The Chinese Communist regime’s invasion of Taiwan has ceased to be only a threat and has become a real and concrete possibility. So much so that the U.S. President Joe Biden himself has been explicit in promising to involve U.S. forces in the event of a Chinese attack on Taiwan.

But it is not only Taiwan’s sovereignty that is at stake in a war and invasion scenario. Taiwan is the global leader in semiconductor production, not least because it owns TSMC (Taiwan Semiconductor Manufacturing Company) the world’s largest chip maker.

TSMC has proven to possess cutting-edge technology and plays an indispensable role in keeping the global economy going. Companies such as Apple, Tesla and Volkswagen AG rely on TSMC chips, as does the U.S. military and a myriad of products associated with the technology.

California-based Intel Corp. is a couple of generations behind the Taiwanese company’s technology and despite the great economic efforts it is making has yet to catch up.

There is great concern about what would happen in the event of a war or the Chinese regime taking control of these production plants in Taiwan. 

The global supply chain is highly sensitive to the semiconductors produced by TSMC and should their production and/or prices be disrupted the economic and social consequences could be disastrous.

The U.S. National Security Council projects in its reports that a Chinese invasion and the loss of TSMC could disrupt the world economy generating losses in excess of $1 trillion, roughly double the value of the annual global sales of the entire semiconductor industry. 

There are several possibilities for what to do with TSMC in the event of a Chinese invasion. The most extreme one is the option of the United States destroying TSMC’s Taiwan facility to prevent the regime from having free access to such a tool of power. 

With many details still to be worked out, academics, military, and U.S. officials are developing various contingency plans to implement in the event of a worst-case scenario.

Taiwan and the U.S. strengthen alliance in the face of Chinese regime threat

The great technological and arms development of the United States was accompanied by a strong dependence on the use of semiconductors. However, domestic production of this essential product did not keep up with demand, forcing the United States to turn to countries that have developed this industry better, such as Taiwan. 

This close relationship led the United States to make a commitment to defend Taiwan against a possible Chinese invasion. Last month, the Senate Foreign Relations Committee approved a law guaranteeing “unconditional support” for Taiwan. 

And Taiwan pledged to work closely with the United States and other allies to prevent the regime’s armed forces from acquiring its cutting-edge technology.

At the same time, TSMC reached an agreement to build a chip production plant in Arizona, with an investment of more than $12 billion. Although in principle it would not transfer its most advanced technology.

The most radical option

Despite the distance that separates the United States from China and Taiwan, the U.S. has been immersed in the middle of the conflict between the parties. This means that in the event of actual combat, or an attempt by the regime to invade the island, the U.S. will have to take on some role. 

Although Biden’s government has already stated that it would defend Taiwan with weapons, reality has shown that this type of conflict could last a long time (such is the case of the conflict between Russia and Ukraine). So there is concern about what the regime could do with industries such as TSMC, until such time as the West manages to impose itself against China. 

An article by two academics published in the U.S. Army War College Quarterly suggests that the United States should make it clear to the communist regime that it will destroy TSMC’s facilities if the island is occupied.

According to the article’s authors, such a move could deter military action by the CCP or ultimately deprive it of access to TSMC’s production plants.

Elbridge Colby, a former Pentagon official and national defense strategy contributor during the Trump administration said, “We can’t allow such a valuable equity to fall into Chinese hands, I think it would be nuts.”

Another option being considered in the event of an all-out invasion by China is for the U.S. to evacuate Taiwan’s chip engineers.

However, even if evacuation were feasible, replicating elsewhere the infrastructure TSMC has established in Taiwan would take years and a multibillion-dollar investment. This would not mitigate the impact on the global supply chain in the short to medium term. 

These are just some of the leaked possibilities, but the scenario is very uncertain and so far U.S. officials remain tight-lipped.

Liu Deyin, president of TSMC, speaking about the importance of Taiwan’s semiconductor industry chain during an interview, stated that no one can control TSMC by force. Liu said that in the event of military action, TSMC’s factories would stop operating.

Liu emphasized the complexity that has developed at TSMC’s production plant. To produce its raw materials, chemicals, equipment parts, and engineering software, it must be in real-time contact with other companies and professionals in Europe, Japan, and the United States. 

So TSMC depends on the efforts of many people to operate normally, and if it were to try to be controlled by force, it would not be possible for it to function properly, the company leader said in an attempt to convey some peace of mind.

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