NVIDIA co-founder and CEO Jensen Huang once described the AI industry ecosystem as a “five-layer cake.” At its foundation lies energy, followed by chips, infrastructure, models, and applications. These layers are stacked upon one another to form the architecture of the AI ecosystem, illustrating that AI is far more than chatbots or a competition among models. Rather, it encompasses an entire industrial system spanning electricity generation, semiconductors, data centers, servers, and real-world applications, with each layer influencing the development of the entire ecosystem.
Viewed through this framework, the current AI competition between the United States and China reveals Taiwan as a decisive factor in determining the outcome.
“Taiwan is at the center of the AI revolution. Chips, advanced packaging, system integration, and AI supercomputers are all built in Taiwan,” Jensen Huang recently remarked publicly, underscoring Taiwan’s indispensable role in the global AI supply chain.
NVIDIA has also announced plans to establish its new Taiwan headquarters in Beitou-Shilin Technology Park, which is expected not only to become a major AI research and development hub in the Asia-Pacific region but also to deepen cooperation with Taiwan’s supply chain partners.
Jensen Huang’s remarks highlight Taiwan’s central role in global AI infrastructure and industrial ecosystems. Therefore, when U.S. President Donald Trump claimed that “Taiwan stole America’s semiconductor industry,” such a statement was not only unfair but also overlooked the deeply intertwined technological partnership that has developed between Taiwan and the United States.
Taiwan’s semiconductor industry occupies a critical position in the global supply chain as the result of decades of sustained effort. From the institutional foundations laid by the Industrial Technology Research Institute (ITRI) and the Hsinchu Science Park, to the global expansion of companies such as TSMC, UMC, ASE Technology, MediaTek, Pegatron, and ASUS, as well as the contributions of countless small and medium-sized suppliers, Taiwan has cultivated a highly specialized and closely integrated industrial ecosystem. This success is built upon engineering talent development, investments in education, entrepreneurial spirit, industrial discipline, international collaboration, and continuous innovation. As a result, Taiwan has developed an ecosystem that is both highly efficient and difficult to replicate. Consequently, Taiwan has become an indispensable strategic partner for the United States and like-minded democracies seeking to build more resilient “non-red supply chains” and safeguard emerging technologies and national security interests.
In fact, the United States has already elevated AI competition to the level of national strategy. In July 2025, the U.S. government released “America’s AI Action Plan,” which explicitly declared that the United States must establish global gold standards across the AI value chain—from advanced semiconductors and AI models to practical applications. The plan further emphasizes that critical AI infrastructure, including energy resources, semiconductor fabrication facilities, and data centers, must not depend on technologies that could undermine America’s leadership in AI. President Trump stressed that “the United States will not be defeated by any other country in the AI race.” AI also became one of the topics discussed by the U.S. and Chinese leaders during President Trump’s visit to China in May 2026.
From official government documents and policy language to the agenda of U.S.–China summit meetings, it is evident that both Washington and Beijing now regard AI as the central battleground of national power competition. Yet for the United States to maintain its leadership, it cannot rely solely on advanced models or export controls. It must also secure a sustainable, scalable, and trustworthy physical AI supply chain—and this is precisely where Taiwan’s strategic value becomes most significant.
First, at the semiconductor level, the United States possesses the world’s strongest chip design capabilities. However, chip designs only become genuine AI capabilities when they are successfully manufactured, packaged, tested, and mass-produced with exceptionally high yields. Taiwan sits at the heart of the global AI and trusted technology supply chain, controlling the world’s most advanced manufacturing processes and packaging capabilities. Taiwan produces approximately 90 percent of the world’s AI servers, 60 percent of global semiconductors, and more than 90 percent of the most advanced chips. In other words, America’s leadership in chip design can only be fully realized through Taiwan’s manufacturing capabilities.
Second, at the infrastructure level, the United States is home to hyperscale cloud platforms such as Microsoft, Amazon, Google, Meta, and Oracle. Taiwan, meanwhile, possesses a complete AI server and ICT supply chain through companies such as Foxconn, Quanta, Wistron, Wiwynn, Inventec, Delta Electronics, and Accton Technology. The combination of American platforms and markets with Taiwan’s comprehensive hardware manufacturing capabilities creates the world’s most complete AI infrastructure ecosystem and forms a highly complementary “AI symbiotic partnership.”
This is also the significance of the “Silicon Prosperity Initiative Declaration” and the Joint Statement on Taiwan–U.S. Economic Security Cooperation signed under the Sixth Taiwan–U.S. Economic Prosperity Partnership Dialogue (EPPD). Bilateral cooperation encompasses AI supply-chain security, digital infrastructure, critical minerals, drone supply chains, high-tech talent development, collaboration in third countries such as Paraguay and the Philippines, and broader economic cooperation. These initiatives demonstrate that Taiwan and the United States are becoming increasingly important partners in safeguarding each other’s economic security.
At the model layer, although the United States continues to maintain an advantage in advanced AI models, its lead is not overwhelming when considering model performance, cost, open-source accessibility, and barriers to adoption. China’s provision of low-cost—and in some cases free—open models has enabled rapid expansion across the Global South, developer communities, and educational sectors. Future AI competition will increasingly be a contest of languages, knowledge systems, and values. If democratic nations fail to establish sovereign AI capabilities and trusted datasets, the future AI order may become dominated by authoritarian narratives and alternative information governance models.
Against this backdrop, Taiwan–U.S. cooperation under the EPPD on “Sovereign AI” and a “Trusted Traditional Chinese Language Corpus” becomes particularly significant. For governments and critical infrastructure operators, AI involves issues of data security and national sovereignty. By developing sovereign AI capabilities and strengthening cybersecurity resilience, Taiwan can provide fertile ground for democratic AI ecosystems to flourish and subsequently expand across Asia and the Global South.
Ultimately, the next stage of competition will be determined by the fifth layer of the AI ecosystem: “Physical AI.” This refers to the integration of AI into robotics, drones, smart manufacturing, intelligent healthcare, smart transportation, and defense applications. Taiwan possesses significant opportunities in this field, but it also faces growing international competition. Therefore, Taiwan cannot remain satisfied with contract manufacturing alone. It must proactively invest in AI applications and industrial transformation by integrating Taiwan’s strengths in semiconductors and servers, America’s leadership in AI models and cloud computing, Japan’s expertise in robotics and precision machinery, and Europe’s industrial applications to build a democratic AI alliance. At the same time, Taiwan’s machine-tool industry, medical devices, logistics, long-term care, agriculture, transportation, and drone sectors should all become important platforms for the deployment of Physical AI.
Taiwan’s Integrated Diplomacy Policy, Prosperous Allies Initiative, and Three-Chain Strategy all encompass AI-related cooperation. Within the “Global Democratic Value Chain,” priority is given to sovereign AI and trusted databases. The “First Island Chain in the Indo-Pacific” includes drones, communications resilience, and defense security. Meanwhile, the “Non-Red Supply Chain” strategy covers semiconductors, AI servers, smart healthcare, smart transportation, and the global deployment of Physical AI technologies.
Through the Silicon Prosperity Initiative and the EPPD framework, Taiwan is positioned to become a decisive factor in the outcome of the U.S.–China AI competition. Taiwan not only enables the United States to fully leverage its strengths in AI capital, innovation, and market scale, but also contributes its own advantages in supply-chain management and systems integration. In doing so, Taiwan can seize the opportunities presented by the coming Physical AI revolution and emerge as an indispensable symbiotic partner within the democratic AI ecosystem at a time when AI is reshaping national power and international order.