a year ago

A single tech company that will not let China invade Taiwan

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Russia’s armed aggression over Ukraine is regarded as the deadlock breaker, and analysts are showing concern that there might be more armed invasions of superpowers over their neighbouring countries. 

The first possible invasion that tops the list is an armed Chinese invasion of Taiwan. And there are good reasons for that. China’s incursion into Taiwan’s Air Defence Identification Zone has increased noticeably in recent times, giving rise to a global concern that a Chinese invasion might be imminent.

However, China has everything to gain from keeping the world worried about a possible invasion, and a lot to lose if they actually do so. Why?

Global tech industry depends on a tech company!

Because Taiwan’s chip manufacturing industry is too important for the world to let it get compromised, and the company that has made Taiwan so valuable in the global geo-politics is none other than Taiwan Semiconductor Manufacturing Company (TSMC).

TSMC started its journey in 1987, and since its inception as the world’s first dedicated semiconductor manufacturing company, it has grown from a small venture to the world’s 10th biggest company by market cap in 35 years, with a total market cap of USD 617.5 billion.

TSMC is the world’s biggest third-party chip manufacturer. It makes semiconductor chips for some of the biggest companies of the world, including Apple, Nvidia, Qualcomm, AMD, and the list goes on.

That means all the iPhones and the M1 products, and all the graphics cards in the world, and also almost all the Qualcomm mobile processors in the world are linked with TSMC’s fabrication process.

If you happen to own any products from the mentioned companies, then the product’s processors were diffused by TSMC. It also makes the chips for the most advanced military technologies, including the chips of the F-35 and F-15 fighter jets, the status symbol of America's technological and military supremacy.

Alternatives are far behind

So what are the alternatives? As of now, only Intel and Samsung have their own semiconductor foundries, but those are not nearly identical in terms of product diversity, production capacity, and precision.

Intel only makes chips for their own products and they are far behind TSMC’s 4 nm chip technology, whereas Samsung only makes chips for smartphones, including their own Exynos chips (which are not very popular amongst smartphone users).

India and China tried to enter the industry. Although making some progress in the 80s, India’s venture failed in a massive fire and it was too costly for the country to run full-scale again.

China, on the other hand, has been trying to establish itself in the chip market for 20 years. Despite investing billions of dollars, the country is yet to make any major breakthrough in the department.

Even the US has recently passed a bill regarding chip manufacturing, which will allow USD 52 billion in subsidies for US manufacturers to build more chip plants. Although, just one full-fledged plant can cost up to USD 20 billion.

What is America’s interest there?

So, let’s assume China prepares for an armed invasion of Taiwan. What would be the global response? What would be the tech company's pressure on the Biden administration?

Let’s look at the tech donations in the 2020 US elections. The following chart shows the employee donation of the tech companies.

A 2020 report from the Observer showed that Joe Biden was the top recipient of almost all the big tech election donations in the USA. In this age of big corporation supremacy, it is not hard to imagine how far these big, influential companies will go to save their global business.

So can the world afford Chinese destruction on Taiwanese soil where literally all the biggest companies in the world are somehow dependent for their hardware on TSMC?

The answer is no, at least for now. The global chip crisis has already created the worst supply-chain issue in decades, and if the whole supply line gets compromised, there is no way the tech companies, as well as the customers base, will be able to recover from this.

China’s own trillion dollar tech business will be in massive jeopardy, and that is way too costly for any country to ignore regardless of the geo-political incentive of an armed invasion.

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