Semiconductor Business Intelligence recently published a different take on China's plans for Taiwan and TSMC. Numerous predictions have been made about the events that would unfold if China invaded Taiwan, with most theories predicting that either Taiwan or the US would destroy TSMC's fab to deny China ownership of what are arguably the most important factories in the world. However, Claus Assholm, a semiconductor analyst, has a contrarian take—what if China's strategy to deal with TSMC's presence in Taiwan is simply to destroy it?

"What if China is not deterred by potentially mined TSMC factories and ASML kill switches? What if the reunification plan is based on eradicating the TSMC factories and the Semiconductor supply chain in Taiwan and beyond?" Assholm ponders in his blog.

It's no secret that the Chinese Communist Party (CCP) has ambitions of bringing Taiwan under its control as part of China. However, the prevailing thought in many tech circles is that its plans are somewhat tempered by TSMC or the threat of its destruction if the Chinese People's Liberation Army (PLA) fails to capture its facilities during an invasion's opening hours.

Much of the globe's advanced semiconductors come from the island, so regional conflict will affect chip supply. TSMC and its advanced chip fabs are considered a strategic resource by the U.S. and its allies, with the U.S. Commerce Secretary saying that a Chinese seizure of the company would devastate America. The U.S. has even been said to be willing to bomb TSMC facilities themselves in case of a Chinese invasion, and the company added a remote self-destruct function to its EUV machines.

Washington has been applying several sanctions to hamper Beijing's semiconductor aspirations. Still, even if it has slowed down hardware development in China, Chinese tech firms have made several innovations that are slowly allowing them to pursue advanced technology while decoupling from Western sources.

Assholm says that Taiwan and South Korea own 22% and 28% of the global semiconductor capacity, respectively, with China coming in third at 12%. However, if both countries are removed from the equation, China's 12% will quickly jump to about a third of global capacity.

In this scenario, Assholm says that China's share of semiconductor output would only grow annually, even as the U.S. supercharges its semiconductor manufacturing industry. The CHIPS Act spurned chip fab investments to greater heights than the past 28 years combined. After all, Beijing is also investing billions into its tech industries to drive development.

If a conflict occurs between Korea and Taiwan, the two biggest semiconductor manufacturing nations would be taken out of play, putting China on top. Furthermore, the analysis said that if Taiwan were to get into an armed conflict, American semiconductor manufacturing would only suffer a slight loss, with integrated device manufacturers (IDMs like Intel) gaining market share. At the same time, fabless companies would incur massive losses. On the other hand, the semiconductor supply chain would be gravely affected as it would leave the U.S. dependent on other unaffected sources. However, in both scenarios, China will become a self-sufficient country in the long run.

 

After the dust settles, China, with most of its supply chain based in-country, would likely be the leading global electronics supplier, especially with both Taiwan and South Korea devastated. Even though we will likely have our electronics turned back by about 15 to 20 years, we'd still gladly buy them from the cheapest quality supplier, especially as we transition our society into an electronic, interconnected one.

Fortunately, as Assholm points out, this is just a scenario. But war is irrational, and to some, it's just a tool to remain in power. History shows that even the most significant trading partners can get into a shouting match because of one dictator. Let's hope that cooler heads prevail and we continue living in peace.

Taiwan reports more Chinese military activity, calls for de-escalation

Taiwan on Friday reported renewed Chinese military activity nearby with another "combat patrol" as the government called on Beijing not to escalate tensions after the seizure of a Taiwanese fishing boat.

China, which views democratically governed Taiwan as its own territory, has stepped up its pressure over the past four years, both militarily and politically.

On Tuesday, Chinese officials boarded and detained a Taiwanese fishing boat for illegally operating in the country's waters, in what a senior Taiwan official said may be act of psychological warfare.

Taiwan's defence ministry said that starting just before 7 a.m. (2300 GMT) on Friday, it had detected 26 Chinese military aircraft, including J-16 fighters, carrying out a "joint combat readiness patrol" with Chinese warships.

The Chinese aircraft flew into airspace to the north, centre and southern part of Taiwan, the ministry said.

Taiwan has detected at least 127 Chinese military aircraft operating near the island since the start of this month.

China's defence ministry did not immediately respond to a request for comment.

Speaking to reporters earlier on Friday, Taiwan Premier Cho Jung-tai said fishermen should raise their alert level and not do anything that could be considered illegal.

"At the same time, I also want to ask the Chinese side not to escalate with any the use of any excessive measures, because this can easily cause tension and unnecessary confrontation which is extremely unnecessary," he added.

China says the root cause of its problems with Taiwan is what Beijing views as the "separatist" views of new President Lai Ching-te.

China staged war games shortly after Lai took office in May, and has rebuffed his repeated calls for talks.

Lai rejects China's sovereignty claims, saying only Taiwan's people can decide their future.

Why Texas Gov. Greg Abbott is opening a state office in Taiwan

Texas will open a state office in Taiwan to enhance trade and cultural relations, Gov. Greg Abbott announced Sunday during an economic development trip to Asia.

“Texas and Taiwan are critical economic partners that seek to drive the future of innovation,” Abbott said in a news release from Taipei, the capital of the self-governing island off the coast of China. "Both initiatives — an economic agreement and a new State of Texas Taiwan Office — will strengthen the economic and cultural relationship between Texas and Taiwan."

The new office in Taiwan will fall under the governor's economic development and tourism umbrella.

The trip to Asia also included visits to South Korea and Japan. The governor was joined by his wife, Cecilia; Texas Secretary of State Jane Nelson; Democratic state Sen. Carol Alvarado of Houston; and Republican state Reps. Angie Chen Button of Richardson, Giovanni Capriglione of Keller and Jacey Jetton of Katy. Button was born in Taipei.

The United States severed diplomatic ties with Taiwan, once known as the Republic of China, in 1979 as part of the agreement that normalized the nation's relationship with the People's Republic of China, which had been isolated after the Communist takeover in 1949.

However, according to the U.S. State Department, which describes Taiwan as "a leading democracy and a technological powerhouse," the U.S. and Taiwan "have a robust unofficial relationship."

"The United States and Taiwan share similar values, deep commercial and economic links, and strong people-to-people ties, which form the bedrock of our friendship and serve as the impetus for expanding U.S. engagement with Taiwan," the State Department says on its website.

Abbott signed what his office called an Economic Development Statement of Intent with Taiwan Economic Affairs Minister Jyh-Huei Kuo "to further boost investment, expand trade, spur job creation, and increase innovation in critical industries between Texas and Taiwan."

The document's priorities include collaboration in such sectors as semiconductor manufacturing, electric vehicles and energy resilience.