Experts tell IAN BIRRELL that conflict with China would create worldwide shockwaves greater than Covid and may cost trillions of dollars, as Taiwan leads the world in the production of cutting-edge computer chips that are now essential to our daily life.
Taiwan’s new cash crop consists of cutting-edge computer chips.
The rapidly expanding technology park in the south of the island produces the world’s most advanced semiconductors, which are 10,000 times thinner than a sheet of paper. “The global cost of conflict might reach trillions of dollars.”
For years, the rich grounds around Tainan, the historical capital of Taiwan renowned for its firefly, cuisine, and hundreds of ancient temples, were covered with verdant rice paddies and vast sugar cane fields.
Today, however, if you drive north from the city, past the National Museum of Taiwan History, you will find yourself surrounded by dozens of drab, low-rise industrial buildings.
Instead of rural tranquility, there is the hustle of construction sites. In the shade of trees, groups of young workers smoke and converse while others dash along the street under the scorching sun, holding lunches from noodle stands.
A local man in his twenties remarked, “I grew up in an entirely different world.” Now everything is engineers, scientists, and new construction.
For Taiwan has discovered a rich new cash crop: the production of cutting-edge computer chips, the small silicon semiconductors that are the building blocks of modern society, from national defenses to power grids, healthcare systems, stock trading, and transportation.
Taiwan has discovered a profitable new cash crop: advanced computer chip manufacturing.
This rapidly expanding research park in the south of the island already manufactures the world’s most advanced, paper-thin chips. Soon, it will produce an even smaller, faster, and more efficient next generation.
As a result of Taiwan’s market supremacy, which vastly outpaces that of China and the United States, there are concerns about the terrible worldwide repercussions if the Chinese government ever carries out its threat to grab the prospering island democracy on its doorstep, Taiwan.
Chris Miller, a professor of economic history and the author of Chip War, a book analyzing the struggle for control of microchips, which he argues are now humanity’s most vital industrial resource, stated, “We all now depend on peace in the Taiwan Strait.” ‘The cost of a battle between China and Taiwan may reach trillions of dollars for the global economy, with nearly every corporation damaged by years-long delays in the delivery of goods upon which our society depends. The shock may be even worse than the Covid epidemic.
Chris Miller, a professor of economic history and the author of Chip War, a book on the struggle for control of microchips, which he argues are now humanity’s most vital industrial resource, said, “Peace in the Taiwan Strait is now essential for all of us.”
Miller considers microchips to be “the new oil” – a limited strategic resource that fuels military, economic, and geopolitical dominance. A standard mobile phone comprises 22 chips, yet a small diabetes monitor has only four and a domestic coffee maker has only three. As a result of their significance, some experts fear that the Beijing leadership may launch an attack on Taiwan just to grab its chip-producing foundries.
China’s performance in this industry is surprisingly bad. It spent more than $100 billion (£84 billion) developing its own semiconductors, only to realize recently that a significant portion of the funds had vanished due to corruption. It is believed that its semiconductor sector is at least a decade behind Taiwan’s.
Others, though, argue that Taiwan’s $125 billion (£106 billion) chip sector may dissuade an invasion because China’s businesses and military are so dependent on it. It has been referred to as a “silicon shield” and “huguo shenshan” – “the mountain of magic that defends the nation.”
“If there is a battle across the Taiwan Strait, there will be no victor,” declared Lee Hsi-Min, the former chief of staff of the country’s armed forces. It is a form of economic deterrence because Taiwan is so far ahead and supplies the world with the most advanced semiconductor.
However, the admiral warned that the Ukraine war demonstrates that dictatorships do not always act rationally. Beijing may concur that the outcome would be catastrophic, but this may not be enough to deter them.
A software entrepreneur in his nineties who reads Shakespeare before night to acquire insight into “the grandeur, greed, brutality, and ugliness of human nature” is crucial to Taiwan’s chip domination.
In the past decade, Morris Chang has transformed his company into a global technology powerhouse and one of the world’s most valuable corporations. However, few people outside the industry are familiar with the name of this billionaire visionary or his behemoth company, let alone his extraordinary life story.
After a terrible adolescence in China and Hong Kong marked by war, poverty, and instability, he was admitted to Harvard University in the United States and ascended steadily through the ranks of the US semiconductor company Texas Instruments.
Chang accepted Taiwan’s offer to modernize its technology sector by establishing a semiconductor industry, then left to establish his own company, Taiwan Semiconductor Manufacturing Company, after being passed over for the top role (TSMC).
Morris Chang has transformed his company, Taiwan Semiconductor Manufacturing Company, into one of the most valuable firms in the world over the past decade (TSMC)
His breakthrough occurred in 2012 when he obtained a contract to manufacture iPhone processors for Apple. Now, only ten years later, his company is the largest contract chip manufacturer on the planet, owning roughly 90 percent of the market for the most advanced superconductors.
Chang’s brilliance was focusing on manufacturing rather than design, as he foresaw that technology corporations would outsource production as chip foundries became more complicated and expensive to operate.
As a result, his rise went virtually unnoticed, as all of his company’s items appeared under other brands while generating enormous profits for reinvestment. The company’s latest multi-billion-pound plant in Tainan, which is the size of 22 football pitches, will soon produce the next generation of chips, which are expected to be up to 70 percent faster and more power-efficient than the most advanced ones currently in production. Only one other competitor, Samsung in South Korea, can produce these chips.
His breakthrough occurred in 2012 when he was awarded a contract to manufacture iPhone processors for Apple.
Chang pioneered Taiwan’s growth as the dominating power in chip production, with clusters of support firms feeding off his success, despite his resignation as chairman. This has stoked jealousy in China and the United States, with the latest alarm raised over China’s saber-rattling after the controversial recent visit to Taiwan by US House Speaker Nancy Pelosi.
She visited with a top TSMC executive, as did five additional US Congressional politicians a few days later, contributing to China’s displeasure over the most senior Washington figure to visit Taiwan in the past quarter-century.
The Communist regime unleashed an unparalleled military display in the air and seas surrounding Taiwan in an effort to deliver a stern reminder that it views Taiwan as a renegade province, not a sovereign state. President Xi Jinping has stated that China will “take all necessary methods” to seize the affluent island democracy 110 miles off its coast.
Last year, the world witnessed Taiwan’s significance when automakers in Germany, Japan, and the United States were forced to halt vehicle production and close operations due to a chip shortage caused by the epidemic.
China and the United States are engaged in an intensifying struggle for global preeminence, which has compelled TSMC to cease supplying Huawei, formerly its second-largest customer after Apple.
Chang’s brilliance was to concentrate on manufacturing rather than design, foreseeing that technology corporations would outsource production as chip foundries got increasingly complicated and expensive to operate.
TSMC has opened two facilities in China and is constructing a third in Arizona. However, Taiwan continues to be home to 15 of its production units and its most advanced production facilities, as well as 57,000 of its 63,000 employees, of which half possess doctoral or master’s degrees.
According to a Taiwanese industry observer, Beijing has been attempting to lure personnel with lucrative compensation packages. “I’ve seen many friends move to China, but after three to five years, they are sidelined after imparting all their knowledge and abilities,” she added, adding that upon their return, they are generally viewed as traitors and have difficulty finding excellent positions.
The crucial question is whether the Chinese government will adhere to these strategies or take more direct action that might have catastrophic repercussions for the entire world.