- I'm reporting from Taiwan

where this island is increasingly becoming a focal point

between US and China tensions.

I'm going to take you to three places

to explain how the competitions between the two superpowers

from the tech to the military

could determine the future of this place.

But first, a little history about why Taiwan

is so important to China.

This island was where the Chinese Nationalist Party fled

after its military defeat at the end

of the Chinese Civil War in 1949.

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Today, Taiwan holds democratic elections,

uses a different passport, and has its own distinct flag.

And while some politicians here

support closer ties with Beijing,

many people have grown uncomfortable with that idea.

This, our first stop, the capital of Taiwan, Taipei.

Here growing numbers of young Taiwanese

supports closer ties with the US

over closer relations with China.

(warm instrumental music)

(woman speaking in foreign language)

- Security experts say this kind of statement

could mean military actions that puts the US into conflict.

And recently there has been a lot more military activity

in the strait between the island and Mainland China.

- This is the Strait of Taiwan.

"The Wall Street Journal" will tell you

of how many Chinese warplanes were in the region

using information from Taiwan's Defense Ministry

and would find that in 2020,

China sent about 380 warplanes to this region.

But this year there were already about 290 warplanes.

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US officials and former Taiwanese military leaders

say Taiwan will need to do more

to be able to fend off an invasion from China,

especially since China has about 100 times

as many ground force personnel as Taiwan.

China's annual military budget is also 25 times larger.

So in an attempt to fill the gap,

last year Taiwan increased the military spending by 10%

and has been purchasing weapons from the US.

But some military analysts say

it's not in China's interest to attack.

The seas are rough, and Taiwan's coastline

make it difficult for a warship to land.

Most importantly, an invasion could prompt

a military response from the US which would likely escalate.

But if not a military conflict,

Taiwan provides at least one more area of competition

between the US and China.

Behind me is the headquarters of TSMC,

the world's largest contract chip maker.

Its chips ends up in our smartphone and laptop,

but now because of a global chip shortage,

Taiwan is becoming more important to the US and China.

That's because TSMC controls more than 90% of the market

for the most advanced semiconductors.

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TSMC has tried to walk the line between China and the US,

but the tension between these two countries

has made this difficult, especially after Washington

restrict Chinese telecom giants Huawei's access to TSMC

over national security concerns.

The Trump administration has instructed American supplier

to stop working with TSMC

if it kept exporting chips to Huawei.

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To reduce its dependence on Taiwan,

China has made chip manufacturing a priority.

So has the US with a commitment of $15 billion

to building up that sector.

- We're investing aggressively in areas

like semiconductors and batteries.

That's what they're doing in others, so must we.

- [Joyu] But it will take years

before these efforts bear fruit, giving the US and China

yet another reason to focus on Taiwan.

- [Christopher] Thank you.

- [Tsai] I suppose we should do this.

- [Christopher] We can do that, okay.

(woman speaking in foreign language)

And I can say with confidence

that the United States' partnership with Taiwan

is stronger than ever.

- Ultimately, the future of this island

is going to be a key challenge for the Biden administration.

So the US will have to find the right balance

between supporting Taiwan while making sure

ongoing tensions with China doesn't escalate further.

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