TSMC is China’s Ace in the Hole Against the United States and Taiwan

Nancy Pelosi’s visit to Taiwan may become more important to Americans if they learn that the production of their new Toyota is at stake. TSMC, formerly known as Taiwan Semiconductor Manufacturing, is one of the most important chipmakers in the island’s economy, and if tensions between the two countries rise, the People’s Republic of China has a trump card: the threat to cut off Taiwan’s exports.

Apple, Qualcomm, and a slew of other multinational corporations rely on this firm for critical components. Even Americans, who are generally indifferent to foreign affairs, should be alarmed by this. It was the first time a House speaker from the United States has visited the region since 1997 when Nancy Pelosi made her trip earlier this week.

On Thursday, Beijing replied by initiating its largest military exercises ever in the Taiwan Strait, which included firing missiles and sending planes to the area. The People’s Republic of China may issue a further threat of retaliation. Taiwan’s principal exports may theoretically be blocked by a naval blockade or a no-fly zone.

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As a result, China, too, would experience the effects of TSMC’s difficulties in China. The $447 billion company’s cutting-edge technology is relied upon by mainland chipmakers, handset companies, electric vehicles, and many more. It makes it less likely that the People’s Republic will follow through.

TSMC’s dominance, however, puts U.S. firms, who have many allies in Washington, at a disadvantage. More than half of the contract chip-making market, including 80 percent of microcontrollers used in automobiles and 90 percent of the most advanced semiconductors, is supplied by the company’s chip factories, which are mostly located in Taiwan.

The pandemic has caused a global scarcity of chips, which has already affected the production of automobiles around the world. In light of the economic crisis and the conflict in Ukraine, American leaders are extremely wary of any more surprises.

The global economy would suffer greatly if TSMC were to be taken out of the equation. China has a significant ace in the hole as tensions escalate to the point of real-world repercussions. On August 4, China launched a series of missiles toward Taiwan, a day after Nancy Pelosi visited the island claimed by Beijing. It was the greatest military exercise in the Taiwan Strait.

According to a July 31 interview on CNN, TSMC Chair Mark Liu said that if China conquered Taiwan, the company’s advanced chip manufacturing would be rendered unworkable. According to Bain & Company, TSMC has a market share of more than 50% of the global contract chip-making business. Stay tuned with us only on Lee Daily