Which Country Makes the Most Advanced Microchips?

A new type of 300 millimeter wafer with semiconductor chips and finished microchips of the semiconductor German manufacturer Bosch is pictured in Dresden, Germany, on May 31, 2021. Jens Schlueter/AFP via Getty Images

Microchips, also known as semiconductors, have become an essential part of everyday technology, and are utilized in almost every electronic device, from smartphones to computers and medical equipment.

In 2020, more than 932 billion chips were manufactured around the world, while in 2021, roughly 1.15 trillion semiconductor units were shipped across the globe.

However, increased demand for microchips, shortages, and supply-chain issues—kickstarted by the COVID-19 pandemic—have led to a global chip shortage that has severely affected manufacturers.

The auto industry was dealt a particularly strong blow, with some carmakers forced to cut production and in some cases reduce safety features on vehicles.

As a result of the ongoing shortage, most analysts expect the supply of semiconductors to remain constrained well into 2023, although some, including German automaker Volkswagen, believe it could last longer.

Who Makes the Most Advanced Microchips in the World?

The vast majority of the world’s most advanced microchips are made by the Taiwan Semiconductor Manufacturing Company (TSMC), which accounts for about 90 percent of advanced chips produced worldwide and serves as an important supplier to the United States and other Western nations.

TSMC supplies a string of large firms, including Apple, Intel, Qualcomm, AMD, Nvidia, Broadcom, and Marvell.

Samsung is not far behind TSMC, and it recently announced plans to more than triple its advanced chips production capacity by 2027 in an effort to meet strong demand. Those chips would be used for things like high-performance computing and artificial intelligence.

Is Taiwan the Biggest Manufacturer of Microchips?

Taiwan is by far the world’s leader in microchip production, largely due to its high investment in research and development (R&D) in the semiconductor industry and its ability to fulfill strong global demand.

The self-ruled island has also granted large tax breaks as an incentive for technology companies that invest in their R&D as well as those that export high-tech products, such as chipmaking machines and the raw materials that are needed to make the chips, further bolstering its position as the world leader in chip production.

In addition, Taiwan has significant manufacturing capabilities and an exhaustive industrial supply chain. That means that even countries like China, which also produces some semiconductors, depend heavily on advanced chips from Taiwan. 

Are Any Microchips Made in the US?

America invented the semiconductor, but today, just 12 percent of semiconductors are manufactured in the United States and the country instead relies on East Asia for 75 percent of global production.

As a result, the United States is facing a chronic shortage of chips that the Department of Commerce says poses economic and national security risks to the nation.

A government survey of more than 150 companies that produce and buy chips in January this year found that urgent action is needed to resolve the crisis as soon as possible.

Earlier this year, U.S. lawmakers passed legislation that would provide $52 billion in funding for semiconductor chips, including $2 billion set aside for chips used by automakers.

The legislation, known as the Chips and Science Act, aims to boost the country’s ability to compete with Chinese technology, while simultaneously reducing its reliance on manufacturers in Taiwan, as well as South Korea.

That being said, the United States does produce its own microchips, with Intel, Nvidia, Texas Instruments, Micron Technology, and Analog Devices leading the way in domestic-based chip manufacturing.

In addition, TSMC has promised to open new chip-making factories in the United States.

What Percentage of the World’s Microchips Are Made in Taiwan?

Taiwan makes 65 percent of the world’s semiconductors, while the United States produces approximately 10 percent and China produces just over 5 percent, according to market analysts.

Also, the self-ruled island makes nearly 90 percent of the world’s most advanced chips, which are used to power artificial intelligence used in things like supercomputers and self-driving cars.

Why Is Taiwan Important to the US?

Given that Taiwan dominates in the global manufacturing of semiconductors, and is a key provider to the United States, it is of critical importance.

However, tensions between Taiwan and China, which views the former as part of its territory, have steadily increased and fears are rife that Beijing may attempt to invade the nation, meaning microchip factories could potentially fall under the control of China.

Experts widely believe that in such a scenario, Beijing would likely block exports of chips to the United States and its allies, prompting a global shortage of essential chips and significantly affecting critical technology.

It could also hamper national security while further bolstering the China’s military capabilities, which poses another risk to the United States and its allies.

What Are the Most Advanced Chips in the World Used For?

Advanced semiconductor chips are used in military weapons systems, such as hypersonic missiles, and in other technology that is crucial for national security.

As a result, a decline in U.S. capabilities regarding chip manufacturing and its dependence on other nations for them puts the country’s ability to defend itself at risk.