If China Controls Taiwan’s Chip Manufacturers, It Will Control The World

If China Controls Taiwan’s Chip Manufacturers, It Will Control The World

It’s a real possibility China could take over Taiwan and seize the majority of the world’s production of chips, which are used in aircraft, warships, submarines, cars, iPhones, computers, and more.
Bob Anderson
By

If Americans think the shortage of cars due to chip supply issues is bad, then consider what it would mean if the U.S. military were deprived of the advanced chips required for its arsenal of war equipment. It’s a real possibility as the world’s largest and most advanced semiconductor manufacturers sit precariously, approximately 100 miles off the coast of communist China on the island of Taiwan.

In total, Taiwanese companies supply 63 percent of global semiconductors, compared with 12 percent by U.S. manufacturers. Taiwan Semiconductor Manufacturing Co. (TSMC) alone provides over half the world’s made-to-order chips, and an estimated 90 percent of advanced processors.

China’s leader Xi Xinping knows of the technological power that lies just within reach. After pumping billions into China’s chip fabrication efforts, the country is still trailing years behind TSMC. There is no substitute for simply taking Taiwan’s established world-class capabilities, which cannot be readily replicated. In one swift movement, the Chinese Communist Party could both supply itself and deny distribution to whomever it chooses.

If there were any doubts about China’s intentions for Taiwan, the country’s communist leaders are quickly erasing them for all to see. Recently, its military held assault drills on the beach closest to the free soil of the democratic republic that it so desperately wants to own and control. A few months earlier, it had already set an annual record for flights around Taiwan — nearly 400 aircraft.

In one day, October 18, Taiwan’s Ministry of Defense reported 56 Chinese fighter jets within its Air Defense Identification Zone, causing air defense missile systems to be activated. As if underscoring its point, China’s intrusions came one day after the United States condemned its military activity near Taiwan. Xi has repeatedly stated his intent to “unify” China.

Asked recently if he thinks China will invade Taiwan, Gen. Michael Flynn responded, “I believe right now that this is the highest level of threat against Taiwan that I have ever seen … yes, I believe the Chinese are preparing the battlefield to basically take over Taiwan.”

Commenting further regarding China’s view of an “apathetic and weak” White House in the aftermath of the retreat from Afghanistan, he said, “I don’t think China is going to allow themselves to go another couple of years and potentially lose the advantage that they have with the Biden administration right now.” The outcome is now “inevitable.” Like Hong Kong, he believes Taiwan will be subsumed by China.

We should at least know the consequences of such an action.

Wars Over Oil Supply Will Now Be About Chips

In the wars of the last century, oil was the essential commodity of armies. Japan’s attack on Pearl Harbor was largely sparked by America’s embargo of its imported supply. After war was declared, Japan immediately pivoted to seek and conquer supplies within its region to fuel its forces. Allied bombardments in Europe were largely focused on denying the Nazi machine of the oil that turned its gears.

Today, if you control access to microchips then you can control the world – cars, iPhones, computers, cameras, and the machines of war. Every aircraft, warship, submarine, and many ground-based weapons require them, as do missiles.

It was reported in April that the secretive China Aerodynamics Research and Development Center was actively developing hypersonic vehicle technology. While the Biden administration was busy figuring out how to retreat from Afghanistan, those efforts continued unabated.

They culminated with the “surprise” launch of a nuclear-capable hypersonic test missile in August. It circled the globe at a more difficult to defend low-altitude orbit before missing its target by a mere few dozen miles. It shook the world, and it should shake politicians into the realization that it was only accomplished with American software – and chips made in Taiwan.

Outsourcing Chips Equals Outsourcing Security

Even as the United States is still regarded as a leader in chip design, it long ago outsourced most fabrication to more cost-efficient locales in the Far East. Realizing this strategic weakness, Congress approved $52 billion in June for domestic semiconductor manufacturing via the U.S. Innovation and Competition Act, but it may be too little, too late.

As members of Congress crow to voters that they’ve done something, Taiwan Semiconductor Manufacturing Chairman Mark Liu notes that his company is investing $100 billion in new capacity, and “it’s not going to be enough.” Investments from partner companies such as Apple, Nvidia, and others will amplify that number to a “budget that is 100 times what you will see on their financials,” according to semiconductor industry expert Daniel Nenni.

Contrary to popular belief on Capitol Hill, every problem cannot be solved with more money – particularly one that requires replicating the capabilities of fabricators who have invested decades of time and effort toward learning how to create a transistor that is 1/20,000 the width of a human hair, using a process that involves more than 1,500 steps. Today, only TSMC and South Korea’s Samsung Electronics can produce the most advanced 5-nanometer chips.

TSMC already has its eyes on a new 3-nanometer chip that will be 15 percent faster. According to Nenni, it will be “impossible for any company or country to catch up to this huge ecosystem that’s moving forward like a freight train.”

Even if available for procurement, chips from overseas still present an inherent security risk. During the development of the Joint Strike Fighter, the Pentagon found that components were changing hands as much as 15 times before being delivered for installation, with many countries involved, including Taiwan and China. Each step in the process represented an access point for foes to compromise or study the technology involved.

To counter this threat, a “Trusted Foundry Program” was created in 2004 by the Department of Defense to control the military’s supply chain, but today it is unable to satisfy a need for the most advanced chips. There are no other options on American soil, and even billions in new investment won’t change that any time soon.

Intel CEO Pat Gelsinger emphasizes the company’s big new $20 billion investment in fabrication facilities in Arizona, but acknowledges it will take years to catch up. The company that largely birthed Silicon Valley today produces chips that are 30 percent slower than TSMC’s.

Any restriction of access to Taiwanese chip fabricators would represent not only a loss of processing speed but of sheer volume of product required to keep all things electronic running. Two-thirds of the world’s semiconductors cannot be removed from the market without a calamitous impact on both military and civilian consumers.

Magnify the chip shortage in the auto market across all sectors, and it’s not hard to envision the degree of control China could hold. These chips control not just physical products but also the downstream systems that rely on them — energy, transportation, communications, manufacturing, and, yes, national defense.

Biden Policy Is Supporting Taiwan’s Self-Defense

What is the White House’s position on Taiwan? When China’s hypersonic missile launch came up at the recent CNN town hall, President Biden was asked, “So, are you saying that the United States would come to Taiwan’s defense if China attacked?” “Yes … yes, we have a commitment to do that,” replied Biden. That answer lasted less than 24 hours before the White House backpedaled in the wake of a fiery response from the Chinese Foreign Ministry.

Clarifying that the president who said otherwise “was not announcing any change in our policy,” a spokesperson reinforced U.S. commitment to the Taiwan Relations Act, a Carter-era treaty that eliminated the United States’ commitment to defend Taiwan. Instead, “we will continue to support Taiwan’s self-defense” – meaning, leaving a small island nation with an estimated 165,000 active military personnel to stand its ground versus a 2.2 million-strong Chinese army just across the Strait.

As the confrontation builds, Taiwan’s President Tsai Ing-wen warns of “catastrophic” consequences if the island were to fall to China: “It would signal that in today’s global contest of values, authoritarianism has the upper hand over democracy.” True — and it would tangibly and irrevocably alter the balance of power amongst the world’s superpowers.

Bob Anderson is a partner and CFO of a hotel development company and a former aerospace engineer who worked on the International Space Station and interned in Reagan’s Strategic Defense Initiative Organization (SDIO) at the Pentagon. He is also a licensed commercial pilot.

Copyright © 2021 The Federalist, a wholly independent division of FDRLST Media, All Rights Reserved.