AMD founder Jerry Sanders opens the intellectual frame of this case in a single 1979 line, quoted on the case's cover page: "Semiconductor processing technology is today's crude oil.... The strength of all industrialized nations will largely depend on semiconductors by the end of this century." Session 4 treated critical minerals as a geopolitical lever because they sit at the base of every supply chain that matters. This session applies the identical logic one rung up the value chain: whoever controls the manufacturing chokepoint for a general-purpose technology — the chips inside every phone, missile, data center, and AI model — accumulates leverage disproportionate to that chokepoint's share of global GDP. Semiconductors generated $550 billion in global revenue in 2021, a rounding error next to the $100+ trillion world economy. But the case's entire argument is that dollar share understates strategic weight: a modern economy, a modern military, and a modern AI program simply do not function without leading-edge logic chips.
The case (Exhibit 10) breaks the value chain into four segments, each with a different geography, capital intensity, and defensibility — which is exactly why the chain fractures so cleanly along geopolitical lines:
The software that designs chips and the foundational research behind them. Three US firms — Synopsys, Cadence, and Mentor — hold a combined 70% of the design-software market, making this a quiet American chokepoint.
Concentrated: United StatesFirms like Nvidia, Qualcomm, AMD, and Apple design chips but own no factories — the "fabless" model TSMC's founding made viable. High value-add, low capital intensity, highly portable.
Concentrated: United StatesFabricating the physical chip. A cutting-edge fab cost ~$20 billion and took two years to build as of 2020. By 2020, TSMC alone held 50% of global foundry capacity and the "lion's share" of leading-edge capacity — the case's central chokepoint.
Concentrated: TaiwanLower-value, more labor-intensive finishing steps. Historically the segment Taiwan itself entered via — dispersed across Taiwan, mainland China, and Southeast Asia; far easier to relocate than a fab.
Dispersed: Taiwan / China / SE AsiaThis is also the session's bridge from Session 4: critical minerals (rare earths, copper, cobalt) are the geological input; semiconductors are the manufactured chokepoint one step downstream, and China's own hand in that upstream layer — 35% of known rare-earth reserves, over 60% of production, and more than 85% of global refining capacity, per the case — means Beijing holds a countervailing lever even as it plays catch-up in chips themselves.
The case is built around one man's improbable bet and one company's improbable dominance. Morris Chang left a 25-year career at Texas Instruments in 1983 feeling "put out to pasture," only to be summoned back to Taiwan in 1985 by ROC Premier Sun Yun-suan to run the Industrial Technology Research Institute (ITRI). Chang's insight was structural: fab costs were doubling roughly every five years, reaching $250 million by 1985, while a small cohort of "fabless" design firms was emerging with no capacity of its own. In 1987 he spun ITRI's Electronics Research and Service Organization into a "pure-play" foundry — Taiwan Semiconductor Manufacturing Company (TSMC) — that would manufacture chips designed by others rather than compete in design or marketing. Over the next three decades TSMC became the world's most advanced semiconductor manufacturer, contradicting AMD CEO Jerry Sanders's 1992 boast that "real men have fabs" so thoroughly that AMD itself divested its foundries in 2009. By 2020, TSMC held 50% of global foundry capacity and effectively the entire market for the most advanced process nodes.
That concentration is now a geopolitical fact both superpowers are racing to undo. Washington's 2022 CHIPS and Science Act authorized $278 billion in federal funding, more than $52 billion of it for domestic semiconductor manufacturing; Beijing's National IC Plan (2014) and Made in China 2025 initiative set a target of 70% semiconductor self-sufficiency within a decade, backed by a $150 billion state-investment target — forty times China's previous investment in the industry. Yet as of the case's writing, Chinese-owned firms still produced only 5.9% of all semiconductors used in China, and Exhibit 14's count of firms worldwide capable of manufacturing below 10 nanometers shows almost none headquartered in China. Both superpowers, in other words, are spending unprecedented sums to reduce their dependence on an island neither fully controls — and that effort is precisely what has made Taiwan's semiconductor industry a live strategic asset rather than a purely commercial one.
That asset has a name in the case: the "silicon shield" — the idea, voiced by President Tsai Ing-wen and TSMC chairman Mark Liu alike, that Taiwan's centrality to the global chip supply makes an invasion too costly for China, and for the world, to tolerate. Liu told 60 Minutes that "the world all needs Taiwan's high-tech industry" and "will not let war happen in this region." The case opens in autumn 2021 with Chinese warplane incursions at record levels and Taiwan's defense minister warning China could mount an invasion "at the lowest possible cost" by 2025, and closes in winter 2024 with newly elected President Lai Ching-te repeating the shield's logic on the world stage. The case's central, unresolved tension is whether that shield still holds — or whether the very policies (CHIPS, Made in China 2025) both powers are pursuing to reduce their Taiwan dependence are quietly dismantling the deterrent they claim to fear losing.
Session 4's Zambia case showed a smaller, weaker state navigating great-power competition over a resource it could not fully control. Taiwan is the same structural position at a vastly higher level of stakes: a 23.5-million-person democracy whose formal statehood is contested by its largest trading partner, sitting on top of the single most consequential manufacturing chokepoint in the modern economy. Where Zambia had copper and cobalt as bargaining chips, Taiwan has TSMC — and where Zambia's leverage was largely passive (its minerals are in the ground regardless of policy), Taiwan's leverage is the product of forty years of deliberate, state-orchestrated industrial policy that this session asks you to evaluate directly.
The case is, among other things, a natural experiment in industrial policy — the same technology, pursued by three governments with radically different tools, time horizons, and starting conditions.
The case frames this as its central open question, and it deserves to be argued both ways before landing on a position.
The silicon shield is not a myth — TSMC's centrality genuinely raises the cost of conflict for China, for the US, and for every economy dependent on advanced chips, and that cost is real leverage Taiwan should not surrender lightly. But the shield's logic contains the seed of its own erosion: because Taiwan's concentration is precisely what threatens both superpowers, both are now rationally investing to reduce their exposure to it. Every CHIPS-funded fab in Arizona and Ohio, every additional percentage point SMIC claws toward self-sufficiency, is a small withdrawal from the account the shield draws on. The shield does not disappear overnight — Exhibit 14's chipmaker count shows the leading edge will remain Taiwan-and-Korea-concentrated for years — but its deterrent value is a depreciating asset, not a permanent guarantee.
The case gives Morris Chang — the architect of the most globalized, most specialized supply chain in existence — the closing word on this question, and it is a stark one: "globalization is almost dead and free trade is almost dead." I largely agree, with one important qualifier: what the evidence supports is not deglobalization across the whole economy, but a deliberate bifurcation of the technology stack specifically, into US-aligned and China-aligned blocs.
The case also supplies real evidence that chokepoint controls leak. Despite the 2022 controls, Chinese imports of semiconductors and manufacturing equipment reached near-record levels in 2023; Nvidia simply redesigned its most advanced chips to fall just below the regulatory threshold; and the Russia precedent is instructive — Russian semiconductor imports fell more than 50% in the first half of 2022 after sanctions, only to rebound and exceed 2021 levels by year-end, mostly rerouted through China and Hong Kong. BCG's own estimate that $50 billion in CHIPS subsidies shifts US global production share only from 12% to 14% suggests the "reshoring" story is more a hedging exercise than a genuine unwind of the existing network. I take this seriously — full deglobalization (a total severing of the US-China tech relationship) looks unlikely — but partial, deliberate bifurcation at the leading edge is already happening and accelerating, even if trade in mature-node chips and everything else continues largely as before.
Every additional geography building a $20B, two-year fab raises the industry's cost base without adding net global capacity — TSMC's Arizona build alone cost roughly 4x the Taiwan equivalent.
"Trusted" supply chains (Chip 4) sacrifice the specialization gains of letting Taiwan do what it does best, cheaper, for everyone — trading efficiency for redundancy on both sides of the split.
Cutting China off from EUV and design software slows its innovation curve (SMIC remains "years behind" without EUV) — but US firms also lose a China market that historically supplied 20–30% of their revenue, a mutual drag on R&D funding.
The class will quickly agree that TSMC's dominance is real, structurally hard to replicate on a subsidy timeline, and now central to both US and Chinese strategy. Don't spend airtime re-litigating that — the more interesting question is what each side does about it, not whether it's true.
Challenge the room: is the silicon shield's own logic self-defeating? If Taiwan's centrality is the reason Washington and Beijing are spending hundreds of billions of dollars building around it, then talking up the shield as leverage may be accelerating its own expiration — every dollar of CHIPS or Made in China 2025 spending is a small bet against the shield's premise. The shield may be most valuable in the years right now, while it's being actively dismantled by the powers who fear it most.
Think like a product operator, not a political scientist: TSMC's foundry model is a single point of failure the entire global tech industry rationally chose to accept for thirty years, because splitting fabless design (Nvidia, Apple, Qualcomm) from foundry (TSMC) let every fabless firm skip $20B capex and two-year build cycles. That's the same chokepoint economics I see one layer up in AI infrastructure today — nearly every AI product, including work I've done in African tech and edtech, ultimately depends on a small number of GPU and cloud chokepoints. The concentration that makes the industry efficient is exactly what makes it fragile precisely when geopolitics compounds it.
If the tech world splits into a US-aligned and a China-aligned compute stack, African and other emerging-market tech companies don't get to build a third stack — they inherit whichever bloc's chips, cloud, and AI models are cheapest and most accessible in their market, and increasingly that choice is not theirs to make. This is directly relevant to how affordable-compute-dependent African products source infrastructure, and it will only get more consequential as export controls expand from semiconductors into AI model access itself — a preview of Session 7's Nvidia case.
Singapore's pivot toward biomedical sciences and a "Global-Asia" tech hub (Biopolis, A*STAR) is a smaller-scale version of the same state-directed tech-industrial playbook that built TSMC — a resource-poor state manufacturing competitiveness in a strategic technology sector through deliberate, patient institution-building rather than market forces alone.
Zambia's copper and cobalt sit one layer further upstream in the exact same supply chain this case sits atop — the rare earths, copper, and critical minerals debate is the raw-material precursor to the chip fabrication chokepoint this session examines, and China's leverage in both layers (mineral supply and, increasingly, mature-node chips) is not a coincidence.
This session's export-control theme continues directly into Session 7's Nvidia case — the same October 2022 controls that cut Chinese AI firms off from Nvidia GPUs (95% of China's AI chip market) become the central strategic dilemma when examined from a single company's perspective rather than a national-policy one.