This is a conflict that hides another, that between China and Taiwan for control of the world market for semiconductors. The tensions and economic stakes are such that some fear a chip war.
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Taiwan largely dominates the global semiconductor market. A domination that the island owes to its national champion TSMC. This name probably means nothing to you, but its chips may equip your smartphone. The Taiwanese giant notably supplies Apple, Qualcomm, and even Nvidia. TSMC is THE leading specialist in high-end chips among the most advanced in the world, a market of which it has a virtual monopoly.
More generally, Taiwan accounts for more than two-thirds of the world’s production of semiconductors, far ahead of South Korea or the United States, its main competitors. Vital components for consumer electronics, but also for the automotive industry, or even the defense sector.
Taiwanese chips are so important to China pbecause Chinese factories, which assemble most of the electronic products sold in the world, are major consumers of these components. According to a US Congress report, China alone accounts for more than half of the world’s demand for semiconductors. Chips either imported or made in China, often by Taiwanese suppliers. Any disruption in the supply chain would be a disaster for Chinese industry, and beyond that, for the entire global economy. It would only aggravate the current shortage of components which particularly affects the major automotive companies.
The United States is well aware of this since it has just launched a 52 billion dollar plan to massively relocate the manufacture of these chips. TSMC also plans to build several factories there, including a giant one in Arizona, currently under construction.
Most of the production sites are located on the western side of the island, just opposite China. TSMC headquarters itself is not far from the coast. In the event of the landing of Chinese troops, these factories would be prime targets.
Although TSMC boss Mark Liu recently claimed on CNN that “no one could control by force” his group, he recognizes that in the event of an invasion his installations would become “inoperative”so much they are “sophisticated” – he says – and dependent on their “real-time connection with the outside world”, be it Europe, Japan or the United States.
According to experts, this scenario of a takeover by China of the Taiwanese semiconductor industry would be the great fear of Washington, the red line not to cross, in the event of an escalation of the conflict.