Geopolitical Tensions between China and the US: Implications for Taiwan's Semiconductor Industry (2020-2025)

Abstract

Applying neo-mercantilist framework, this paper investigates the geo-political tensions between United States and China regarding Taiwan’s semiconductor industry (2020-2025). With growing US-China technological competition between US and China, Taiwan's dominance in the world semi-conductor industry, specifically from TSMC’s control 90% of cutting-edge chip production, has transformed from economic benefit into strategic liability. This study examines how both superpowers use export controls, protectionist policies and strategic instruments to protect Taiwan’s semiconductor capabilities while denying them to rivals using neo-mercantilist analysis. The research shows that Taiwan faces a "pincer effect" from dual pressures, forcing Taiwan to respond by balancing technological cooperation with both powers while maintaining its strategic autonomy. Key findings show that neo-mercantilist strategies have escalated technological nationalism, transforming economic interdependence into a tool for geo-political rivalry. The research advances our knowledge of how strategically significant but small states negotiate great power rivalry in the digital era, by providing Taiwan’s sustained technological leadership while reducing existential threats.