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Home›Japanese foundation›Taiwan’s semiconductor dilemma | The Heritage Foundation

Taiwan’s semiconductor dilemma | The Heritage Foundation

By Jane R. Chase
November 23, 2021
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Thanks to the Communist side of the Strait, awareness of the threats facing Taiwan is higher than at any time in the past 50 years. It’s an opportunity to educate the world on everything the country has to offer, from public health and disaster relief to entrepreneurship and democratic governance. However, one of Taiwan’s greatest strengths – its semiconductor industry – is also potentially a terrible political liability. Taipei and Taiwanese friends should be careful how they use it.

The idea that China could shut down large swathes of the global economy with an attack on the world’s 60% microchip manufacturing center, including 92% of the world’s most advanced chips, has captivated the imagination of types of foreign policy. Here are some recent headlines: “World relies on one chipmaker in Taiwan, leaving everyone vulnerable” (The Wall Street Journal); “The world is dangerously dependent on Taiwan for semiconductors” (Bloomberg); “Why threats against Taiwan are a technology nightmare” (Axios).

>>> The fight for semiconductor leadership in Asia

A destructive Chinese invasion of industry is not the only scenario considered. Some envision the PLA taking control of the manufacturing workshops and forcing them to continue manufacturing at gunpoint. To say this is highly unlikely is an understatement. They are sophisticated workplaces, not iron mines.

Another even more plausible scenario is long-term pressure on the Taiwanese political environment that will ultimately lead to accommodation from China. However, the way things are going in cross-Strait relations would require a radical change in the policies of the two countries, as well as in their relations with the United States. For example, if China pressured by seizing one of the outer islands, say Pratas, Kinmen or Taiping, it certainly wouldn’t make Taiwan more flexible. Not only would Taiwan’s resolve harden, but the resolve of its many friends around the world would also be strengthened.

Ultimately, the threat to the global semiconductor supply is only as great as the general threat of an invasion. And at this point we have bigger issues than the price of electronics.

Meanwhile, narratives around the threat to global supply chains play a role in another very powerful stream of US politics. Disruptions in the supply of personal protective equipment during the COVID-19 pandemic have raised awareness among Americans about the security of supply chains in all areas. The current shortage of chips has caused this concern more intensely on semiconductors.

And where Americans see a crisis, American politicians and businesses see opportunity. Already, lawmakers have proposed legislation to offer subsidies to chipmakers, and industry representatives are deploying on Capitol Hill to gain support. A US tech CEO summed up the situation by repeating the advice offered by Rahm Emmanuel, then White House chief of staff, at the height of the 2008 financial crisis: “Never let a good crisis go to waste. “

Only the most intrepid defender of economic freedom dares to stand up against this wave by shouting “Stop”.

A similar surge is underway in Japan and Europe and, perhaps more significantly, in South Korea. South Korea is already the world leader in memory chips in this industry. Its efforts to catch Taiwan in the production of microprocessors are very credible, as well as curiously relieved of the security concerns posed by the active threat from Pyongyang.

The downside to Taiwan in all of this is obvious. A global effort is focused around the need to move semiconductor production out of Taiwan. It cannot be good for Taiwan’s economy in the long run. Not only is this an attack on Taiwan’s industrial crown jewels, but the ultimate and inevitable price collapse that will surely follow so many self-sufficient countries will also hurt.

>>> The United States is not alone in supporting Taiwan

Twenty years ago, Craig Addison coined the term “silicon shield” to describe the deterrent effect Taiwan’s role in the semiconductor industry has on China’s unification dreams. “China will have to think long and hard,” he said, “before taking any military action to disrupt or destroy Taiwan’s economy.” The current consensus around the threat to Taiwan has overturned this assessment. The concentration of microchip production capacity in Taiwan is being seen more as a provocation from China than a deterrent. More importantly, if Taiwan’s defense becomes first and foremost about global supply chain security, then once it is no longer so critical to the global semiconductor supply, the world will have less. interest in his fate.

The defense of Taiwan is important to the world for many reasons. Chinese belligerence gives its supporters a good opportunity to announce them. However, overstating Taiwan’s role in the global electronics supply could backfire in a major way. Those who care about Taiwan’s security should be very careful about how we talk about it.


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