China is one of the most powerful countries in the world, with well over a billion people,
one of the strongest militaries outside the United States, and a powerful nuclear arsenal.
Taiwan is a small island nation, doggedly defending its independence for more than half
a century but far outgunned by its neighborhood rival.
But does Taiwan have a secret weapon up its sleeve that could weaken China’s power over
it in an instant - and is that also Taiwan’s biggest vulnerability?
This is how semiconductors could define the coming conflict in Asia.
Semiconductors are one of the most important tools in the modern world of technology - they
not only play a key role in military technology but in civilian technology as well.
Semiconductors are material in the electric conductivity sweet spot that falls in between
a typical conductor like copper and an insulator like glass.
As the temperature goes up, its resistance to electric currents goes down - the exact
opposite of the way metal behaves.
And that makes it the key to a whole lot of machines.
When a semiconductor is introduced into a design structure, it creates an impurity that
causes two regions to operate in different ways - and this creates a semiconductor junction.
This allows charge carriers like electrons and ions to flow in certain ways - and this
is the core of most modern electronics.
Vacuum tubes were the first version of these devices that controlled the electric flow
in computers and other devices, but now just about everything runs on semiconductor devices.
No semiconductors, no transistors and or diodes.
No transistors and diodes, no computers or computerized modern military technology.
These little devices are the backbone of just about everything we use on a day-to-day basis.
And it all hinges on the supply of the needed elements.
The most common semiconductor used in these devices is silicon, along with the element
Germanium and the manufactured zinc blend Gallium Arsenide.
Knowing how to mine for these compounds, refine them, treat them, and use them to create the
tiny chips that make computer function possible is the only thing standing between us and
a return to a much earlier era of technology - and the collapse of many modern industries.
Good thing there are a lot of scientists all around the world hard at work on them…right?
Not quite.
The world has allowed the vast majority of semiconductor design and production to be
centralized in one company - Taiwan Semiconductor Manufacturing Company Limited.
It’s not only the world’s largest semiconductor company, it was the very first dedicated semiconductor
manufacturer when it was founded in 1987.
The founder, Morris Chang, knew how key these devices would be worth in the future, and
worked to corner the market early.
He was successful beyond his wildest dreams, and retired after 31 years at the head.
Today, it’s one of the most valuable companies in the world - estimated to be worth over
four hundred billion dollars.
It’s also publicly traded, meaning it’s majority-owned by foreign investors.
And there’s a good reason for that.
If there’s a major company you know of, the odds are it relies on TSMC for its smooth
day-to-day operation.
It likely doesn’t have any direct dealings with the company, but if it uses electronics,
the odds are there are some semiconductors involved - and the odds are good that they
come from Taiwan.
In fact, many companies like Broadcom and Apple that manufacture Semiconductor devices
have deals with TSMC.
The companies that make their own semiconductors, like Intel, still outsource some production
to the Taiwanese company!
It all comes back to the massive facility at Hsinchu Science Park - and it’s possibly
the most important company in the world.
And that gives it a lot of leverage.
After 2020, virtually all industries saw slowdowns and shortages due to the pandemic and the
associated work and resource shortages.
But many of those shortages may have come down to the production issues from TSMC, which
is in a country that took strict measures to control the spread of the virus.
While Taiwan’s lockdowns were never as stringent as their rivals in China, they still curtailed
activities for several months - and the resulting shortage of semiconductors can still be felt
today.
It even forced several key automakers to temporarily shut down production of new automobiles - because
as everyone knows, cars today have complex computers in them!
Alexa, play “On the Road Again”.
And when so much relies on one country, it can lead to serious challenges.
It’s estimated that Taiwan makes up almost two-thirds of the world’s total semiconductor
production, with TSMC alone making up 54%.
South Korea is second with 18%, China is in third with only 6%, and the others have 13%
spread around the world.
So an interruption in Taiwanese microchips could not just cause manufacturing delays
around the world - it could give the small island country the ability to pick the winners
and losers in any global conflict - including one targeting it directly.
And that may be coming whether Taiwan wants it or not.
China has had a standard line on Taiwan since the civil war back in the 1940s - Taiwan is
China.
And much like North Korea and South Korea’s blood feud, both governments regard themselves
as the legitimate government of all of China.
China has the military and diplomatic edge, and has been working to pressure other governments
not to recognize Taiwan as a country.
Most countries agree - having diplomatic relations with Taiwan without officially recognizing
it as separate from China.
But occasionally China’s pressure goes too far, such as when a Chinese propagandist said
that the Chinese government should shoot down Speaker Nancy Pelosi’s plane if she visits
Taiwan.
Cooler heads prevailed, Pelosi visited Taiwan unscathed, and China’s bluster made it look
like a paper tiger.
But China’s reason for wanting Taiwan goes back to far more than ego.
China’s economy has been struggling, as their Covid-related decisions lead to repeated
shutdowns of major cities.
The country’s increasingly strict trade policies have made many countries hesitant
to invest there, and China’s economy has begun showing signs of contracting.
Many people are taking their business elsewhere - but if they controlled the world’s semiconductor
production, people would have no choice but to do business with them.
After all, even a temporary shortage led to panic around the world, with many realizing
for the first time just how dependent they were on Taiwan’s production - and how many
industries would be affected.
And China might see their path as simple.
China has focused on developing their air and naval power, and they’re far superior
to Taiwan in those areas.
While Taiwan does have a strong military, they don’t have nuclear weapons.
Or aircraft carriers.
While they might be able to put up a surprisingly strong fight against China - much the way
Ukraine is shocking the world by holding Russia at bay - they likely wouldn’t be able to
do so forever without military assistance from other powers.
While the United States has vowed to defend Taiwan if it’s attacked, would it follow
through if China threatened it with nuclear weapons?
There is no treaty requiring US support, and China might think it could intimidate the
United States out of the equation.
At which point, it seizes the means of production.
Once China takes control of the Semiconductor factories, it’s not hard to see how things
could go south.
China is known for hardball trade tactics, and leveraging its control over this critical
industry to force concessions would likely be its next move.
The first obvious move would be to recognize Taiwan as part of China and remove any sanctions
placed on China for its invasion - something Russia doesn’t have the leverage to do.
But China is unlikely to stop there.
After all, they’ve made other aggressive military moves in the South China Sea and
the Pacific.
While other major powers might be able to step up their own semiconductor production
rather than to acquiesce to China’s demands - although likely not without serious production
delays - the same might not happen for regional countries.
So China might be able to hold other countries’ technology hostage.
China’s likely goal is to control the technology market in the east, if not in the whole world.
It would be a lot easier for small countries to agree to China’s demands than to try
to hold out until they can get the technology they need from other countries.
As long as China’s demands aren’t extreme, the prospect of opposing a technology superpower
might be too much for an Asian or African country to risk.
And so, once it conquers Taiwan, China likely feels it can become the de facto power in
many other countries without ever firing a shot.
At least, that’s the hope - but the reality might be a lot different.
Because while China wants to get leverage over the world through Taiwan’s semiconductor
industry, Taiwan has that leverage right now - and it’s just a question of how much it
wants to use it.
Taiwan has always used a velvet-glove approach with most countries unlike China.
After all, it’s a small power and it needs the support of countries like the United States
more than the United States needs Taiwan.
At least, that was the case - until it became a semiconductor powerhouse.
Now, it might have the leverage it needs to ensure continued support.
But nothing comes without risks.
We’ve already seen how much damage an embargo can cause when the Trump administration decided
to crack down on Chinese manufacturers due to spying allegations.
Because many TMSC semiconductor devices get sent to the United States and wind up in American
devices, Trump banned Chinese access to all US chip technology.
Thus, it was able to ensure that most TMSC chips never made it to China - and particularly
to the controversial Huawei Technologies, China’s biggest tech company.
As part of a trade war, Trump was able to kneecap with his biggest geopolitical rival.
The Biden administration has largely continued Trump’s policies in this area, and TSMC’s
heavy investment in the United States continues.
So what could happen if Taiwan struck harder?
What would happen if Taiwan fully cut off China from its computer chip supply?
For one thing, this would almost definitely be considered an act of war by China - so
this is not a move that would be taken lightly.
It would likely be done if diplomatic relations with China had fully broken down and it seemed
war was imminent.
The odds are this would be a step taken after consultation with the United States and South
Korea, two of Taiwan’s most important technological partners, and after receiving concrete intel
on China marshaling for war.
After all, if you’re going to be hit, why not hit first?
And the impacts would be significant - and immediate.
One way Taiwan could strike back is the most destructive - to China, but also to Taiwan
and to the rest of the world.
In a move reminiscent of Samson pulling down the temple on him, Taiwan and its allies could
immediately target the main chip-production plant and destroy it - ensuring China can’t
get its hands on the infrastructure and control the global flow of semiconductors.
US policymakers reportedly want to deny China access to the chips at all costs, and the
worst-case scenario involves evacuating top scientists and making sure the Chinese forces
don’t inherit anything but rubble.
But this is an extreme measure.
For one thing, this would likely set global supply of semiconductors back years.
While the US and its allies would have the advantage in getting back on their feet thanks
to access to the scientists, that doesn’t mean it would be easy.
No other facility in the world has the same infrastructure needed to manufacture Taiwan’s
level of production, so there would be a lengthy bottleneck even for the people first in line.
And this could cause consequences far worse than a car supply crash - Citadel CEO Ken
Griffin warned that if Taiwan has its semiconductor industry seized by China, it could send the
US into an immediate great depression as essential infrastructure would be unable to keep itself
working and much of the US economy would shut down.
Griffin worried that tough trade policies that freeze out China could make this more
likely - but no one knows if the Chinese have already decided on their next move.
But the worst-case scenario is still on the table.
The United States is still reportedly committed to defending Taiwan’s security - and options
like targeting TSMC are still on the table.
The idea is that this would render Taiwan extremely costly for China to invade - much
like the war in Ukraine is bleeding Russia dry - while denying it any incentive to maintain
the occupation because the most valuable industry is out of commission.
It would be like China getting the goose that lays the golden eggs right after its egg-laying
days end.
But this would still likely see Taiwan at the wrong end of a brutal occupation - and
an angry China might take out its lost money on the country it just invaded.
Fortunately, there is another option - but pulling it off wouldn’t be easy.
Could Taiwan cut off China from its supply of semiconductors without ensuring war?
That heavily depends on how reckless China is - but it’s possible.
TSMC relies on global suppliers to manufacture its chips, and at the first sign of a Chinese
invasion, the odds are those supplies would be cut off to China quickly.
After all, we saw the entire world come together to sanction Russia as soon as they invaded
Ukraine.
Not only did Russia lose access to foreign weapons and supplies, but Russian billionaires
saw their yachts seized and major companies quickly headed for the exit.
Not only is Russia still under crushing military sanctions, but they can’t even watch Netflix.
Take that, Vladimir!
But targeting China in the same way comes with some complications.
For one thing, China has a much stronger infrastructure than Russia.
It’s largely self-sufficient in terms of military hardware, digital infrastructure,
and food supply.
Its economy is much stronger, and it’s already distanced itself from many major western chains
- even Disney can’t get its movies played there regularly anymore!
But like the rest of the world, it needs one thing to keep running - semiconductors and
lots of them.
And it does not make enough on its own soil to have a chance to keep running.
So what would happen if Taiwan cut China off?
China is already cut off from any technology that was developed with the help of the Taiwan
allies sanctioning China, but a full cut-off would cause a much bigger impact.
Much like China assumes that it could cut off the United States from the supply by conquering
Taiwan, the same could happen to China if Taiwan strikes first.
And just about every industry could be affected - including some of the most critical.
Semiconductors are essential in just about every computing device today.
And just about everything is controlled by computing devices now.
For one thing, China’s entire telecommunications structure could find itself in danger if there
wasn’t the supply to replace devices when they went down.
This could cause major issues in transmitting information - and possibly make them dependent
on less-secure technology that could be hacked or intercepted easily.
Most utility systems are run via computer systems now - and with China’s massively
dense cities, any power outage could be disastrous and cause massive civil unrest.
The same goes for China’s transportation infrastructure.
While none of this would happen immediately, the goal would be to unbalance China long-term
to make prosecuting a war in Taiwan far too costly.
But there could be much bigger consequences to the Chinese war machine.
Today’s planes and submarines are among the most advanced machines on the planet - after
all, they often cost billions to design and are made to carry nuclear weapons.
That means they’re heavily dependent on computer systems as well, and China would
likely shift their remaining semiconductor supply to this sector in the event of a war
that cut them off from the industry.
That could mean serious consequences for the country - but that would be a sacrifice they
would be willing to make for the war effort.
There’s a problem with that, though - just ask Russia.
During war, lots of expensive war machines get turned into scrap metal.
Being the stronger power isn’t a guarantee of winning skirmishes, especially when your
target has the protection of a superpower.
And as one Chinese plane and ship after another gets destroyed, they might not have the semiconductors
needed to replace them.
And there is no war without collateral damage.
Another industry would be hit hard by a semiconductor shutdown - and it’s one that no one would
be intentionally targeting in China.
Today’s healthcare industry has come a long way from doctors keeping patient files in
giant drawers.
Today, patient information is often kept in complex computer networks, often on the Cloud,
and it can be easily shared with multiple offices to ensure patients get a good continuum
of care.
Additionally, many of the surgical devices in hospital run on computers as well, and
if something goes wrong, it could stop a hospital in its tracks.
This is why many hospitals have been targeted by ransomware hackers, threatening to hold
the hospital hostage until they get money.
But if a widespread semiconductor shortage threatens hospital supply of devices, it could
seriously compromise healthcare in China - which might put pressure on the country to back
away and get out from under the sanctions.
There’s just one problem with this strategy.
Cutting China off from semiconductors would be seen as an act of war by the larger country
- and they would not hesitate to respond.
So this becomes a game of brinksmanship.
Right now, things are in a slow-boil level of tension with China and Taiwan, with China
constantly threatening Taiwan and conducting war games off the show - but staying just
short of actually attacking.
If Taiwan was attacked, there would be a very short window of time for the United States
and its allies to decide to get involved and defend Taiwan - which is when Taiwan would
likely cut China off and see if it could wait it out as China saw the impacts pile up on
its infrastructure.
But could Taiwan strike first?
It’s possible - but this is a very risky game.
There’s a point where China will view it as a direct attack, but no one is sure where
it will be.
The best chance might be for Taiwan’s allies to slowly “boil the frog” and make it
harder and harder for China to get their hands on any semiconductors that other countries
have anything to do with.
China has been stepping up its own production, but its infrastructure right now is too small
to make up the shortfall - and as their own supply gets lower and lower, they might wind
up too short to risk what they have left on a war they might not be able to win.
But no matter who winds this standoff, everyone can agree on one thing.
Somehow, Taiwan has managed to make itself one of the most important countries in the
world.
Every advanced country largely relies on them - and their neighbor South Korea - for the
little devices that keep just about everything running.
And that means that those two countries are extremely valuable in the global scheme - with
some countries looking to target them and take what they have, and other countries determined
to protect them to keep the global supply flowing.
But not everyone is comfortable with this leverage.
So you can expect to see a lot more semiconductor factories cropping up around the world - maybe
even in your backyard.
Want to know more about this potential showdown?
Check out “China’s Plan To Take Over the World” or “China’s World War 3” plan
for all the details.