Min-Yen Chiang, Deputy Director of the Economic Security Research at DSET, recently contributed a feature article to the Czech think tank Association for International Affairs (AMO), analyzing Taiwan’s irreplaceable role in global semiconductor supply chains and the escalating threat posed by China’s strategic dominance in mature-node chip manufacturing.
In his article, Chiang highlights how the Biden administration’s “small yard, high fence” export control strategy—targeting critical semiconductor technologies—has already begun to constrain China’s progress in advanced nodes. Core measures include restrictions on semiconductor manufacturing equipment, especially EUV and DUV lithography systems, as well as limitations on U.S. persons involved in their development. While these tools are manufactured by firms in the Netherlands and Japan, they incorporate U.S.-origin technology and thus fall under the Foreign Direct Product Rule (FDPR). The U.S. has also engaged diplomatically to encourage multilateral export restrictions from allied nations.
According to TrendForce, China accounted for just 6% of global advanced semiconductor manufacturing capacity in 2023, a figure projected to reach only 8% by 2027. Despite state-backed efforts, Chinese chipmakers like SMICcontinue to struggle. Although SMIC has reportedly achieved 7nm production and is aiming for 5nm, its yields remain at just one-third of TSMC’s, resulting in significantly higher production costs. These limitations stem from China’s reliance on DUV multiple patterning in the absence of EUV tools—an inefficient workaround that introduces higher defect rates and yield losses.
By contrast, TSMC is on track to begin 2nm production by 2025, with 1.6/1.4nm nodes and backside power delivery under development. Overall, China lags Taiwan by two to three generations in advanced semiconductor process technologies.
However, Chiang warns that China’s dominance in mature-node chips presents a more immediate and underappreciated risk. Unlike advanced nodes, mature-node technologies are not easily constrained by U.S.-led export controls, as they rely less on U.S. technology and are deeply embedded in China’s legacy industrial base. Yet these chips play a foundational role in modern digital infrastructure—powering everything from cybersecurity and data privacy to critical infrastructure and national defense.
Despite not being labeled as “high-tech,” mature-node chips account for over 95% of global semiconductor applications and form the backbone of 99.5% of U.S. defense systems.
Chiang outlines China’s multi-pronged strategy, which extends well beyond subsidies. On the demand side, China promotes downstream industries—such as electric vehicles, telecom, renewables, and displays—that drive domestic consumption of mature-node chips. On the supply side, China employs a Pseudo-IDM Model, where different stages of the chipmaking process are delegated to state-backed “national champion” firms. Supported by central and local government subsidies, financing, infrastructure, and procurement incentives, these firms are systematically building vertically integrated ecosystems designed to flood the global market with low-cost semiconductors.
This model has already reshaped global competition. By 2024, China had captured 34% of the global mature-node market, just behind Taiwan’s 43%. Projections for 2027 show China rising to 47%, Taiwan falling to 36%, and the U.S. holding steady at just 4%. Chiang warns that this is not merely commercial competition, but a state-directed strategic encirclement that could undermine the supply chain resilience of all democratic countries.
Full analysis is published in DSET’s latest English-language report:
👉 The Great Siege: How China’s Mature Node Strategy Threatens Global Semiconductor Security
In response, Chiang advocates for a comprehensive and multilateral strategy. While advanced-node export controls have shown measurable success, democratic allies must now focus on chokepoints within mature-node supply chains—such as photoresists, laser light sources, and other upstream inputs. The U.S. should also lead in developing a transparency mechanism to track dependencies on Chinese chips and initiate phased removal plans for Chinese components from sensitive sectors, such as surveillance systems and defense platforms.
Looking ahead, Chiang views the U.S. and EU’s expanded semiconductor initiatives not as threats to Taiwan, but as a strategic opportunity. By investing abroad, Taiwanese firms can enhance global brand recognition, gain proximity to end-user markets, attract top global talent, and refine management and innovation practices. The U.S. and EU, as major tech markets and talent hubs, offer crucial platforms for Taiwan’s next stage of development.
Chiang concludes that while the U.S. and EU aim to expand domestic production, Taiwan remains an indispensable partner in the global chip supply chain. Without Taiwan’s efficiency and innovation, Western economies risk deeper reliance on China. Deepening ties with Taiwan is not only economically logical, but also strategically necessary to deter aggression and preserve stability in the Indo-Pacific and beyond.
