[Opinion] Taiwan's 'Silicon Shield' TSMC

US-China Semiconductor Showdown
China's Taiwan Invasion Could Spike Semiconductor Prices
Triggering Great Depression-Level Economic Crisis

Jensen Huang, CEO of Nvidia, the semiconductor company with the highest corporate value in the world, lamented on the 24th of last month in the Financial Times that American tech companies are at great risk of suffering enormous damage due to the semiconductor war between the US and China. Due to regulations imposed by the Biden administration, American companies have been unable to sell advanced semiconductors to China, the largest market, since August last year. He pointed out that in response, Chinese companies have begun developing their own semiconductors to replace Nvidia’s chips used in gaming, graphics, and artificial intelligence (AI). Meanwhile, credit rating agency Fitch forecasted on the 7th that while Korean semiconductor companies will be affected by the US-China semiconductor war, the impact will not be long-term. They expect Korean semiconductor companies to increase investment and upgrade technology within Korea.

The confrontation between the US and China is ongoing. In 2014, China devised an ambitious plan called “Made in China 2025,” making semiconductors a core part of its industrial policy. China is the largest importer of semiconductors. Therefore, it has invested heavily in nurturing the semiconductor industry for the past decade, coinciding with the period of China’s military modernization. The strengthening of military power has raised concerns in Taiwan, the US, Japan, and others. Behind the semiconductor conflict lie both economic and security aspects simultaneously. Even during the Cold War, semiconductors were key components of missiles. Professor Chris Miller, author of “Chip War,” emphasized that semiconductors are directly linked to the US’s military superiority in the geopolitical competition between the US and China.

The US has been paying serious attention to this since 2016. The US aims to prevent China from achieving its goal of replacing about 70% of the semiconductors it needs by 2030 with domestically produced ones.

Taiwan is at the center of this conflict. What would happen if China invades Taiwan? Democratic Congressman Seth Moulton recently mentioned that if China invades, the US would blow up TSMC. This implies the enormous cost China would bear if it invades Taiwan. Taiwan produces over 60% of the world’s semiconductors, especially more than 90% of advanced semiconductors. TSMC is the core of Taiwan’s “Silicon Shield.” The global dependence on this company is so great that it serves as a deterrent against a Chinese invasion.

What if the Silicon Shield fails and China invades Taiwan? The global economy would collapse. If TSMC builds production plants in other countries, the risk of invasion could be reduced. However, there are limits. In 2021, TSMC announced plans to build a factory in Arizona, USA, but it will not be operational until at least 2025. Even then, it will not be able to produce the most advanced products. If Taiwan is invaded, semiconductor prices will soar. This will cause prices of many products and services such as automobiles, mobile phones, and medical equipment to skyrocket, and securing semiconductors for satellites, stealth fighters, and supercomputers will become difficult. It will cause serious disruptions to military power and trigger a global economic crisis comparable to the Great Depression. This is why we must closely monitor the US-China confrontation surrounding the Taiwan Strait.

Kim Dong-gi, author of The Power of Geopolitics

This content was produced with the assistance of AI translation services.