The results of Taiwan’s Jan 13 elections are consequential not just for its over 23 million people but for the entire world. Taiwan’s indispensable economic significance to the global economy is underlined by the fact that the 36,193 sq km territory, which China claims as its own, produces around 90 per cent of the world’s leading-edge semiconductors that are used for artificial intelligence (AI) and quantum computing applications.
According to TrendForce, Taiwan’s share of global semiconductor foundry capacity stood at about 46 per cent as of 2023.
The semiconductor chips have emerged as pivots of the global economy in modern times. Described as the ‘new oil’ of the technology age, they are required to access computing power from every piece of modern technology.
Almost all electronic products – from refrigerators and microwaves to computers and smartphones – run on semiconductors. Around one-quarter of all semiconductors produced today end up in smartphones. At the same time, national intelligence systems and military missiles also depend on semiconductors.
The rearranged corridors of power in the Taiwanese capital will hold ‘profound significance’, among others, on the country’s semiconductor industry as well.
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“The election outcomes will wield influence over the strategic and economic landscape, extending to cross-strait relations and the dynamics between the US and China,” Sana Hashmi Postdoctoral Fellow at Taiwan-Asia Exchange Foundation in Taipei City, told WION while referring to the 180-kilometer (110-mile) strait that separates Taiwan from China.
In recent years, the Taiwanese Strait has become an active geo-economic spot of aggression by Chinese armed forces. China’s top leader Xi Jinping has asserted Beijing’s claim over Taiwan people by sending warplanes and ships to the skies and waters around Taiwan regularly.
While the Chinese belligerence over the Taiwanese strait has come to define Beijing’s repetitive territorial assertiveness over Taiwan, in recent years, they have had consequences for Taiwan’s semiconductor industry as well. Most notably, when Berkshire Hathaway cited geopolitical concerns in February 2023 to divest its multi-billion dollar stake from Taiwan Semiconductor Manufacturing Company (TSMC).
Global stake in stability, peace between China and Taiwan
According to Chris Miller’s ‘Chip War: The Fight for the World’s Most Critical Technology’, the entire world economy hinges on peace in Taiwan.
A disruption to semiconductor production could have dramatic effects on the world economy, perhaps much more than Covid-19 or the Ukraine war, according to Miller.
In recent years, Taiwan Semiconductor Manufacturing Co. or TSMC, the world’s largest contract chip manufacturer that counts Apple and Nvidia among its biggest clients, has become central to the island nation’s semiconductor dominance.
Besides, China (which itself constitutes 26 per cent of the world’s semiconductor foundry) is a buyer of Taiwan-made chips.
Taiwan exported electronic integrated circuits, or chips, worth over $47 billion to China in 2023, according to preliminary trade data.
Some analysts argue that China’s reliance on chips manufactured in Taiwan is so great that it makes an attack less likely, as destruction or inoperability of Taiwan’s foundries would devastate China’s economy.
Taiwan Election Results 2024: Towards stability or confrontation path with China?
The election sees the pro-U.S. and anti-China Democratic Progressive Party candidate Lai Ching-te leading the polls against the Kuomintang candidate Hou Yu-ih, who is seen as more accommodating towards Beijing.
At the heart of the election is a stark choice presented to the Taiwanese people: one between peace or war that Kuomintang has campaigned on, and democracy or dictatorship, a choice propagated by the Democratic Progressive Party.
Lai is seen leading by a significant margin, suggesting a possible continuation of the Democratic Progressive Party’s rule.
If the Kuomintang, which adheres to a ‘One China’ principle, secures victory, Taipei-Beijing ties are expected to stabilise due to the party’s accommodative stance towards Beijing.
The stabilisation may do away with the imminent threat of military conflict for the time being, keeping the world away from a D-day scenario of disrupted semiconductor supply chains.
A Kuomintang victory, however, would also be perceived as a win for China, possibly paving the way for closer ties with Taiwan.
Contrastingly, a win for the frontrunning Democratic Progressive Party, which advocates for Taiwan’s independence, may further put cross-strait relations in turmoil. For the Chinese leader Xi Jinping, while a Democratic Progressive Party win may appear hostile, it would also present Xi with an opportunity to propagate the idea of ‘unification’ with Taiwan more profoundly in his bid to consolidate power over Chinese Communist Party.
“The results of these elections will chart trajectories that could reverberate across the Indo-Pacific,” Sana Hashmi said. With the US continuing to be the top weapon supplier to Taiwan at the face of Chinese belligerence, the outcomes of Jan 13 elections are set to “influence regional stability”, while “shaping the US’ and other countries’ approaches to China and the region.”
