Taiwan’s ‘silicon shield’

COMMENTARY

Because if war breaks out in the Taiwan Strait, it becomes a battleground right at the beating heart of our digital world, a prospect catastrophic to the world economy.

Tensions over Taiwan are of urgent concern to us just as Washington's firm commitments to us as a treaty ally.

Undoubtedly, United States Vice President Kamala Harris' visit to the country this week is all about the US commitments to our economic, diplomatic, and military needs.

Yet, before Ms. Harris's bilateral meeting with Mr. Marcos Jr. Taiwan ranked high in the meeting's agenda, Ambassador to Washington Jose Manuel Romualdez said.

"I'm sure they will touch on the Taiwan situation," said Mr. Romualdez predicted about Ms. Harris "fairly good briefing" to Mr. Marcos Jr. on the recent three-hour meeting between US President Joe Biden and Chinese President Xi Jinping in Indonesia.

But why should we trouble ourselves with Taiwan when we have enough troubles of our own with China as it is?

Why? Because if war breaks out in the Taiwan Strait, it becomes a battleground right at the beating heart of our digital world, a prospect catastrophic to the world economy.

As Chris Miller writes in his recent book "Chip War: The Fight for the World's Most Critical Technology": "The world's chip industry, as well as the assembly of all the electronic goods chips, enable, depends more on the Taiwan Strait and the South China coast than any other chunk of the world's territory except Silicon Valley."

And, costs from disruptions to Taiwan's chip production arising from war could run to trillions of dollars that "could well be more costly than the Covid pandemic and its economically disastrous lockdowns."

Computers, phones, data centers, and most other electronic devices can't work without chips — those tiny electric switches containing billions of microscopic transistors that flip on and off to represent information.

Now, the world's complex trillion-dollar microchip industry has factories scattered all over the world producing "more transistors every day than there are cells in the human body."

Significantly, however, most big semiconductor firms nowadays don't produce semiconductors at all.

These big semiconductor firms simply design and plan the chips' architecture, earning the moniker "fabless" — meaning they don't fabricate chips and instead outsource the production of their chips.
East Asia happens to be the outsourcing heavyweight in chip production.

Taiwan produces 41 percent of all processor chips and more than 90 percent of the most advanced chips.

China surprisingly produces only 15 percent of all chips and most of the low-tech variety even as it tries to catch up.

With chip fabricating factories, however, only two real giants stand out: Samsung of South Korea and TSMC (Taiwan Semiconductor Manufacturing Company).

Arrayed along the western coast of the Taiwan Strait, TSMC's chip fabrications supply all the American "fabless" firms and produce 90 percent of the most advanced chips, those tiny, three-dimensional transistors, each smaller than a coronavirus, measuring a handful of nanometers (billionths of a meter) wide.

Outside of advanced chips, TSMC also supplies China, making some Taiwanese believe their chip fabricators allow them a sort of "silicon shield" hopefully preventing a Chinese invasion.

Both the US and China, therefore, would like more control over TSMC and other semiconductor supply chains crisscrossing the Taiwan Strait.

Last 7 October, the Biden administration launched a technological offensive against China when it placed stringent limits and extensive controls on the export, not only of integrated circuits but also their designs and the machines used to "write" them on silicon.

Foreign observers conclude this export blockade is "far more threatening to Beijing" than outright hostilities since the aim is clearly to slow down China's economic development.