one of this week's funded companies, has launched a new offering, the Start Fund, designed to eliminate the barriers involved in launching VC funds. It provides zero formation costs, one day launch, low LP minimums (10K) and closes, and automates those processes. Their goal is to launch 10,000 new VC firms worldwide so that entrepreneurs everywhere have access to venture capital. VC Labs, Decile Group's VC accelerator, has been active since 2021. More...

Follow us on LinkedIn to stay on top of what's happening in 2025 in startup fundings, M&A and IPOs, VC fundraising plus new executive hires & investor moves.

Early Stage:

• Honor Education closed a $38M Series A, enables individuals and organizational leaders to build skills, mindsets, and cultures that accelerate growth, alignment, and confidence in navigating change.

• Sundial closed a $16M Series A, takes you from raw data to entities, metrics, visualizations and answers in just a few clicks.

• Decile Group closed a $14M Seed, powers next generation venture capital worldwide.

• AirMDR closed a $10.5M Seed, uses an AI SOC to deliver autonomous Managed Detection and Response (MDR) with advanced AI analysts handling 80 to 90 percent of the tasks typically performed by human analysts.

• OneText closed a $4.5M Seed, win ning incremental sales for DTC brands by making every purchase effortless - OneText shoppers literally reply and buy with one text.

Growth Stage:

• Also. closed a $200M Series B, an electric mobility company focused on creating entirely new (not to mention, innovative and delightful) vertically integrated, small Evs.

• MaintainX closed a $150M Series D, a technology company pioneering a next-generation approach to AI-powered maintenance and asset management.

• LangChain closed a $100M Series B, a low-level orchestration framework for building controllable agents and long-running workflows.

• AirGarage closed a $23M Series B, a full stack parking operator that helps real estate owners monetize their parking assets.

• MAUI Imaging closed a $20.3M Series C, a unique hardware/software solution that uses ultrasound to image multiple different types of tissue simultaneously.

Please join us in welcoming Alexa Ortiz to the Ignite GTM team! Alexa recently joined us as a GTM intern for the summer and has already made an impact with her curiosity, energy, and fresh perspective.

We sat down with Alexa for a quick Q&A to learn more about her background, interests, and what she’s most excited to work on during her time with us.

Tell us a little about yourself.
“I’m currently a full-time student at USC, pursuing a Bachelor of Business Administration with a minor in AI Applications. For the summer, I wanted to immerse myself in an environment that aligns with my interests—and Ignite GTM felt like the perfect fit. I’m based in Sunnyvale and have a younger brother, but I’ll be heading back to L.A. in August to start my junior year.”

Why did you want to intern with Ignite GTM?
“This opportunity aligns perfectly with my academic focus and long-term goals. I’ve always been interested in entrepreneurship, and I wanted hands-on experience to see what happens behind the scenes—from operations to strategy. I’m also eager to expand my understanding of how AI is applied across different industries.”

What projects are you most excited about this summer?
“So far, I’ve enjoyed drafting my first article and learning how the team collaborates across projects. I’m developing both soft and hard skills—like communicating with founders, operating in a fast-paced environment, and maintaining a strong sense of urgency. It’s already been a fantastic learning experience!”

If you could only eat one cuisine for the rest of your life, what would it be?

“If I could only eat one cuisine for the rest of my life, it would definitely be Italian. From rich, comforting pastas and wood-fired pizzas to fresh salads and decadent desserts like tiramisu, Italian food offers such a wonderful variety of flavors and dishes. Plus, the emphasis on fresh, quality ingredients makes every meal feel special and satisfying!”

We’re thrilled to have Alexa on the team this summer and can’t wait to see what she accomplishes next. 

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