Taiwan's Semiconductor Industry: The Backbone of Global AI

Taiwan drives global AI innovation, making it essential for the future of technology.

### Taiwan: The Crucial Hub of Global AI and Semiconductor Manufacturing
* 🇹🇼 "**90% of all the world's most advanced semiconductors or chips** are made right here in Taiwan," making it the **epicenter of artificial intelligence technology**.
* 💻 Taiwanese companies are responsible for manufacturing **90% of AI servers**, highlighting their **dominance in the AI ecosystem**.
* ⚠ However, this leadership is threatened by China's increasing assertiveness, as the **future of AI is closely linked to Taiwan's security**.
* 🏭 In the 1980s, Taiwan invested heavily in chip manufacturing technology, transforming its image from producing **cheap toys** to becoming a **high-tech powerhouse** with a prestigious pool of **STEM talent**.
* 🔗 The partnership between Taiwan Semiconductor Manufacturing Company (TSMC) and Nvidia has been pivotal, as TSMC has **manufactured Nvidia's chips since the beginning**, fueling growth for both companies.
* 💧 As AI servers evolve, companies like Asia Vital Components (ABC) are shifting from traditional cooling methods to **liquid cooling solutions**, which could rise to **30% of thermal spending** by 2028.
* 🌍 Since 2023, Taiwan's AI-related exports have **surpassed China's**, emphasizing its **growing significance** amidst the US-China tech war and the necessity for **diversified manufacturing operations abroad**.
* 📉 A potential conflict could severely disrupt the semiconductor supply chain, with estimates suggesting a **$10 trillion impact on global GDP**, underscoring the **importance of Taiwan in maintaining global technological stability**.

90% of all the world's most advanced semiconductors or chips are made right here in Taiwan. Taiwan is the most important spot in the world for artificial intelligence. All of Nvidia's AI chips, they're made right here on the island. So, no Taiwan, no AI. Taiwan is more than just a microchip factory; it's the beating heart of the wider AI ecosystem. Taiwanese companies are estimated to manufacture 90% of those AI servers today. But that dominance faces a looming threat. China sees Taiwan as part of its territory and has become increasingly assertive. And so, the future of AI has become intertwined with the security of Taiwan. Taiwan is really an engine that's driving AI, so it's important that Taiwan stay safe and stay what it is today if we want to keep AI moving forward. So, how can Taiwan's tech industry adapt to this precarious landscape, and what does it mean for AI? Back in the 70s, made-in Taiwan had this image of cheap toys or things that

break, but the government really wanted to push the island forward in a more high-tech way. It saw potential in chip manufacturing technology, investing heavily in the 1980s and building a top-tier talent pool. The STEM-related degrees are considered relatively prestigious in Taiwan, as opposed to other degrees. Then, with this big pool of engineers, there's also a lot of entrepreneurship. Taiwan became a global leader in efficient mass manufacturing, with factories both at home and in China, and out of that, Taiwan Semiconductor Manufacturing Company, or TSMC, was born. Today, its scale and cutting-edge technology are unrivaled, and its partner right from the beginning, Nvidia, whose specialized chips are at the forefront of artificial intelligence. Please welcome to the stage Nvidia founder and CEO Jensen W. TSMC manufactured Nvidia's chips from the start. That helped Nvidia grow, and obviously, that's helped TSMC grow. Taiwan is the home of our treasured partners, and our partnership has created the world's AI infrastructure, just as TSMC has been

there since the start. So too have the Taiwanese companies supplying vital hardware components. Once used to power PC servers, they've evolved to meet the demands of AI. So what goes into an AI server? Of course, you have to start with the chip. Then the chip goes onto a motherboard. There's a lot of power modules that are in there. You'll have what we now call liquid cooling systems. And then that goes into a server and a server rack. And tons of these rows and rows and rows of these will create our ChatGPTs of the future. Oh, I forgot to say, and Taiwan makes all of this. You want to do the shopping in Taiwan? You can shop pretty much every product, every component. For that reason, there's always some supplier can fulfill your demand. Asia Vital Components, or ABC, is one such company in the AI supply chain. It's worked with Nvidia for more than two decades, specializing in heat dissipation. It pivoted its R&D from traditional cooling solutions like fans to liquid cooling, which better suits the power-hungry and heat-generating AI.

servers. They're basically using water or coolants to use the pipe attached to a certain area like a component so they can conduct heat very efficiently out of that chip. Right now, 90% of thermal-related spending for data centers is on air cooling, with liquid cooling at just 10%. But as AI servers grow, liquid cooling could soar to 30% by 2028. An Nvidia NVL 72 server, which is the highest tech today, is about $3 to $4 million. A small component can hold back that AI server from getting shipped if you don't have it because you have to cool it, otherwise, it'll melt down. And so, a lot of these, as Jensen calls them, unsung hero companies that most of us have never heard of, these are the key companies in the AI revolution driven by an innovative spirit. ABC pursued Amazon as a customer and set up shop right in front of their office in Seattle. Their persistence paid off, and shortly after landing Amazon as a customer, Microsoft followed suit with its small size and efficient

high-speed rail network. Taiwan continues to the big tech companies. Most of the major tech companies doing AI Computing today: Google, Amazon, Microsoft. They all come to Taiwan because they can meet all of the partners really quickly and easily. Since 2023, Taiwan's AI-related exports have overtaken China's, a reflection not just of its growing importance in the world of artificial intelligence, but also the frosty relationship between Washington and Beijing. The US and China are engaged in almost a tech war, and so the US has banned from 2022 a lot of AI chips from getting shipped to China. That means a lot of these AI servers that would have been built in factories in China are being built either in Taiwan or in other manufacturing facilities that Taiwanese companies own. But with the majority of AI technology concentrated on this island, the ever-present risk from neighboring China concerns all those who depend on it for their Computing needs. China has carried out what it says is a mock air blockade of Taiwan, using Jets carrying live ammunition. They are determined, whichever

way possible. However, the long they have to wait to bring time Taiwan into the fold and be part of the People's Republic of China with so much at stake. TSMC and Dutch company ASML can now render their manufacturing plants inoperable should an attack occur. So, essentially, this is a kill switch. It underscores just how concerned they are about China getting hold of these most sophisticated machines. Although an invasion remains unlikely, a war could severely damage the global economy. Bloomberg Economics estimates it would knock out the semiconductor supply chain, delaying any advancements in AI, and have a $10 trillion impact on global GDP. That would dwarf what the war in Ukraine, COVID pandemic, and global financial crisis have each cost. To further mitigate this risk, Taiwanese companies have begun diversifying their manufacturing operations abroad to places like Mexico and Southeast Asia. TSMC has broken ground on new facilities in Arizona, Japan, and Germany. They realize that they can't only stay in Taiwan. Although Taiwan is still the lion's share of production, the US has also passed the

chips act offering incentives to bring semiconductor manufacturing back home. From a risk management perspective, pretty much all the clients would like to think about how to reduce the reliance, but the reality is that it takes time. And so, as we set sail into an AI-powered future, the technology and global stability remains anchored to Taiwan. Years later, maybe manufacturing can build up in other regions of the world, but that's going to take a long time. Replicating Taiwan in the short term is impossible. [Music]

Why Taiwan’s Security Matters for the Future of AI

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Taiwan's Crucial Role in AI and Semiconductor Manufacturing

Taiwan produces 90% of the world's advanced semiconductors and AI chips, making it the epicenter of the global AI ecosystem.

The island's tech industry has evolved from a reputation for cheap manufacturing to becoming a leader in high-tech chip production, with TSMC playing a pivotal role.

However, Taiwan's dominance in AI and semiconductor manufacturing is under threat from China's assertiveness, making the island's security crucial for the future of AI.

The Role of Taiwanese Companies in AI Server Hardware

Taiwanese companies have been crucial in supplying hardware components for AI servers, evolving from traditional PC power to meeting AI demands.

The AI server setup includes chips, motherboards, power modules, liquid cooling systems, and server racks, with Taiwan being the primary source for these components.

Asia Vital Components (ABC) has played a significant role in the AI supply chain, specializing in heat dissipation and pivoting to liquid cooling solutions, which are expected to increase in demand as AI servers grow.

Taiwan's Dominance in AI and Tech Manufacturing

Taiwan has become a key player in AI computing, attracting major tech companies like Google, Amazon, and Microsoft.

Since 2023, Taiwan's AI-related exports have surpassed China's, driven by the US-China tech war and chip export bans.

The concentration of AI technology in Taiwan raises concerns due to China's aggressive actions, leading Taiwanese companies to diversify their manufacturing operations abroad.

The Impact of the CHIPS Act on Semiconductor Manufacturing

The CHIPS Act is providing incentives to bring semiconductor manufacturing back to the U.

Clients are eager to reduce reliance on a single region, but building up manufacturing in other areas will take time.

In the short term, replicating Taiwan's semiconductor dominance is impossible, leaving global stability anchored to the island.