The advanced chips Taiwan makes are an indispensable part of everything from smartphones to washing machines.
If conflict were to happen on the Taiwan Strait, “it will be disastrous not only for Taiwan, not only for China, but also for the US, EU, and everyone else,” said Roy Lee, a deputy executive director at Taiwan’s Chung-hua Institution for Economic Research.
The chaos in global automaking triggered by a pandemic-related shortage of chips over the past year gives a sense of just how bad it could get.
“With the auto shortage, now you have to wait for six months for European made cars,” he added. “If Taiwan stopped supplying chips for other products, then probably you have to wait for over 12 months for a new mobile phone, or even longer for a laptop.”
Taiwan’s ‘sacred mountain’
One Taiwanese company in particular — Taiwan Semiconductor Manufacturing Company (TSMC) — is the world’s largest contract manufacturer of chips and plays a critical role in powering products designed by tech companies like Apple, Qualcomm and Nvidia.
The company did not respond to a request for comment by CNN Business.
Super-advanced semiconductor chips — like the ones produced by TSMC — are difficult to make because of the high cost of development and the level of knowledge required, meaning much of the production is concentrated in just a handful of suppliers.
If Taiwan were to fall to the Communist authorities in Beijing, Western nations could potentially lose access to the island’s valuable semiconductor chips.
Growing concerns
In recent months, China has stepped up its military pressure on Taiwan, including sending a record number of warplanes near it last October. Chinese President Xi Jinping has refused to rule out the use of force to achieve what he called “national reunification.”
But as comparisons are being drawn between Kyiv and Taipei, the Taiwanese government has repeatedly emphasized the strategic role of its semiconductor industry.
“Taiwan and Ukraine are fundamentally different in geopolitics, geography and the importance to international supply chains,” President Tsai Ing-wen said as she condemned Russia’s invasion of Ukraine last month.
When asked about the differences between Taiwan and Ukraine, J. Michael Cole, a Taipei-based senior fellow with Global Taiwan Institute said that the island’s indispensable role in global supply chains, “changes how countries — the international community — will calculate their response to the threat of, or the invasion against Taiwan.”
China’s Taiwan Affairs Office did not respond to a request for comment.
Challenges ahead
While Taiwan’s role as a leading semiconductor hub may be indispensable to the world right now, experts believe there are challenges for the island to keep up its advantage.
The global supply shortage of chips has already prompted many countries to take steps to break their dependency on Taiwan.
“Right now, China, US and the European Union are all pursuing the so-called next generation semiconductor technologies,” Lee said.
“We understand the challenges are coming, and we need to keep our leadership in semiconductors through research and development, and most importantly, cultivating qualified talents that support Taiwan’s success,” he added.
As discussions about the future of Taiwan grow, Lee believes the best way to keep the island safe is via powering a combination of military and economic strength.
“That strength comes not only from military strength, but also economic strength.”
— Will Ripley and Wayne Chang contributed reporting from Taipei, Taiwan.
