Taiwan and the Silicon Shield
After two Ukraine entries, I journey you to a geopolitical hotspot in an entirely different corner of the world
After two previous writings dealing with the crisis in Ukraine, and the current administration’s questionable plans to resolve it, I am now free to move on to another hot topic of geopolitics- Taiwan. Since there are currently no active hostilities between mainland China and the nation with many names, including Beijing’s dismissive “Taiwan separatists” label, the Taiwan issue often goes under the radar compared to Ukraine or the Middle East. However, as far as we in the United States are concerned, the Taiwan issue is far more fundamental to our national interests than either of those two hot conflicts. While the secrecy around the Chinese Communist Party, in particular Paramount Leader and de facto emperor Xi Jinping, makes it difficult to assess Beijing’s medium-to-long-term designs on the island, Xi’s messianic goal to reclaim it makes the Taiwan issue a thorny one for the foreseeable future.
The main reason for that is, as I hope you all know, Taiwan’s stranglehold on the market for semiconductors, and their ultimate product, microchips. These chips are not the kind you eat with guacamole. In fact, you probably have not even touched these chips. But much of what you do touch would not exist without them. If Xi were to wake up one morning and decide that his patience with Taiwan had run out and it was time to solve the “Taiwan Question” once and for all, you can likely forget about buying a new dishwasher, a new computer, a new car (since the old analog vehicles are now just a relic of the past,) or a new iPhone. I shudder to picture how today’s teenagers would cope without their smartphones. Eventually, the products that are working now will no longer work as well as they have, and without the most advanced computer chips, 90% of which come from Taiwan, our society would see something far worse than some angry teenagers or a recession.
If you have ever seen any of the Mad Max films, then you might have an idea the state what’s left of our society would descend into should our access to advanced chips be halted.
This risk is exactly why Washington wants as much of these advanced semiconductors made in the United States as possible, and also where Taiwan Semiconductors Manufacturing Company (TSMC) comes into play. Since their founding in 1987, TSMC has transformed itself into not only Taiwan’s undisputed corporate champion by market capitalization, but also the world’s leading manufacturer of those super-advanced chips I mentioned earlier. There simply is no competitor, which is why the Trump Administration has sought TSMC’s assistance in implementing their goal of making the United States independent of Taiwanese microchips. On March 3, TSMC’s CEO CC Wei visited the White House where he announced a $100 billion dollar investment in seven American chip facilities in Arizona and across the United States. While this investment seems, on the surface, a win not only for the Trump Administration and the United States as a whole, three factors, in my humble opinion, demonstrate the folly of this arrangement.
The first is the administration’s threat of tariffs. This threat that has already forced other companies to relocate to the United States, so far mostly from Mexico. While Wei denied that potential tariffs were part of his calculus, there is no reason to believe that TSMC, as a profit-driven corporation devoted to its shareholders, would not make a similar decision. Second, the extreme capital and labor intensity required in the production of advanced semiconductors are significantly more suitable to Asia’s tradition of long working hours than to our culture of work-life balance. Americans simply won’t tolerate the 12-hour work schedules commonplace at TSMC plants. Finally, there is little incentive, in fact no incentive whatsoever, for Taiwan to give up its biggest point of leverage with not only the United States and the rest of the world, but Xi Jinping and his comrades in Beijing.
And this leverage, I believe, is why Xi has no choice except restraint.
The Taiwanese have a word for this, which, translated into English, means Silicon Shield. The Silicon Shield is entirely self-explanatory- with Taiwan’s vital function via its silicon-forged microchips to not only the global economy but the economy of mainland China as well. Therefore, the cost to China, not only economically but reputationally, of an all-out blitzkrieg attack on the self-governing island, would be catastrophic. Whether the semiconductor plants are crippled as mere collateral damage or intentionally destroyed by the Taiwanese themselves to prevent Beijing from accessing this critical technology, TSMC would be extremely unlikely to survive an all-out military conflict in the Taiwan Strait. For the world, there is simply no alternative to Taiwanese-manufactured semiconductors, whether in Arizona or elsewhere.
Now is when the Chinese threat comes into view.
While war would be a risky endeavor for Xi Jinping, the situation around the Taiwan strait remains precarious. From my understanding, there is every indication that Xi is quite bitter about the cross-strait status quo. This is a man who views what he terms China’s “National Rejuvenation,” including the reintegration of the island that broke away in 1949, as an existential mission for China’s honor and future as a great civilization. This mission is why we have seen various “grey zone” tactics against the island. These grey zone tactics, coercive acts short of the outright military force, are designed to wear down the enemy through exhaustion, uncertainty, and anxiety. China’s measures include regular violations of Taiwanese airspace with military aircraft, rhetorical saber-rattling, and most disturbing of all, internet-disrupting undersea data cable cuts. These acts, while not as headline-grabbing as an invasion or missile attack, are certainly unnerving, and Beijing has no incentive to stop them anytime soon.
After all, if China can even do Russia’s dirty work by cutting such cables in Europe, why would they restrain themselves in their own backyard?
If there is any good news regarding China’s bad behavior, it’s that I remain convinced that Beijing is not ready in the near future to deal with all the negative fallout that would occur from an orchestrated Ukraine-style violent attack against Taiwan. And Taiwan’s semiconductor superpower status is likely a critical deterrent regardless of whether the United States would go to war over Taiwan or not. So, thankfully my readers can, at least for the next several years, rest easily. While TSMC investments in the United States are little more than a political kabuki act, Taiwanese microchips will continue to be used in your everyday life- for the necessity of all humanity. Grey zone coercion, while unnerving and annoying, will not fundamentally disrupt the current equilibrium- at least until Taiwan’s next presidential election in 2028.