Most modern company in Asia – Invasion from China? Taiwan has a secret weapon

With a population of 23 million, Taiwan is a dwarf but a true giant in the international chip industry: no other country in the world can compete with the Taiwanese chip giants, especially the market leader TSMC, in the semiconductor sector.

AMD, Apple, Nvidia, Qualcomm – all made in Taiwan
The world’s largest chip maker operates most of its factories in its native Taiwan – and its customers include some of the biggest names in the high-tech industry, including Apple, AMD, Nvidia and Qualcomm. And TSMC is just the tip of Taiwan’s chip iceberg, IT portal “Heise” emphasizes in an analysis. UMC, number three in the global chip market, is also at home in Taiwan – and is critical to the global automotive industry, among other things.

How important these companies are to Taiwan’s economy and how confident it is in dealing with its overwhelming neighbor, was revealed in a recent interview TSMC boss Mark Liu gave to US television station CNN. In it, the head of Asia’s most valuable company, with a market cap of $425 billion, said: “No one can control TSMC by force.” In the event of a Chinese invasion, TSMC’s leading chip factories simply would no longer function. Liu: “These are production facilities that are so highly developed that they depend on real-time connections to the outside world – Europe, Japan, the US.” This concerns, for example, materials, chemicals, machines, spare parts and software.

China also relies on Taiwan chip factories
According to the TSMC boss, Beijing should also have a stake in Asia’s most important company that continues to manufacture highly developed microchips. Because Chinese rivals like semiconductor company SMIC lag behind TSMC in manufacturing technology. They have tried to catch up in recent years, including by poaching TSMC personnel. But that hasn’t happened yet.

However, Chinese customers still account for one-eighth of TSMC’s total sales, equivalent to $2 billion in volume. There are also other chips manufactured by TSMC that are processed in China. For example, AMD has manufactured its processors, some of which are subsequently used in Chinese computer factories, exclusively by TSMC.

Photo gallery: what it looks like in a TSMC factory

Without Taiwanese chips, the economy would grind to a halt
The importance of Taiwan to the global semiconductor industry is also reflected in its market shares: market researcher Trendforce estimates that Taiwan’s share of the global chip industry, based on revenue, is about two-thirds. When it comes to production capacity, Taiwan is also a giant at 48 percent. If an invasion stopped and Taiwan’s chip industry came to a standstill, it would be catastrophic and send shockwaves across the global economy. Entire industries that depend on Taiwan’s semiconductor technology would simply come to a standstill. The lack of chips, which in recent years has repeatedly led to a reduction in working time at car manufacturers, is said to be nothing short of dangerous.

These prospects inspire confidence in Taiwan that its all-powerful neighbor would not dare to invade. Taipei sees its world-leading chip industry as life insurance: As long as countless major companies – whether in North America and in Europe or China – depend on Taiwan’s chip expertise, there will also be allies interested in Taiwan’s independence in the event of Chinese aggression. In short, Liu appeals to the political actors to reason, a war does no one any good. If the Russian invasion of Ukraine shows anything, it’s that all sides are losing.

Conflict arose in 1949
There are historical reasons why the small island nation off China’s coast is enraging Beijing’s government: In 1949, the Chinese Civil War between Mao Zedong’s Communist Party and the nationalist Kuomintang Party under Mao’s opponent Chiang Kai-shek ended with the defeated Nationalists. returned to Taiwan and proclaimed the Republic of China there. It came to a dispute with the Communist People’s Republic. Both sides stressed that there could only be one China and claimed leadership.

The conflict has been dormant for decades. To avoid escalation, most western countries today do not recognize Taiwan as a state, but treat it as a state. In a dispute with Beijing, Taipei later abandoned its plans for reconquest and transformed, under the protection of the United States, from a military dictatorship into a democracy. The communists consolidated their power in Beijing, where President Xi Jinping still has the repatriation of the “demolished province” on his agenda.