How Trump and Taiwan can affect your phone

Elon Musk's $118 million support for Trump highlights concerns over Taiwan's chip industry, crucial for global tech amidst geopolitical tensions.

Make America Great Again (MAGA) makes for a great slogan. Coupled with the $118 million Elon Musk alone invested, it powered Donald Trump to a historic victory. But it won’t be too long before endorphins, the feel-good hormones election victories release, settle down. After that, there will be tough decisions to take. Here’s one: How does America deal with the semiconductor (or chips) business headquartered in Taiwan, for instance. The outcomes will reverberate globally.

How Trump and Taiwan can affect your phone

Taiwan, a small island with an outsized influence, sits at the heart of the chips industry, so much so that it has earned the nickname ‘Silicon Island’. And its impact boils down to one major player: Taiwan Semiconductor Manufacturing Company (TSMC). This company alone produces over half of the world’s chips, essential for everything from smartphones to high-powered AI systems. Businesses as diverse as automobiles and telecommunications can’t operate without it. Without Taiwan, our tech-dependent world can come to a standstill.

For global chip giants like NVIDIA and ARM, Taiwan is indispensable. These companies, don’t manufacture their own chips; they focus on design. But neither company has the in-house capability to produce these chips at scale or sophistication— that’s where TSMC comes in. The chips designed by NVIDIA, ARM, and other tech leaders world over come to life at Taiwan’s cutting-edge foundries. This makes Taiwan’s expertise essential to their business models and, by extension, to modern technology itself.

When the euphoria over MAGA dies down, this is where the problems will begin. Alok Sama, author of Money Trap, says company such as ARM is an interesting one. “It doesn’t manufacture chips. It has created the Intellectual Property to create chips. And it makes money by licensing it to companies like Qualcomm or Apple or TSMC.”

“The other part of ARM’s secret sauce has been energy efficiency,” he adds. This is hugely significant because energy efficiency is absolutely crucial in the business. Because the designs are energy efficient, chips made by ARM have become the dominant design used in smartphones. One of the things that irks people is their battery dying out and the technology has to be just right, so smartphones can last longer and longer. It’s a race that ARM is leading right now.”

It is at work to find its way into more complex things such as Autonomous Cars that need millions of chips. Then Apple’s next generation of phones interacts with AI in ways we haven’t experienced before. These too need more efficient chips. All of this means ARM pushes itself harder. In much the same way, NVIDIA has its own competencies and is at work to expand its dominance.

This takes us back to where we started from. Everyone outsources the manufacturing of their chips to TSMC. “And that’s a little bit scary, because we can all agree when it comes to geopolitical volatility,” points out Sama. His concern is rooted in the present because there is no visibility if China may push to take over Taiwan. This is a concern Navkendar Singh, analyst at research firm IDC (Asia Pacific) shares.

His concerns are exacerbated about what way will Trump push American foreign policy. If he goes down the path of his rhetoric, it is inevitable China clamps down on Taiwan and cuts off the world’s access to the technology. But it is also possible that when all the grandstanding is done, Elon Musk will move in. Musk has skin in the game with his electric car Tesla that needs batteries and chips.

“Musk wouldn’t like to upset China. It’s a battery source, you see,” says Singh. The best EV batteries can come from China and the chips emerge out of Taiwan. When looked at from that perspective, it wasn’t ideology, but business interest that drove him to invest $118 million to back Trump. Musk will want to see a significant Returns on Investments (ROI). So, his backing Trump wasn’t personal. Just business!