TAINAN (NYTIMES) - The United States and China are wrestling to lead the world in artificial intelligence, 5G wireless and other cutting-edge technologies. But the real wizardry that makes those advancements possible is being performed on a yam-shaped island that sits between them, geographically and politically.
On Taiwan's southern rim, inside an arena-size facility stretched out among lush greenery and coconut palms, colossal machines are manipulating matter at unimaginably tiny scale.
A powerful laser vapourises droplets of molten tin, causing them to emit ultraviolet light.
Mirrors focus the light into a beam, which draws features into a silicon wafer with the precision, as one researcher put it, "equivalent to shooting an arrow from Earth to hit an apple placed on the moon."
The high-performance computer chips that emerge from this process go into the brains of the latest tech products from both sides of the Pacific. Or at least they did until last month, when the Trump administration effectively forced leading chipmakers in Taiwan - and elsewhere - to stop taking orders from China's proudest tech champion, 5G giant Huawei.
The administration's stranglehold on Huawei shows that for all of China's economic progress, the United States still has final say over the technologies without which the modern world could not run. Chipmaking relies on US tools and know-how, which gives officials in Washington the power of life and death over semiconductor buyers and suppliers anywhere on the planet.
Next in the firing line is China's most advanced chip producer, Semiconductor Manufacturing International Corporation (SMIC). The US Department of Commerce told US companies last week that they needed permission to export to SMIC, saying its chips could be used by China's military.
If the administration blocks SMIC from using US software and equipment entirely, it will sharply set back Beijing's hopes for meeting more of its own semiconductor needs.
That leaves Taiwanese chip companies - including the industry's leading light, Taiwan Semiconductor Manufacturing Co. (TSMC), which owns the Tainan plant - in a tough spot.
They are forced to heed the dictates of US tech policy. Yet they can scarcely ignore the fact that so many of their customers and their customers' customers are in China, where the Communist government is also threatening Taiwan with ever bolder displays of military force.
China has for decades claimed the self-governing democracy as part of its territory.
In the high-stakes tech fight, TSMC had been playing Finland: a sometime friend to both feuding giants. But that is not the way the tech world works anymore.
"China has virtually no room for maneuver," said Pierre Ferragu, the head of technology research at New Street Research. "The US definitely has the upper hand in the struggle."
Tensions in the Taiwan Strait are rising more broadly this year.
The Trump administration has stepped up official exchanges with Taiwan ever since its president, Tsai Ing-wen, won reelection in January over an opponent who was friendlier to Beijing. In response, Chinese aircraft and warships have menaced the island with growing frequency.
When a State Department representative, Keith Krach, visited Taiwan recently, Tsai feted him at a banquet alongside a bevy of government dignitaries and TSMC's retired founder, Morris Chang, a nod to the company's significance to Taiwan's relations with the United States.
US officials have taken a great interest in TSMC, whose advanced chips are used in fighter jets and other hardware critical to America's military edge. The company said this year that it would build a new factory in Arizona, responding to U.S. concerns about overreliance on offshore production.
Now, the Trump administration's campaign against Huawei has forced TSMC to turn against one of its biggest customers. With the two companies unable to work together without licenses, Huawei may find itself unable to make its late-model handsets, an important chunk of its business, once it uses up its chip inventory.
"I don't think Huawei has much of a future unless they can find some way to get their suppliers to get export licences," said Matt Bryson, an analyst with Wedbush Securities.
One of Huawei's deputy chairmen, Guo Ping, said last week that the company was assessing its options.
"Survival is our main goal," Guo said in Shanghai. "As Alexandre Dumas once said, all of human wisdom is summed up in two words: wait and hope."
TSMC executives sound confident that Huawei's plight will not dent it much. If Huawei cannot order chips from the company, then its rivals will instead.
Mark Liu, TSMC's chairman, said at an industry conference last week that Taiwan would continue improving its technology so US and Chinese companies had no choice but to keep working with the island.
"We are enjoying the success of the past," Liu said. But for the future, "we cannot stay where we used to be before." TSMC could still get caught in the middle, though, if the US government's continuing attacks prompt Beijing to strike back.
A full-blown clampdown on sales to SMIC could increase the risk of Chinese retaliation "really significantly," said Ferragu of New Street Research.
Countermeasures that Beijing might once have considered too self-defeating - such as choking off Qualcomm's or Apple's sales in China, effectively depriving Chinese citizens of most high-end smartphones - could start to seem more acceptable.
"At this point, it's really a game of poker," Ferragu said. Apple and Qualcomm are both TSMC customers.
So what happens if China stops needing TSMC as much as it does now?
This could happen naturally. TSMC is working at the frontiers of physics to continue doubling the number of transistors it can fit onto a piece of silicon. That principle, known as Moore's Law, has guided semiconductor development for decades.
Not all tech products today need the most advanced chips, though. Some work best by packaging high-end processors with less sophisticated ones. Simple "internet of things" devices do just fine with simpler chips.
"The way we design chips is changing. It just has to," said Jay Goldberg, a tech industry consultant and former Qualcomm executive. "Moore's Law is slowing, and we're just having to design chips in a way to accommodate that."
A TSMC spokeswoman, Nina Kao, said demand for the company's latest production processes was "stronger than ever." China could also lessen its dependence on Taiwan by getting better at making chips itself.
Beijing last year created a US$30 billion fund for investing in chip projects. In recent months, thousands of Chinese companies have said they are getting into the semiconductor business, according to an analysis by the 21st Century Business Herald, a government-owned newspaper.
China is trying to poach more Taiwanese talent for the task. Dozens of former TSMC managers and engineers joined two ambitious Chinese chip projects last year, according to a person with knowledge of the matter.
Kao of TSMC said recent turnover was less than 5 per cent, which the company considered a healthy level.
