TSMC’s pre-eminence in the field was already becoming a point of tension in the long-standing conflict between Taipei and Beijing.

A supply-chain disruption to one of the world’s most essential technological products is quickly becoming the flashpoint for global tensions. The fallout from the Covid-19 pandemic has not just hit international markets in unprecedented magnitudes but has also affected market dynamics in almost unprecedented ways.

Originating in China, the novel coronavirus hit East Asia first. This had a massive impact on business operations in the region, from manufacturing to shipping. But by far the most important consequence of this phenomenon, and the one the world continues to reel from today, was the disruption it inflicted on the global supply of semiconductor chips.

For months now, the world has slowly been inching toward the most severe shortage of these vital devices ever experienced. Companies across industries, from mobile-phone producers to automobile manufacturers, are speaking out on the danger this trend is posing to global production.

While many fields of manufacturing were able to recover – some relatively quickly – from the shock to the system triggered by lockdowns and travel restrictions, chip production has not seen this same comeback.

Initially, manufacturers of semiconductors assumed that demand would fall drastically as global production across the board fell. However, the exact opposite actually took place. Demand for semiconductor chips boomed as cars and medical devices continued their technological advance and an increasing number of products began requiring these chips.

This miscalculation of the market has been exacerbated by the fact that chip production is, surprisingly, not a particularly widespread business. Currently, there are only three major chip producers in the world: Intel in the US, Samsung in South Korea, and TSMC in Taiwan. These companies are yet to respond to the ever-increasing demand for their product.

Already the shortage has had a ripple effect throughout the automotive industry. In the US, manufacturers have significantly cut back production because of a lack of chips for their increasingly high-tech cars.

US chip ban has had many undesired punitive effects. Image: Twitter

Several months ago, American semiconductor manufacturers began receiving frantic phone calls from auto executives at Ford, Volkswagen, BMW, Daimler-Benz, Fiat Chrysler and General Motors – every one begging them to ramp up production.

Recent news reports revealed that lack of conductors has forced GM and Ford to slash production in three US states as well as in Canada and Mexico, presenting a huge threat to these companies’ employees as well as those of their suppliers.

The crisis has already begun to extend outside mere market parameters. The repercussions to US business have attracted the attention of a host of policymakers, including US President Joe Biden’s office.