Taiwan’s semiconductor industry gives it a strategic advantage, but that advantage would be threatened as the US seeks to end Taiwan’s monopoly in the industry and as China grows more assertive, analysts said at a security dialogue last week.
While the semiconductor industry is Taiwan’s “silicon shield,” its dominance has been seen by some in the US as “a monopoly,” South Korea’s Sungkyunkwan University academic Kwon Seok-joon said at an event held by the Center for Strategic and International Studies.
In addition, Taiwan lacks sufficient energy sources and is vulnerable to natural disasters and geopolitical threats from China, he said.
Academia Sinica Institute of Sociology researcher Wu Jieh-min (吳介民) at a forum last month said that it has been debated whether the global economy’s reliance on Taiwan’s chips would even be a deterrent to Chinese aggression.
Taiwan must proactively integrate further with the global community to strengthen its security and industrial resilience, he said.
As Wu suggested, Taiwan should not rely on the strength of its semiconductor industry alone to protect against a Chinese attack. Taiwan’s post-war economic boom was fueled by the manufacturing of textiles and electronic appliances, and although there was a shift to capital-intensive and knowledge-based industries in the 1980s, Taiwan’s dominance in chips did not occur until roughly two decades later.
Starting around 1977 there were major innovations in the industry from Taiwan’s Industrial Technology Research Institute, United Microelectronics Corp (UMC) and later Taiwan Semiconductor Manufacturing Co (TSMC), which was founded in 1987. However, the US remained dominant in the industry until about 2007, by which time TSMC was making the majority of the world’s more advanced semiconductors.
By the late 2010s, policymakers and analysts in the US and Europe were beginning to discuss Taiwan’s monopoly in the industry, and the threat that a Chinese invasion of Taiwan would pose to the global economy. Likely in response to that threat, the US passed the CHIPS and Science Act in 2022 and the EU passed the European Chips Act last year, which aim to spur chip development and manufacturing.
Taiwan has enjoyed dominance in the industry for less than two decades, and with so much focus on chip development globally, it is anyone’s guess how long it can remain the top player. South Korea is also a major player, and China — despite being about three to five years behind Taiwan technologically speaking — is investing heavily in semiconductors.
It is unlikely that China would be motivated by Taiwan’s chip dominance to attempt an invasion to take over the fabs of TSMC, UMC and other Taiwanese companies. Companies have already told Bloomberg that they could remotely disable their fabs, rendering them useless. China would be unable to sell the chips to the global market following an invasion, anyway, as it would find itself under multiple sanctions.
Asia-Pacific Foundation of Canada research and strategy vice president Vina Nadjibulla said that China is trying to “fortify itself from the West” and “fully integrate itself” with the non-Western world. That might be true, but relationships with the US and EU would always be significantly more valuable to China than those with the BRICS bloc or Shanghai Cooperation Organization member countries.
While China is likely to be deterred from attacking Taiwan for fear of sanctions and potential US military involvement in the conflict, Taiwan should still invest heavily in its asymmetric warfare capabilities (submarines, long-range missiles and drones), and should seek to diversify its tech industry through dominance in artificial intelligence (AI) software and hardware.
President William Lai (賴清德) has already confirmed investments in AI, so Taiwan is on the right path, regardless of what happens to its chips sector.
