The Director of National Intelligence of the United States, Avril Haines, has warned that a Chinese invasion of Taiwan could bring to a halt the world’s biggest advanced semiconductor chip maker, Taiwan Semiconductor Manufacturing Company Ltd (TSMC), causing the global economy to lose up to $1 trillion annually for the first few years. In a testimony before the Senate Armed Services Committee, Haines estimated that TSMC’s advanced semiconductor chips are utilized in 90 percent of almost all electronic devices worldwide.
Haines warned that an invasion of Taiwan by China that halts TSMC’s production would have far-reaching global financial implications. She called it a “general estimate” and stated that the impact could be “between $600 billion to $1 trillion annually for the first few years.” She further noted that such an invasion would also have an impact on the US GDP as TSMC’s production would be blocked, and it could adversely affect China’s economy if the chipmaker stops producing chips.
The global economy relies heavily on Taiwan’s TSMC, which produces semiconductor chips that are utilized in various electronic devices, from smartphones to cars, and even military equipment. The company is an essential supplier to several multinational corporations such as Apple, Intel, and Qualcomm, to name a few. The US, being one of the largest consumers of TSMC’s chips, is likely to be severely impacted by any disruption in the chipmaker’s production.
The warning comes amid the rising tensions between China and Taiwan, with Beijing repeatedly stating its intent to bring Taiwan under its control, even by force, if necessary. China sees Taiwan as its breakaway province and claims it as its territory, which Taiwan firmly rejects.
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The escalating tensions have led the US to support Taiwan, with President Joe Biden’s administration vowing to strengthen its ties with the island nation. In April, the US State Department stated that it would deepen its unofficial ties with Taiwan by establishing a new body to enhance economic and business relations.
Taiwan has been ramping up its efforts to enhance its defense capabilities to counter China’s growing military might. The island nation is developing its own semiconductor industry to reduce its dependence on TSMC, with the government pledging $9.2 billion to support the local chipmakers.
Meanwhile, China is also pushing ahead with its efforts to become a global leader in the semiconductor industry, with Beijing recently announcing a $1.4 trillion plan to achieve self-sufficiency in the sector. The plan includes the development of several large-scale chipmaking projects, including a new $2.8 billion facility in Wuhan.
In conclusion, a potential Chinese invasion of Taiwan and the subsequent halt in TSMC’s production would have a catastrophic impact on the global economy, leading to a loss of up to $1 trillion annually in the first few years, as warned by the US intelligence chief. The warning underlines the critical role played by Taiwan’s semiconductor industry in the global supply chain and highlights the need for nations to diversify their supply chains and reduce their reliance on a single supplier.
