Although the tension seems subdued for the moment, doubts about a possible invasion of Taiwan by China have become a recurring issue of great concern worldwide. Aside from the geopolitical escalation that an assault on Taipei could entail, the fight for the island has become a major problem for the world economy due to its dominance of the semiconductor industry. Mainly through its flagship company, TSMC, the small Asian nation controls this key industry for the energy transition, artificial intelligence and all types of key electronic products for today’s world.
Taiwan’s importance is even greater because its chip reign is mainly focused on the most sophisticated ones. That is why ASML (the largest partner of the Asian firm) and TSMC, the company, have prepared a plan in case the worst scenario occurs and the Chinese military forcess begin to take possession of the sensitive Taiwanese industry or if an attack occurs. According to Bloomberg, both companies have prepared a protocol to deactivate the machines remotely and the Netherlands has even carried out simulations of a possible invasion.
The formula to render the island’s equipment unusable, key to the race for global chip dominance, has been carried out especially in a key product of the Dutch firm that it has sold for years to the Taipei firm. Extreme lithography equipment (EUV) are a cutting-edge system in the industry that for many experts represents the future of the sector. It is a technology that only the European firm has in its possession and that allows ultraviolet light to be used to create intricate patterns on the most sophisticated microchips.
This system is fundamental for the most modern semiconductors, for military and artificial intelligence uses, two critical areas. In this way, ASML would have already spoken with senior US officials regarding the concern that Beijing gets hold of this technology through weapons. Furthermore, if its use spreads among Chinese companies that are already strongly entering the sector, it would also be a disaster for ASML. This model has been one of the great keys that has allowed the Dutch company to become the great technological jewel of Europe, reaching 343,000 million euros in capitalization and skyrocketing 70% from 2023.
ASML machines are one of the main focuses in the trade war between the US and China. After imposing its own restrictions, Washington pressured the Netherlands to will decree restrictions on his rival. Thus, the Dutch Government revoked the export permits of some of the firm’s equipment so that it could not reach the Asian country. On this occasion, US officials are the ones who have asked ASML and TSMC for information on how a Chinese intrusion on the island could affect them.
In any case, EUVs are extremely delicate machines that require exhaustive maintenance. In fact, a constant supply of ASML spare parts is needed. This, added to the lack of concrete knowledge about these models and the ‘blackout’ from Amsterdam, would lead to The invasion does not allow China to seize the technology. In fact, in a recent interview with CNN, the president of TSMC, Mark Liu, explained that if soldiers enter their plants, they would find “broken down” machines so “no one can control TSMC, at the time of an invasion.” all the machines and factories would stop working.”
Regarding the Chinese companies that are already strongly entering the sector, Huawei’s great advances stand out. This company, together with SMIC, will begin to create its own next-generation chips to achieve independence in this sector. Until now, the Asian firm used models, precisely, from ASML. This plan has had significant support from the government, which continues to take steps to “remove Western technology” and replace it with its own. In that sense, they have not only introduced plans to ‘phase out’ Intel and AMD chips of Chinese computers, but they hope to soon take similar steps in other areas, such as abandoning the Windows operating system and other software in their state companies.
Although there is no open diplomatic or economic confrontation, movements are being made between the main actors From the market. ASML, at the request of the US, has begun to stop exports of chip machines this year to China. According to Bloomberg, even before this ban, the US would have asked ASML to cancel orders that were already scheduled for the Asian giant. A series of measures that have slowed the company’s sales to China by 15%.
However, at the end of last month, when the leadership of the lithographic company was replaced, the then CEO, Peter Wennink, said that the impact on ASML accounts until 2030 would be limitedsince it will only affect a few Chinese factories.
‘Mutually assured destruction’
Aside from the economic advantage that the island represents, China has been accelerating for a long time to integrate the region that they consider part of their territory. Taiwan is an independent country since the civil war in the country that ended in 1949 with Mao Zedong’s communist victory. The defeated retreated to this region where they ruled for decades. However, Beijing has always considered this as just another province of its country and has committed itself to ‘reunification’.
Economic incentives have accelerated this need and the possibility of armed conflict has become an increasingly present reality. In fact, China has carried out more and more military maneuvers in the Strait of Formosa during 2023. According to the head of the US Indo-Pacific, John Aquilino, China has been preparing the military assault since 2020, adding 400 combat aircraft and 20 warships key to the operation. According to Aquilini The idea would be an invasion in 2027.
If that happens, the remote shutdown would apply to ASML’s line of extreme ultraviolet machines, whose biggest customer is TSMC. Extreme ultraviolet (EUV) light equipment uses high-frequency light waves to print smallest microchip transistors that exist, creating processors with uses for artificial intelligence, as well as for the most sensitive military applications.
“The invasion would be absolutely devastating for the North American economy”
In any case, experts and politicians are clear that ‘mutual assured destruction’ would occur in the event of a ‘shutdown’ of the Taiwanese semiconductor industry. This same week, the US Secretary of Commerce, Gina Raimondo, spoke on the subject. Regardless of whether China managed to seize TSMC’s production (whether they can use it or not), the result would be “absolutely devastating for the American economy“. The senior official stated that 92% of the most advanced chips that the US needs for various industries comes directly from this company.
Adding the impact of chips to other key industries on the island, the Center for International Strategic Studies believes that an invasion of the island would cost the global economy $10 trillion, i.e. about 10% of world GDP, “clearly overcoming the war in Ukraine, the Covid pandemic or the Lehman Brothers financial crisis.”
For the chip industry as a whole, having Dutch machines is differential. Last month, Intel was the first company in the sector to use the brand’s next-generation machine (the TWINSCAN EXE:5000). The American company spent weeks working on installing the equipment, which prints tin at a temperature of 220,000 degrees, a heat 40 times greater than that of the surface of the sun. This gives an idea of how complex the entire process is and allows us to understand why the United States wants to deprive China of the most cutting-edge technology.
