Taiwan Semiconductor Manufacturing Co (TSMC) on Tuesday announced plans to expand production capacity in Tainan for its most advanced 3-nanometer chips. It also announced plans to build 2-nanometer plants in Hsinchu and Taichung, with operations scheduled to start in 2025.
TSMC chairman Mark Liu (劉德音) told the firm’s annual general meeting in Hsinchu that he hopes Taiwan’s semiconductor industry would have “a stabilizing effect on global geopolitical conflict.”
After all, China and the US “hope that TSMC is around,” Liu said.
TSMC is often touted as the biggest part of Taiwan’s “silicon shield” and among all the talk of impending doom due to a hypothesized invasion by China, investors and multinationals continue to demonstrate faith in Taiwan’s continued prosperity.
Nobody confused about the apparent contradiction between portents of Armageddon and investor tenacity would have been surprised by a report by the Nikkei Asia published on April 27 that said multinational corporations are including provisions in contracts covering a possible conflict in the Taiwan Strait, business disruptions caused by cross-strait tensions and US sanctions affecting assets in Taiwan if Washington were to say they were under Beijing’s control after an invasion.
Even the whiff of cross-strait tensions sets investors on edge, but the repercussions of actual hostilities breaking out, as Liu alluded to, are something that nobody wants, be they Taiwanese, the Chinese Communist Party or the international community.
The Global Economic Disruptions From a Taiwan Conflict report published by the Rhodium Group in December last year offered what it called a partial and conservative analysis of the outcome of a hypothetical conflict in the Taiwan Strait, which it said would start with “a blockade of Taiwan by China that halts all trade between Taiwan and the rest of the world.” A blockade would put “well over” US$2 trillion of annual economic activity at risk, even before military escalation or the imposition of international sanctions, the report said.
In addition to the economic shock within China, foreign investors dumping Chinese securities, the tightening of capital controls by Beijing to prevent investors from moving money offshore and the probable pause of financing for Belt and Road Initiative projects, by far the biggest effect would be from the strangled supply of chips from Taiwan, and the massive disruption and shortages it would bring to downstream industries, Rhodium said.
These are just predictions of economic disruptions. The clash between China and allies coming to Taiwan’s defense would be far worse, but awareness of the likely economic disruptions has rallied significant sections of the international community to voice support for Taiwan and stress the importance of maintaining peace.
This is part of a process Beijing refers to as the “internationalization” of the Taiwan issue. While internationalization is a catalyst for awareness of Taiwan’s plight and importance, it also increases tensions. Beijing is not happy with the internationalization of a relationship that it has worked so hard to portray as an “internal matter.”
The Chinese Nationalist Party (KMT) believes that pandering to Beijing’s portrayal is the best way to ensure peace, while the Democratic Progressive Party (DPP), especially under President Tsai Ing-wen (蔡英文), believes that internationalization is the best way forward.
How will next year’s presidential election — presuming it is either a KMT or DPP victory — change the calculus? If Chinese President Xi Jinping (習近平) genuinely prefers a peaceful solution — to avoid the insanity of war and the massive, crippling disruptions it would bring — would he be willing to negotiate with a DPP government?
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