Taiwan: TSMC Would Be Useless to China in Event of Invasion

Taiwan is, for all intents and purposes, an independent country, but its official status depends on who you ask. Mainland China claims the island as part of its territory, and that has led many to worry about what would happen if the Chinese government got control of Taiwan-based chipmaker TSMC. The head of Taiwan’s National Security Bureau recently told lawmakers that even if China invaded, they wouldn’t be able to continue TSMC’s operation. So, there’s no need for crazy contingencies like blowing up TSMC factories.

Following the 1949 Chinese Revolution, the former government of the mainland fled to Taiwan. Most countries, including the United States, initially recognized Taiwan (officially the Republic of China) as the true Chinese government. That changed in 1971 when the UN voted to recognize the People’s Republic of China instead. Taiwan has been in limbo ever since, but it maintains the tacit support of western nations in part thanks to its semiconductor operations.

Economists believe that a Chinese takeover of Taiwan would cause a serious global recession. This potential threat has made governments like the US plan for the worst, including suggestions to evacuate TSMC engineers or even destroy the company’s facilities in the event of invasion. Not so fast, says Chen Ming-tong, director-general of Taiwan’s National Security Bureau. “TSMC needs to integrate global elements before producing high-end chips,” Chen says. “Without components or equipment like ASML’s lithography equipment, without any key components, there is no way TSMC can continue its production.”

TSMC is not the only chipmaker on the island, but it’s by far the largest. It manufactures more than half of the world’s semiconductors for customers like Apple, AMD, and Nvidia. In just the last few months, the US has forced Nvidia and AMD to stop selling high-performance computing equipment to China, citing their utility in designing weapons. Several years ago, America also put the screws to Chinese megacorporation Huawei, cutting off its supply of semiconductors. There is a greater fear that China might move to assert control over Taiwan as a way to secure its technological future.

Just because China would be unable to manufacture chips with TSMC facilities doesn’t mean there isn’t a threat. Losing half of the world’s semiconductor manufacturing capacity would be economically devastating. These concerns have spurred new investments in the US. The Biden administration succeeded in passing the CHIPS and Science Act this year, which includes $52 billion to bolster domestic semiconductor production. Micron also recently announced it would spend $100 billion to manufacture chips in New York, taking advantage of CHIPS Act and state-level incentives.

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