Apollo News reported on August 5 that since House Speaker Nancy Pelosi visited Taiwan earlier this week, China has resorted to various tactics, from conducting live-fire drills to imposing economic sanctions against the island. However, the world has never seen computer chips on its import ban list.

According to the report, Sanjoy Paul, a supply chain expert at Sydney University of Technology, said that China’s economy relies heavily on chips from the world’s most advanced chip manufacturer TSMC of Taiwan. 

He explained that Beijing would lose if its sanction impacted the TSMC foundry’s operations. Any additional action from China would also influence the world and create “an imbalance” in the supply chain across industries, including the production of Apple iPhones in China. 

He said, “I don’t believe China will take such drastic actions because China itself cannot survive without TSMC. But if they did, China would suffer a lot.”

In addition, TSMC Chair Mark Liu told CNN that “nobody can control TSMC by force.”

Liu added, “If you take a military force or invasion, you will render the TSMC factory not operable. Because this is such a sophisticated manufacturing facility, it depends on real-time connection with the outside world, with Europe, with Japan, with U.S., from materials to chemicals to spare parts to engineering software and diagnosis.” 

Earlier this year, a top U.S. Army War College paper even suggested that Taiwan should destroy TSMC in the event of a Chinese invasion. The article noted, “If done correctly, such a strategy could discourage a Chinese invasion of Taiwan.”

As reported by Cairns Post, TSMC manufactures more than 90% of the world’s most advanced computer chips for big names in the industry, including Apple, Intel, AMD, Broadcom, and others.

The outlet citing data from Gartner, reported that Taiwan’s foundry accounted for 68.4% of the global market share in 2021, of which TSMC held 56.6% market share and maintained the top position.

Paul pointed out that in the past two years, the proportion of the Chinese market in TSMC has dropped from 20% to about 10%, and TSMC is becoming less reliant on China over time.

According to the report, Pelosi met with TSMC founder Morris Chang 張 and other technology leaders during the trip to Taipei. 

Dr. Paul believes that the U.S. would want TSMC to speed up relocating chip manufacturing to the U.S. and other countries.

CNBC reported that the House of Representatives passed the Chips and Science Act last week. The Act provides billions of dollars in incentives to build chip factories in the U.S. While much of the bill’s incentives will go to American companies like Intel, TSMC’s $12 billion chip factory under construction in Arizona could still benefit from the subsidies.

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