Taiwan plays a crucial role in ensuring the world receives its cutting-edge devices, from laptops to advanced weapons. That’s because the self-governing democratic island of 24 million people is a leading global supplier of semiconductor chips.
But as tensions mount between Taipei and Beijing, the fate of this industry has become a global concern. Experts have warned that any disruption to Taiwanese chip supplies could bring production of key equipment to a halt, impacting nearly everyone in the world.
The island has faced increasing military aggression from China in recent months. In response, Taiwan has stepped up its own military training and committed a record amount of defense spending this year.
The advanced chips that Taiwan manufactures are an indispensable part of everything from smartphones to washing machines.
If a conflict happens across the Taiwan Strait, “it will be disastrous not just for Taiwan, not just for China, but also for the US, the EU and everyone else,” said Roy Lee, deputy executive director of the Chung-hua Institution. of Economic Research.
The chaos in global auto manufacturing triggered by a pandemic-related chip shortage last year gives an idea of how bad it could get.
“With the car shortage, you now have to wait six months for cars made in Europe,” he added. “If Taiwan stops providing chips for other products, it will likely take more than 12 months for a new 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 chip maker and plays a critical role in powering products designed by tech companies like Apple, Qualcomm and Nvidia.
With a market cap of nearly $500 billion, TSMC is one of Asia’s most valuable companies and accounts for 90% of the world’s super-advanced chips, Reuters said in a recent report citing industry estimates.
The company – widely dubbed in Taiwan as its “holy mountain” – is so important to the island that its employees can apply for exemption from military reservist training – even if called upon, the Defense Ministry said.
The company did not respond to a request for comment from CNN Business.
Super-advanced semiconductor chips – such as those produced by TSMC – are difficult to manufacture due to the high cost of development and the level of expertise required, which means that much of the production is concentrated in just a few suppliers.
The global semiconductor industry is already under pressure from growing supply shortages, with many tech companies reporting delays in getting chips for their production activities.
This makes Taiwan all the more important, especially as the United States and China engage in a bitter rivalry over the development of advanced technologies of the future, such as artificial intelligence and 5G.
If Taiwan falls into the hands of Communist authorities in Beijing, Western nations could lose access to the island’s valuable semiconductor chips.
Growing concerns
Russia’s invasion of Ukraine has raised concerns about the risk of China increasing its military strength against Taiwan. Communist leadership in Beijing has long claimed the island as part of its territory, despite never having ruled over it.
In recent months, China has intensified its military pressure on Taiwan, including sending a record number of warplanes near Taiwan last October. Chinese President Xi Jinping refused to rule out using force to achieve what he called “national reunification”.
But as comparisons are being made between Kiev 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 importance to international supply chains,” President Tsai Ing-wen said in condemning Russia’s invasion of Ukraine last month.
Last month, Taiwan announced that it had begun imposing economic sanctions against Russia. Officials said Taiwan’s top chipmakers, which account for more than half of the world’s semiconductor chip production, had pledged to comply.
When asked about the differences between Taiwan and Ukraine, J. Michael Cole, a senior fellow from Taipei at the Global Institute Taiwan said that the island’s indispensable role in global supply chains “changes the way countries – the international community – will calculate their response to the threat of, or invasion of, Taiwan.”
China’s Office of Taiwan Affairs 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 maintain its edge.
A global chip supply shortage has already led many countries to take steps to break their dependence on Taiwan.
Last week, the US Senate approved a $52 billion plan to invest in the research, design and manufacture of semiconductor chips in the United States.
China’s biggest chipmaker, Semiconductor Manufacturing International Corp (SMIC), has pledged to invest $5 billion in extra capacity this year.
“Right now, China, the US and the European Union are looking at so-called next-generation semiconductor technologies,” Lee said.
“We understand that challenges are coming and we need to maintain our leadership in semiconductors through research and development and, more importantly, by cultivating skilled talent that supports Taiwan’s success,” he added.
In response to the challenges, Taiwan recently committed $300 million to chip-focused graduate programs to train the next generation of semiconductor engineers.
Last month, it also passed new legislation that requires those working in key technology roles to seek permission from authorities before visiting mainland China.
As discussions about Taiwan’s future mount, Lee believes the best way to keep the island safe is through a combination of military and economic strength.
“That strength comes not only from military strength, but also from economic strength.”
— Will Ripley and Wayne Chang contributed reporting from Taipei, Taiwan.
Source: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
