A “crisis” between China and Taiwan would impact “literally every country on Earth,” US Secretary of State Antony Blinken told Euronews last week.
In the midst of escalating tensions between the two nations, China conducted three days of military exercises around Taiwan, which Beijing views as a renegade province.
Any outbreak of hostilities in Taiwan would likely have significant economic and security repercussions worldwide. However, one of the most significant may involve the production of semiconductor processors.
Semiconductors allow the world to function. They are indispensable components of digital products, devices, and infrastructure, including smartphones, automobiles, and medical and military equipment.
As the world becomes increasingly digital, with more Internet of Things (IoT)-enabled devices, artificial intelligence (AI), and cloud, edge, and quantum computing, the demand for semiconductors will only increase.
Blinken noted in his Euronews interview that Taiwan is by far the largest producer of the semiconductors in the globe.
China has resolved to reunite the democratic island of Taiwan with the mainland, a goal that Western nations interpret as code for a potential future large-scale military intervention.
Why are semiconductors so essential and what are they?
Semiconductors, also known as semiconductors, are indispensable components ofinnumerable electronic products that we use every day.
Without semiconductors, everything from smartphones, radios, televisions, computers, laptops, video games, automobiles, airplanes, and other modes of transportation, to a vast array of medical devices, would cease to function.
According to a report from the consulting firm McKinsey & Company, the industry is expected to reach one trillion dollars by 2030.
This report predicts that approximately 70% of growth will be driven by three industries: automotive, computation and data storage, and wireless.
Despite their importance to the modern world, semiconductors are difficult to produce. Producing them is a time-consuming, costly process involving a number of intricate processes.
It is also an expensive and time-consuming process, making it difficult for manufacturers to react rapidly to market changes or technological advancements.
Due to the significance of chips in so many products, disruptions in chip production have devastating effects on the global supply chain. During the COVID pandemic, work-from-home orders caused semiconductor factories to cease in 2020.
When factories began to reopen, there was already a backlog of orders as a result of the increased demand for processors caused by the increase in demand for electronics from people working from home.
This resulted in a shortage of newly manufactured automobiles, as semiconductor manufacturers struggled to meet the increased demand.
Taiwan’s semiconductor manufacturing significance
Taiwan is by far the largest semiconductor manufacturer in the globe. It generates more than sixty percent of them worldwide, and ninety percent of the most advanced ones.
Its largest manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), supplies processors to companies such as Apple, Qualcomm, and Nvidia, accounting for approximately 54 percent of the global market.
Approximately 12% of the market is held by the United States, whereas only 9% is held by the European nations combined.
Both the United States and the European Union intend to increase semiconductor production. EU officials plan to increase Europe’s share to 20% by 2030, while the US government passed the CHIPS act and invested billions in semiconductor manufacturing last year.
Taiwan remains a crucial source of processors for the world’s electronics, despite the difficulties and costs involved in establishing the entire manufacturing process.
How Chinese aggression against Taiwan might impact the supply
Given Taiwan’s near monopoly on the production of sophisticated chips, any military conflict between China and Taiwan would have enormous global repercussions.
Taiwan’s semiconductor production dominance has been dubbed the “Silicon Shield” by some analysts, implying that China could be prevented from re-absorbing Taiwan due to Taiwan’s global significance in manufacturing electronic components.
China’s recent military exercises around the island raise concerns about the effectiveness of the shield.
“Every day, fifty percent of global commercial traffic passes through the Taiwan Strait,” Blinken told Euronews on April 5 following a NATO foreign affairs meeting in Brussels.
He continued, “Seventy percent of the semiconductors we need for our smartphones, dishwashers, and cars are manufactured in Taiwan.”
The global economy would be severely disrupted if a crisis arose as a result of China’s actions, which is why the international community expects everyone to conduct and act responsibly.
He added, “I heard this in conversations with many of our NATO allies and Asian partners: there is concern that, should there be a crisis as a result of China’s actions regarding Taiwan, it would have repercussions for literally every country on earth.”
If China were to blockade or invade Taiwan, the preponderance of semiconductors used in products around the globe would be immediately cut off.