What makes Taiwan so important in microchip production?
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There are basically factories in only 3 countries that can manufacture the highest end semiconductors in volume – Taiwan, S Korea and the USA. In fact there are only 3 companies in the world that can do this TSMC (Taiwan), Samsung (Korea) and Intel (USA)
Of the 3 companies, TSMC has the largest volume and specifically designs their factories to build chips for other chip design companies. So companies like AMD, NVIDIA etc etc are pretty much 100% dependent on TSMC Taiwan for the high end semiconductors.
That just happens to be how the industry developed since the 1980s. These factories require billions of dollars of investment and decades of ongoing process development and knowhow in order to run these factories. Therefore this capability is not easily developed by other companies.
Right now: the decades of investment, development and experience.
There’s nothing inherent about Taiwan that was destined to make it that way, but it was historically the place where labour was cheap and companies outsourced their production to.
And one thing about mass production thing is that once someone gets good at it, it’s difficult to catch up with them. There’s job opportunities, which encourage people to study towards it. There’s the institutional experience of seasoned professionals that only comes with having done the job for decades. Without those, you have a limited labor pool and more inefficiencies.
So Taiwan offers either high quality or lower prices, sometimes both. And that attracts customers. That generates investment. That spurs progress. It’s a positive feedback loop.
History. TSMC was the first successful semiconductor “foundry” (a company that makes chips but doesn’t design them). They’ve built upon that success very well and are now the crown jewel of semiconductor foundries. Only a few manufacturers (most notably Intel and Samsung) can do what they can do in terms of both technology and high volume manufacturing.
Apple use to have only one supplier, Samsung making everything for them. Chips, screen, memory, storage etc. Samsung decided to enter the mobile phone market. Both started fighting. To divest itself Apple poured a ton of money into at the time a relatively unknown chip company called TSMC. Notice how Apple was able to launch multiple products during the pandemic. As they say, the rest is history.
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