Inside The 'Iron Triangle' Looking To Beat China On Chips

Power has always had a geometric flair—it’s arranged itself in triangles.

In the 18th century, the Opium Triangle bound together the fortunes of imperial Britain, colonial India, and Qing China in a narcotic web that altered the arc of global trade and dominion.

Today, that triangle has been redrawn, with silicon as the new opium.

Enter the Semiconductor Iron Triangle—a tech alliance connecting Taiwan, Japan, and the United States—built to defend the world’s most vital resource: semiconductors.

Taiwan: At the Apex of Innovation

At the apex of this triangle lies Taiwan, the indisputable epicenter of global semiconductor manufacturing.

The island produces 60 per cent of the world’s semiconductors and a staggering 90 per cent of the world’s most advanced nodes. This technological supremacy owes itself in no small measure to a single colossus: TSMC, or Taiwan Semiconductor Manufacturing Company.

There is a popular idea in Taiwan that the island’s dominance in chipmaking confers a “silicon shield”—that is, a deterrent against war since any wartime damage to Taiwan’s fabs could create supply shocks that would hurt China’s economy as much as anyone else’s.

China would not dare to attack Taiwan and risk destroying such a crucial source of chips, and the United States would have to intervene in any conflict across the Taiwan Strait to defend Taiwan and protect its access to chips—regardless of any broader diplomatic or political calculations, notes a report from Hoover Institution.

But as much as semiconductors protect, they also provoke.

Beijing’s long-standing objective of reunification, peaceful or otherwise, has cast a looming shadow over the chip supply lines that girdle the globe. For all the talk of deterrence, the degree to which Beijing perceives and respects a “silicon shield” over Taiwan is debatable, and perhaps even dubious.

Amid this uncertainty, Taiwan has refused to stand still. Rather than relying solely on its role as the chip world's indispensable node, Taipei is hedging its bets—deepening ties with allies while pushing outward through policies like the New Southbound initiative, which expands economic partnerships across the Indo-Pacific.

In the 1980s, Japan was king of the chip world—commanding half the global chip market, home to six of the ten largest semiconductor firms. As the years turned, Japan's crown quietly slipped—eroded not by calamity, but by the subtle, relentless tide of American ingenuity, South Korean momentum, and Taiwan’s meteoric rise.

By 2019, the island nation’s once-dominant presence in chipmaking had receded to a mere 10 percent of global output, a number cited with quiet dismay in the Ministry of Economy, Trade and Industry’s own reports.

Shaken by pandemic-fueled supply chain breakdowns and the geopolitical tremors of the U.S.-China tech war, Tokyo has begun to rediscover a sense of urgency, pushing the government to make concerted push to redevelop the sector.

Japan’s bet is twofold: lure the world’s most advanced foundries back onto Japanese soil, while simultaneously fortifying homegrown champions. To that end, the Japanese government has unveiled a sweeping plan: more than 10 trillion yen will be mobilized by fiscal 2030 to support the twin pillars of semiconductors and artificial intelligence.

As part of this, TSMC has begun mass production at its first fabrication facility in Japan's Kumamoto prefecture. The plant, a joint venture with Sony and Denso, will produce 12nm to 28nm chips critical for automotive and industrial use.

TSMC has announced plans to break ground on a second fab in Kumamoto in early 2025, with operations set to begin by the end of 2027. Together, the two factories are expected to represent a combined investment of nearly 2.96 trillion yen, or $18.8 billion, and will boast a production capacity exceeding 1,00,000 300-millimeter wafers per month.

The last piece of Tokyo's plan to revive its former status as a chip powerhouse is Rapidus, a Tokyo-based startup.

Founded in 2022 with a capital of 7.3 billion yen from a consortium of eight Japanese heavyweights, including Toyota, Kioxia, and NTT, Rapidus plans to mass-produce 2-nanometer chips by 2027 at a new facility in Hokkaido.

No Japanese company has ever achieved this level of chip sophistication. In fact, only three players in the world—TSMC, Samsung, and Intel—are currently on track to manufacture 2nm chips, all aiming to do so by 2025.

The scope of the challenge is staggering. The project could cost as much as 5 trillion yen, and the Japanese government has already committed 330 billion yen to kickstart the effort.

Analysts remain skeptical though. Some quietly predict failure. Others question whether Rapidus can catch up to industry titans operating at the bleeding edge of Moore’s Law. But in many ways, that’s beside the point.

And this audacity is not without foundation. Even in its years of relative dormancy, Japan has remained indispensable to the global chip supply chain.

Companies like Tokyo Electron, Shin-Etsu Chemical, and SUMCO hold commanding positions in markets that matter deeply—producing 53 percent of the world’s silicon wafers, 50 per cent of photoresists, and much of the critical equipment used in chipmaking worldwide.

In the geometry of the semiconductor “Iron Triangle,” Japan, with its technical prowess and policy resolve, is positioning itself as the triangle’s reliable engineering base.

United States: The Arsenal of Incentives

The final vertex of the triangle - the United States - brings money, market power, and military muscle.

With the passage of the CHIPS and Science Act in 2022, Washington unleashed a torrent of funding: $52.7 billion in direct subsidies, plus over $200 billion in tax incentives and R&D support. The goal is clear: claw back America’s lost manufacturing share, which shrank from 37 per cent in 1990 to just 12 per cent today.

U.S. is now home to TSMC's first cutting-edge plant overseas, which went into production in Arizona late last year, with some 3,000 employees on site.

The chip titan plans to start operations at the second Arizona plant, for 3-nanometer chips, by 2028, and the third one, for 2-nm and better chips, before the end of the decade. Intel, Samsung, and Micron are also expanding operations across Texas, Ohio, and New York.

But America’s biggest challenge isn’t funding—it’s execution.

Permitting delays, talent shortages, and a lack of industrial coordination mean that despite its financial firepower, the U.S. relies heavily on Taiwan’s precision, Japan’s materials, and both nations’ experience.

Why a Triangle—and Why Now?

At its heart, the so-called Semiconductor Iron Triangle is a calculated countermeasure to China’s unrelenting march toward semiconductor self-sufficiency.

While U.S. export controls have curbed China's advances in cutting-edge chips, the broader picture is far more complex. These restrictions have not brought China’s chip industry to its knees.

Instead, they have accelerated the country's development of the so-called “mature nodes”—older, less advanced chips that still power a vast swath of the global economy, from automobiles and appliances to telecom base stations and industrial machines.

And the numbers tell a sobering tale.

By 2025, China is projected to command nearly 28 per cent of the world’s mature chip production capacity, according to research firm IDC. SEMI, the global industry association for electronics manufacturing, forecasts that this figure could surge to a formidable 39 per cent by 2027.

Beijing’s efforts are anything but ad hoc. In 2024, China unveiled the third phase of its mammoth China Integrated Circuit Industry Investment Fund—known simply as the “Big Fund.”

Designed to supercharge domestic chip production, especially in materials and equipment, this latest installment adds billions more to an already colossal war chest. When combined with the earlier rounds launched in 2014 and 2019, the fund’s total reaches approximately 688 billion yuan—around $95 billion—making it one of the largest state-led semiconductor financing efforts in the world.

Layered atop this financial blitz is China’s 14th Five-Year Plan, released in 2021, which prioritized upgrades in legacy chipmaking as well as emerging materials such as silicon carbide (SiC) and gallium nitride (GaN)—key enablers of high-efficiency power devices.

Such efforts are paying off, though not as quickly as Beijing might hope. According to data from TechInsights, China's domestic chip production rose from about 15 per cent of its consumption before the pandemic to over 20 per cent by 2024. Even if the current growth rate of 12.3 percent annually continues, homegrown chips will make up just 26 per cent of the country’s market by 2028—still far short of full self-reliance, but well ahead of where it was just five years ago.

Perhaps more telling is how close Chinese technology is inching toward the cutting edge, despite the export bans.

An analysis of China's current semiconductor technology revealed that the country is approaching a level three years behind industry leader TSMC, showing the limitations of U.S. efforts to stem Beijing's development of cutting-edge chips.

According to Tokyo-based TechanaLye, a semiconductor research company that disassembles 100 electronic devices a year, TSMC's Kirin 9000 chip, and Chinese contract chipmaker Semiconductor Manufacturing International Corp. (SMIC) Kirin 9010 chip were found to be nearly comparable in performance.

It is this progress—unexpected, relentless, and increasingly real—that has set off alarm bells across Washington, Tokyo, and Taipei.

Charles Shi, a chip analyst at Needham & Co., has warned of an impending “China shock” for the semiconductor industry, likening the potential disruption to the seismic effect China had on the solar panel sector. There, an avalanche of inexpensive, state-backed Chinese production devastated Western firms and reshaped the global solar landscape in under a decade.

The risk now is that China’s dominance in mature chips and niche semiconductor substrates could create a similar market rupture—one where prices collapse and supply chains tilt dramatically eastward.

This is the shadow looming over the Iron Triangle.

And while the Triangle holds the advantage in the upper echelons of semiconductor production, it remains vulnerable to a bottom-up disruption—one driven by volume rather than virtuosity.

The United States and its allies thus have finally decided to use their strengths in the semiconductor supply chain—and China’s current reliance on them—as a form of economic deterrence against Beijing's aggression and intimidation in achieving its geopolitical goals

China’s View: A Cage Disguised as a Club

In China, state-run media see the Iron Triangle as a geopolitical containment play, with Japan cast as a subservient actor trading sovereignty for strategic shelter.

Editorials in the Global Times, the Chinese Communist Party’s fiery mouthpiece, paint a scornful picture. “Even as the tariff stick is already pounding on Japan's doorstep, some Japanese politicians still assume a submissive posture, signaling, "I'm willing to be your enforcer - just spare me".

What’s more troubling, Chinese commentators say, is the mindset that underpins this behavior

The so-called "semiconductor iron triangle" boils down to one thing: Japan is making a plea to be kept in the game by the US, with technology becoming a bargaining chip and sovereignty the price. Some Japanese politicians firmly believe that to earn Washington's trust, they must demonstrate loyalty in the campaign to contain China.

"This 'iron triangle' is nothing more than political flattery toward the US," argues Lü Chao, a researcher at the Liaoning Academy of Social Sciences, speaking to the Global Times. It hinges on whether one remains useful to Washington - hardly an 'iron' bond at all.

"This is a failed policy," Lü added. "The persistence of some politicians in pushing this narrative reveals that their motivations are far from economically rational. It's a naked act of political opportunism."

To prove the point, Chinese commentators frequently invoke the case of TSMC. The Taiwanese chip titan’s multibillion-dollar investment in Arizona was once hailed as a breakthrough in U.S.-Taiwan ties.

But the honeymoon was short-lived: it wasn’t long before Washington floated the idea of 100 per cent tariffs to press for even greater concessions. “Even TSMC learned the hard way—compliance does not equal immunity,” said one analyst.

What next

Leadership and self-sufficiency in semiconductors are political goals without clear benchmarks. Yet Beijing's determination to pursue them must not be underestimated, and it will bring to bear all the tools at its disposal, including diplomacy, IP theft, and espionage.

Just a few years ago, the semiconductor industry was a byword for globalization’s excesses—hyper-optimized, ultra-lean, and dangerously concentrated. The COVID-19 pandemic, US-China decoupling, and rising tensions in the Taiwan Strait exposed its fragility.

The win-win promise of globalization - which encouraged governments to embrace cross-national supply chains that provide quality, low prices, and fast delivery without fully considering possible geopolitical risks - is now ending.

In response, the United States has begun forging what some call a new era of strategic techno-diplomacy. No longer content with laissez-faire leadership, Washington is coordinating tightly with allies to outflank China’s ascent.

The arsenal includes an alphabet soup of geopolitical compacts: the Quad with Japan, India, and Australia; AUKUS with the UK and Australia; the EU-US Trade and Technology Council; the G7’s “Build Back Better World (B3W)” initiative; and the Clean Network program to purge Chinese vendors like Huawei from critical infrastructure.

History shows that no tech blockade has ever successfully contained innovation. On the contrary, it often accelerates self-sufficiency and breakthroughs.

If the United States is to retain and strengthen its global leadership in semiconductors, or even to preserve its most vital economic and national security interests in this sector, it will need to revive the competitiveness of its workforce and business environment.

And in this increasingly globalized world, the United States cannot run alone. On that count, the triangle may be a pragmatic, if imperfect, solution to current supply chain vulnerabilities. But while the Iron Triangle addresses immediate vulnerabilities, it is not a silver bullet and may not be enough to simply constrain China’s malign behavior and intentions.