Taiwan is positioning itself as the chokepoint for the next stage of AI hardware, which is good news for its chipmakers and another lever of leverage over the rest of the world.

• Silicon photonics — moving data between chips with light instead of copper wire — is seen as the way past the limits of AI computing power.
• Light barely generates heat, so the switch cuts power use by 30% to 50% and speeds up AI work.
• Taiwan makes over half the world's chip packaging and testing, the exact step needed for co-packaged optics, the hardest piece of the technology.
• Nvidia put $4 billion into silicon photonics in March, and TSMC, ASE, MediaTek and Foxconn are among 30-plus firms in a Taiwanese alliance working on it.
• The government has folded silicon photonics into its flagship AI infrastructure plan and is funding company research on it.

Outlook: Taiwan is betting that owning this whole supply chain keeps it indispensable as AI hardware shifts from electricity to light.