A China-Taiwan Conflict Could Lead To A Catastrophic Semiconductor Shortage In The World

This past week, U.S House Speaker Nancy Pelosi visited Taiwan despite repeated warnings from China not to do so, leading to China conducting live fire exercises around Taiwan.

As a result, the political unrest highlights how heavily the world depends on Taiwan for semiconductors. In addition, the ongoing global effects of Russia’s invasion of Ukraine, such as the coming gas crisis in Germany brought on by Russia’s tightening gas supply, make it a crucial problem.

The worldwide semiconductor issue of 2021 made Taiwan’s dependence on the global economy clear. For instance, the semiconductor scarcity significantly impacts the automotive industry, which has forced many significant firms to halt production.

Taiwan Semiconductor Manufacturing Co. (TSMC) is the world’s largest chip foundry and Apple’s primary chip producer. However, the U.S. and Europe politicians have discussed the urgent need to boost or build their chip industry to reduce the reliance on TSMC’s production.

“TSMC, if you just have a look at market share, I believe manufactures around 50 percent of all semiconductors in the world,” said Dan Wang, a technology analyst at research firm Gavekal in a podcast last year.

“And I think that still understates how important it is because these are some of the most advanced chips out there,” he added.

Authorities have invested billions in expanding their local chip production capacities in response to the increased risk of violence. For instance, the United States Congress recently approved a $52 billion funding proposal to help TSMC and Intel Corporation increase their manufacturing operations in the area.

It stands to reason that if China invaded Taiwan, the effects of war would far surpass any difficulties brought on by a chip shortage.

The chairman of TSMC, Dr. Mark Liu, has also commented on the effect. “War can only create problems on three sides. . . all the sides. We need to prepare for the worst, but we should hope for the best.” It would be a lose-lose situation for all sides, Dr. Liu added.

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