China, Taiwan, and the Microprocessor Economy

China is likely to try to take control of Taiwan this year, 2023. Why? It would provide a substantial increase to China’s political, economic, and military power.

1. The U.S. has been preventing China from obtaining cutting edge lithography machines (which make chips) as well as advanced microprocessors (chips used in computers, phones, and military equpment).

The reason for this intervention by the U.S. is to prevent China from outcompeting the U.S. economically and militarily. Advanced chips can be used in supercomputers, to design advanced weapons, including nuclear weapons. Advanced chips can also be used to provide the extensive computing power needed for China’s attempts to surveil and control its population. Keeping lithography machines and advanced chips from China hobbles these attempts by that nation. Then computer chips are also needed by militaries around the world, including China. And China has been building up their military and advancing their military equipment to try to compete with the U.S. and NATO. Advanced chips are important to this goal.

Most U.S. and NATO military equipment (communication devices, surveillance devices, missiles, smart bombs, smart artillery shells, planes, tanks, troop carriers, ships, subs, anti-tank weapons, drones, advanced radar, satellites, and the Army’s new computerized rifle scope) all require microprocessors. The U.S. DoD buys over 2 BILLION microprocessors per year for defense of the nation. U.S. fabs cannot manufacture anywhere near to that number of chips. In particular, the U.S. has a very limited capacity for manufacture of advanced chips for the military. A shortage of chips means a shortage of new military equipment.

The U.S. has succeeded in convincing the Netherlands to deny China the most advanced lithography machines in the world (from ASML) and in convincing Taiwan not to provide advanced chips to China or any company in China. This limitation is a serious obstacle to China’s economic and military goals.

UPDATE: The Biden Administration has decided to extend this denial of technology from the most advanced lithography machines (EUV) to the prior generation of machines (DUV). The Netherlands (ASML) and Japan (Nikon, Canon) are the only nations making these machines, and they seem ready to cooperate. This will greatly increase the restrictions on China’s ability to make chips for government, military, and economic purposes.

2. If China takes control of Taiwan, will this provide China with the chip-making capability it seeks?

Taiwan makes 90% of the advanced (5 nm or less) chips in the world. This fact was stated by President Biden as one reason for the recently passed CHIPS and Science act. That law offers 52 billion dollars in subsidies to companies setting up new chip fabs (fabrication plants) in the U.S., while the price tag for the entire act is about 280 billion dollars total. Already TSMC, Intel, Samsung, SK Hynix, Micron, and Global Foundries are taking advantage of this offer. But those fabs will not see volume production until 2024 or 2025 or later.

Taiwan also has 53% of the overall dedicated chip manufacturing capability (pure-play fabs — making chips designed by other companies) in the world. Adding China’s own older chip making ability to that of Taiwan provides about 70% of the world’s chip making capability.

If China can take control of Taiwan, without a war that damages Taiwan’s chip industry, it would seem that China would be able to make all the chips it desires for its economic and military ambitions. In addition, China would see a sharp jump in political power. They would control the chip industry worldwide, as their denial of chips to the U.S., E.U. or any other nation or region would entail severe economic and military harm. The U.S. is able to deny lithography machines and advanced chips to China by threatening other nations with a denial of access to U.S. technology and to U.S. company products and services. But unification of China and Taiwan would give the combination the ability to use a similar tactic on any and all advanced nations.

However, TSMC (Taiwan Semiconductor) has stated publicly that if China takes control of Taiwan, they will be unable to continue production of any chips. The basis for this claim is the assumption that the global supply chain, which TSMC relies upon to feed their chip fabs with materials and services, would stop doing business with a Chinese-controlled Taiwan.

That is a false assumption. Other nations, including the U.S., would be likely to attempt such a denial of goods, so as to continue disrupting China’s economic and military ambitions. But without Taiwan’s chip-making, the world will fall into a very severe chip shortage that will have severe effects on the U.S. economy and the U.S. military’s ability to resupply and repair its weapons systems. The mere announcement that Taiwan is under China’s control would likely crash or shutdown stock markets around the world. The economic implications would be staggering.

Any refusal to provide Taiwan companies (after a China takeover) with chip making supplies would likely prompt “microprocessor sanctions” against nations refusing to do business with China/Taiwan, and thereby causing a severe chip shortage in those nations. Such a scenario would present an imminent danger to the military security of the U.S. and other advanced nations, as well as a danger of global economic collapse. Thus, the U.S. and other developed nations would have NO CHOICE but to require companies to continue to do business with Taiwan chip companies AND to lift the restrictions on doing business with China and Taiwan’s chip industry.

3. The result would be effective control of the microprocessor industry worldwide by the Chinese government. Taiwan would likely be offered status as a semi-autonomous region (like Hong Kong and Macau), with the Chinese government controlling the military and the islands’ economic policies (including exports of chips).

China could then force nations such as South Korea, Japan, and Malaysia to join them in any microprocessor sanctions against other nations. Refusal would result in sanctions against those nations, wrecking havoc with their economies. Such a move would strengthen Chinese control over the global microprocessor economy, giving China a sharp increase in political power.

Despite U.S. efforts, China still makes a large percentage of less-advanced computer chips (i.e. microprocessors), for which demand is high. Taiwan makes 90% of cutting edge computer chips, as well as a large percentage of less-advanced chips (~53% of total world production of all chips). If China is able to annex Taiwan, without a war, then China will control 90% of advanced chip manufacture and a combined total of about 70% of all computer chip manufacture, worldwide. This position will give China a sudden increase in political power, as withholding the export of these chips from the U.S., the E.U., or any other nation or region would be devastating to their economies and militaries.

Will U.S. ships continue to sail through disputed waters, claimed by China but considered international by most of the world? Not if the U.S. military wants to be able to make new anything-with-chips-in-it. Will the U.S. have the same influence over other nations in the region as before? Not with China holding all the chip-making-cards. If China decides (unlikely) that the U.S. and E.U. should stop supporting Ukraine in the war, the threat of withholding chips might cause these Allies to comply. Foreign policy worldwide would need to take account of China’s wishes and demands. And if the U.S. or other nations do not evaluate the risks and benefits of this new situation correctly, they could be subject to severe economic harm until they change their policies.

If China gains control of Taiwan’s economy and foreign policy, China could withhold chips from the U.S. This would slow the pace of manufacture of military equipment and weapons to a crawl, leaving the nation unable to produce enough weapons for a major war. If so, then the U.S. would unfortunately have no choice but to withhold any further shipments of weapons to Ukraine and other allies. Control of Taiwan gives China the ability to hobble the militaries of other nations, while building up their own military equipment with the most modern chips available. Control of Taiwan would turn the tables on U.S. efforts to limit Chinese military development by limiting access to advanced chips.

4. Control of Taiwan by China might occur by a Fait Accompli

The current National Defense Authorization Act (NDAA), passed by Congress and recently signed by President Biden (in late 2022), offers $10 billion in weapons for the defense of Taiwan. The law also asserts that Taiwan must be treated — and the language used is very cautious — almost like an independent nation in world affairs. This represents a large step back from past “one China” language by the U.S. The passage of the NDAA may provoke a response from China. (One response already happened. China sent an aircraft carrier group to sail very close to the U.S. base on Guam.) The combination of the U.S. giving Taiwan billions for weapons, undermining the “one China” policy in the NDAA, and preventing China from obtaining advanced chips may have the effect of pushing China to act sooner, rather than later, on unification with Taiwan.

China could take control of Taiwan by a “fait accompli”, that is, by a swift sequence of actions, with or without violence, before the U.S. could intervene. This possibility is explicitly mentioned in the NDAA, with Congress instructing government agencies to take whatever actions are possible to prevent such a scenario.

But in reality, nothing much can be done to prevent a fait accompli. China could offer Taiwan two choices: 1) a brief war which China will certainly win, but which will also destroy much of Taiwan’s chip making ability, with the consequent economic and military effects around the world, or, 2) status as a semi-autonomous region in China, leaving Taiwan free to hold elections and benefit from its successful economy. There is no real choice there; the second option is the only rational path for Taiwan.

No matter how much support the U.S. military gives Taiwan, its small size compared to mainland China and its proximity (less than 200 miles) to the mainland make a determined attack by China all but certain to succeed. Even if Taiwan somehow “wins” such a war, with China discontinuing military attacks, Taiwan’s economy would be devastated, and its ability to manufacture computer chips could be destroyed permanently. (ASML and other makers of lithography machines would be literally unable to supply Taiwan with enough equipment to rebuild their microprocessor industry, no matter how much money Taiwan might have to spend. ASML is the only company building advanced lithography machines, and they make only a few dozen per year.)

In addition, all the military materiel that the U.S. has supplied to Taiwan would fall into Chinese hands. They could study and reverse engineer U.S. military tech, allowing their military to advance more rapidly in sophisticated military tech. The $10 billion in U.S. military aid to Taiwan will likely end up in Chinese government hands, sooner or not-much-later.

Any war between China and Taiwan would turn the current global chip shortage into a catastrophic collapse, causing severe harm to the U.S. economy and the U.S. military. Chip manufacture machinery requires an absence of vibrations along with an absolutely clean environment. Slight damage in warfare to a chip fab in Taiwan would shutter that fab for months, at a minimum. Cleaning a clean room that has suffered even very limited damage from war might be impossible. But if China directly targets Taiwan’s chip industry in war, Taiwan would certainly cease to be a source of microprocessors of any type for the world. The resultant catastrophic collapse of the global chip supply would devastate the world economy and the ability of the U.S. and NATO to engage in warfare anywhere. By comparison, China would retain its ability to make less-advanced chips for its military and economy.

5. For all these reasons, the United States must prevent a violent takeover of Taiwan by China at all costs. If China demands that Taiwan accept unification with a semi-autonomous status, the U.S. would literally have no other viable choice but to pressure Taiwan to accept the offer. So, unfortunately, I have to conclude that unification of China and Taiwan is inevitable, and will likely occur soon. (Ideally, Taiwan should remain an independent nation. But politics is never ideal.) The longer that China waits to take control of Taiwan, the more the U.S. and the E.U. will develop their own chip making ability, lessening the advantages to China of such a takeover.

Ronald L. Conte Jr.

More Reading:
* Business Insider: The fate of the world economy may depend on what happens to a company most Americans have never heard of
* CNN: War game suggests Chinese invasion of Taiwan would fail at a huge cost to US, Chinese and Taiwanese militaries

This entry was posted in commentary. Bookmark the permalink.

6 Responses to China, Taiwan, and the Microprocessor Economy

  1. Siby says:

    Good take on the strategic implications. But I think you are severly underestimating Taiwans ability to defend itself and severly overestimating China’s capability to mount a large scale amphibious offensive larger than Operation Overlord (D- day) in World War 2. 100 miles from the Chinese coast may seem close to a lay man. But its more like 1000 miles to a Chinese military planner trying to land millions of troops and tens of thousands of tons of material on a hostile Taiwanese coast.

  2. Ben says:

    We witness an epic failure of the consecration of Russia on March 25, 2022 to bring any visible effects, even less the promised Era of peace in the world. The talk of nuclear use only intensified since then. Who is to blame, if pope Francis did his work according to the words of Our Lady? Maybe the bishops who didn’t participate? Regardless who is to blame, we are still not on the page of the Era of Peace, and it is not seen in sight. War in Ukraine is at full force, short of only tactical nuclear explosions that Russian politicians call for.

    China, Chinese communism, is the result of the errors of Russia spreaded throughout the world. However, China advanced much from that early communism, including by allowing limited but guaranteed religious services. Only people who don’t know much about China could claim that the Chinese have some brutal dictatorship. They have quite a refined dictatorship with long lasting goals spanning for much longer than one generation (contrary to our short term goals in the developed West).

    Could China invade Taiwan? It is the same as asking could USA invade Panama or Venezuela. It will come at a cost though, and China knows it. China prefers Taiwan to be granted peacefully as Hong Kong.

    Will USA allow it? USA will lose credibility if that happens. Japan, South Korea and Australia will have to develop their own nukes. Europe will feel more threatened by Russia. Hardliners will take power in Europe, saying USA cannot defend them.

    USA cannot afford giving Taiwan to China, as well as it cannot afford Ukraine to lose to Putin. It was clearly said by NATO secretary general Stoltenberg. It is amazing the boldness in the face of a nuclear Russia, but it is what it is. NATO and USA cannot and will not let Russia win, even at the expense of a nuclear conflict.

    Similarly USA has to defend Taiwan at all cost, maybe with backstage arrangements the war not to go nuclear (but it is not guaranteed, as it is not with Russia). A full scale conventional war with China’s largest army, with sunken carriers etc. CNN has a story today on its front page. Will there be a winner? I am afraid there will be no winner until the war enters the next stage. There will be either armistice or a nuclear exchange.

    The big question is, will the wars in Ukraine and Taiwan, probably also the Koreas and the Middle East at the same time, spill out of control and go to the next level of tactical nuclear and then strategic nuclear exchange. We have to be ready for the worst, while hoping for the best. And the sad truth is, many people are not ready, neither as stored supplies/equipment/emp proof, nor psychologically. They hide behind old views, or at best say that God will deliver them. Let remember that God allowed both WW1 and WW2 to happen, started between Christian, even Catholic nations (Austria, Italy and France were Catholic, along with other smaller countries) in a time of much higher personal and societal morale. To claim that now we are any better, and the world will not have a nuclear war, after Our Lady herself has warned about annihilation of entire nations, is to put our heads in the sand.

    When will the promised spiritual victory come, if even the papal consecration according to Our Lady’s desire didn’t bring the expected change in the world? And how much worse it must happen, before it becomes any better? Should there be some unknown factor, some wild card, such as asteroid impact, super volcano, or pandemic much worse than Covid, so everyone comes back to their senses and in that way the consecration of Russia to give its long awaited fruit – the triumph of the Immaculate Heart and the Era of peace?

    Many expect the Great Warning to stop it all in a blink of an eye. I’d wish it to be the case. Until now, we didn’t have the Great Warning, as well as we didn’t have the fulfilment of Fatima, no matter the passed years, efforts, and world events. I doubt that the Heaven awaits the papal plane to land in Moscow, in order to greenlight the angels for the Great warning. Wasn’t it said it was set at a fixed date and year? I don’t know, but the speculation is just too big, by people who want to be faithful. Just see what nonsense most catholic blogs and forums write. The secular forums are more objective to the facts. And now, today, it is a CNN main story. That’s why I decided it is a time to write (though longer). If Even CNN says it, be ready!

  3. James Belcher says:

    Ron,
    China’s attack on Taiwan (If it happens at all) would probably be the year of 2023 or the early part of 2024. I believe the attack hinges on whether or not the communist
    hierarchy is sold on the idea of the USA getting involved militarily. Should they believe the USA will get involved militarily and are driven to conquer Taiwan anyway, I have no doubt they will attack the airfields and ship yards in Guam, Australia, and Japan thus igniting WW3. I strongly pray China will not miscalculate the consequences of such actions.

    On another topic, I believe I read in one of your older posts in where you suggested the Consecration of Russia and of the world to the Immaculate Heart of Mary should be repeated from time to time. I am of the opinion you are 100% correct.
    I hold the belief that all prior consecrations (limited in scope) – 1942 via Pope Pius XII, 1964 via Pope Paul VI, 1981 & 1983 & 1984 via Pope John Paul II and Pope Francis this past year has led to wonderful happenings around the world. Ie. WW2 won by the USA and Allies, Civil Rights Movement, The breakup of the USSR and Ukraine holding its own against Russia.

    Daily prayer is a powerful tool for the betterment of mankind. I truly do wish the Pope and body of bishops would gather together and offer such consecrations on a more frequent basis.

    • Ben says:

      “WW2 won by the USA and Allies, Civil Rights Movement, The breakup of the USSR and Ukraine holding its own against Russia.”
      Although noble goals, this is not Our Lady promised in Fatima. She promised an Era of Peace for the world, not a victory of one country over another, not civil right movement. Look at Africa, look at Asia, and today look at Eastern Europe. On contrary of the worldwide Era of Peace as a result of a proper done Consecration, we can’t see even the end of a regional conventional war. Let notice that two years ago we didn’t have the Russia-Ukraine war, and the situation was bad enough, we weren’t in the era of peace rather galloping on the slippery slope. For those who want to see in the 1984 consecration of St John Paul II of the world the cause of the fall of communism in Eastern Europe and break up of the USSR, it was separated by 5-10 years. How could that be contributed to the Consecration in 1984 in a manner the whole world to see that the peace is obtained by Our Lady’s Immaculate Heart, as the wish of Jesus himself expressed to Lucia?

      It is a time for the Vatican (those who know the Fatima secret, it is not only pope Francis) to examine what exactly went wrong, who didn’t participate from the bishops, and why after keeping the secret for a century and not doing the proper consecration repeatedly for whatever reason, when finally they did it, it didn’t work as promised by Our Lady. Someone screwed it up. Maybe an entire group of bishops who opposed the pope. The sooner we know it, the better for all. In first place for pope Francis because it is his pontificate that will remain in the history, not the pontificate of some cardinals and bishops who didn’t do as required. Yes, I am calling for responsibility and accountability of high Vatican hierarchy and individual bishops who didn’t do as supposed to do. Because the victims are potentially all of us. And I Refuse to be a victim of a bunch of prelates who did not comply with Our Lady’s words to the letter, in an open defiance to the Holy Roman Pontiff. If they have to be retired, let it be so. If they would have sexual trespasses instead for which they would’ve been retired or suspended, that wouldn’t affect the entire Church and the world, as it affects it now. This talk has been dragging for decades after 1984 failed consecration. And now when we have the next attempt and it fails, infront of the possibility of Russian Poseidon torpedo to wipe out the entire East coast with one only shot and tsunami, or Rome being nuked, I don’t understand what more shall we wait for or keep convenient silence.

    • Ben says:

      Lucia has said that should the proper consecration was done before WW2, WW2 would never take place! Imagine, 50 million victims from all sides, 6 million Jews burned in a holocaust unknown to the humanity until that time, destruction on all sides, rise of communism in the heart of Europe, uncountable number of souls lost as a result of all that.

      That was BAD ENOUGH. Maybe, indeed the consecration of Pius XII lessened to some extend what could otherwise happen, i.e. Hitler obtaining the nuclear bomb first and start nuking or blackmailing the world and achieving if not victory then armistice and preserving his satanic regime. Nobody knows, it is a pure speculation. We know what HAPPENED in real not what could happen as a worse scenario. We know for certain that the failure on the side of the prelates to aid the pontiff in his efforts to consecrate Russia properly before WW2, leaded to suffering that is not just acceptable lesser evil.

      If we will have a similar situation now, if we will be satisfied let say with a limited nuclear exchange in Ukraine and elsewhere compared to a total nuclear war, and that we will contribute to a failed (by now) consecration…Is that all about? Will that bring the triumph of the Immaculate Heart?

      When pope Francis was elected, on the televised meeting with the cardinals he told them frankly in their faces: dear brothers, half of you are already old.
      In the following months I did not see halving of the staff of Vatican. Maybe now is the time to do that reform that pope Francis kept in his heart since and even before his election. We cannot afford another 10 years hoping that somehow Russia will not resort to nukes, while we slowly die off, including our church communities, also torn apart by ultra groups on both sides. We have to think also what remains after us, what kind of Church we leave after us. To much higher degree that concern should be the concern of the cardinals. And if it comes to retiring 100-200-500 people who didn’t do their job as required by Our Lady, then now is the time before the nukes start flying, not after the fact. We can prevent WW3, not saying afterwards that you see Paris was saved as a result of the half consecration, but not Rome. How many souls will be lost forever in that process? Millions? It is just absurd that 106 years after Fatima we still discuss that, instead of having one united faithful for the literal fulfillment of the Heavenly conditions for salvation. Instead, we see the faithful separated by new division lines. Those who should be helping the Roman pontiff most in that uneasy task that Traditionally have been the Traditionalists and conservatives, are those who rip apart the Church most by promoting a new ultra conservative sect in it (not discussing this now). And the liberals have never really cared enough for mystical revelations. Does it mean Our Lady’s request will await a new 10, 20 years or more? Until the Angelic pope? IF that interpretation is correct. Because I am afraid everything will be decided in the next MONTHS.

Comments are closed.