Hualian, Taiwan (photo by Ting Wen H)
Isn't Taiwan Beautiful?
As a benefit of our membership website, we will publish, from time to time, unique articles by our contributors. Today, we would like to publish a member contributed article by Dr. Tomaž Slivnik. It is an extremely interesting and important perspective regarding China’s possible invasion of Taiwan. Will the CCP really do it? Despite all the concerns Beijing has, there could be one big motivation for Xi Jinping to take the risks. What is it? Dr. Slivnik explains.
Introduction to the Author
Dr Tomaž Slivnik obtained an MA, MMath and a PhD Mathematics at Trinity College, Cambridge. He spent time in academia including at Louisiana State University, Griffith University and the National University of Singapore, becoming an assistant professor. In 1999 he became a full time technology entrepreneur and then an angel investor. Dr. Slivnik is a member of the board of Cambridge Angels and runs a monthly gathering of semiconductor angel investors. He is an Honorary Industrial Fellow at the School of Physics of the University of Bristol and a mentor at the Bristol Quantum Technologies Entrepreneurship Centre (QTEC)."
Chinese Takeover of Taiwan: An Existential Threat to the West
While it could be that China could not defeat the USA in a kinetic war at the moment, and waging kinetic war against a nuclear power would in any event be risky, the world appears not to have appreciated yet the strategic significance of Taiwan to the world economy and how vulnerable we are to China taking control of Taiwan one way or another – be it through a sudden invasion, the subversion of their leadership, or otherwise.
We were encouraged when we heard Nikki Haley recently say that if China takes Taiwan, it's "all over". Perhaps senior politicians now understand the scale of the threat? Sadly, perhaps not. Haley's take is that it's game over because if China were to take over Taiwan, it would be emboldened to seize other territories around the globe. In reality, in our view, if China takes over Taiwan, it is game over because China does not need to take over any other territory. It will have achieved total world domination and acquired the power to turn us all into vassals - or worse.
Most semiconductor devices (e.g. silicon chips) are manufactured in Taiwan, specifically at the Taiwan Semiconductor Manufacturing Company, better known as TSMC.
Every computer requires a Central Processing Unit (“CPU”), today almost universally a microprocessor, to run.
Virtually all computers and mobile devices – servers, desktops, laptops, mobile phones, tablets – these days use either an Intel or an ARM architecture CPU.
Outside China, there are two vendors of Intel architecture CPUs: Intel and AMD. By market share, Intel is leading, but AMD has recently taken a technological lead on Intel which Intel is struggling to catch up with.
There are many vendors of ARM architecture CPUs, who have them made under licence from ARM. Apple make their own ARM-based CPUs. Samsung currently use the Qualcomm Snapdragon ARM-based CPUs.
Every computer with a display requires a Graphical Processing Unit (“GPU”), to run. There are three GPU vendors which between them have virtually 100% of the market: Intel, AMD and nVidia.
Another important class of chips are Field Programmable Logic Arrays ("FPGAs"). These are used for digital chip prototyping and small scale prototype production and also in High Performance Computing: in order to extract more processing power and power consumption efficiency one can shift computation from multi-core CPUs to GPUs to FPGAs. There are two FPGA vendors which between them have virtually 100% of the market: Xilinx and Altera (acquired by Intel in 2015).
TSMC currently manufactures, among many other things:
all recent AMD CPUs;
all Apple CPUs;
all the Qualcomm Snapdragon CPUs used in the current generation of Samsung mobile devices;
all nVidia GPUs;
all AMD GPUs;
all Xilinx FPGAs.
Intel still fabricates most of their own CPUs, GPUs and Altera’s FPGAs at their own fabrication facilities, but Intel also outsources some of their fabrication to TSMC.
Were China to take control of Taiwan and therefore of TSMC (or even just of TSMC):
of the top 2 computer Intel architecture CPU vendors in the world (Intel, AMD) one would be at China’s mercy and could be wiped out by them at will, and the other would be significantly impacted;
of the top 2 mobile device vendors in the world (Apple, Samsung), both would be at China’s mercy and could be wiped out by them at will;
of the top 3 GPU vendors in the world (Intel, AMD, nVidia), two would be at China’s mercy and could be wiped out by them at will, and the other would be significantly impacted;
of the top 2 FPGA vendors in the world (Xilinx, Altera) one would be at China’s mercy and could be wiped out by them at will, and the other would be significantly impacted.
Some other companies which also have their products manufactured at TSMC are Marvell, MediaTek, Qualcomm (which also uses Samsung) and Broadcom (which also uses UMC (Taiwan), SMIC (“Semiconductor Manufacturing International Corporation”) (China), GlobalFoundries (USA/Singapore/Germany/UAE) and Silterra (Malaysia – a much smaller supplier)).
In the global smartphone semiconductor industry, TSMC and Samsung stand out as the only major players, with TSMC having the lion’s share of the smartphone chip manufacturing market .
TSMC is not the only semiconductor subcontract manufacturer in the world, but its largest (but smaller) competitor, UMC (“Universal Microelectronics Company”), to which you would most naturally transfer your business if you needed to, is also based in Taiwan.
Every company which relies on computers also crucially depends on semiconductors manufactured in Taiwan. Computer manufacture also depends critically on Taiwan in other ways – e.g. computer motherboard and computer manufacturing.
Companies which depend critically on computers includes not just the obvious ones such as e.g. all the cloud service providers on which most of the Internet relies, such as Microsoft Azure, Amazon and Google clouds.
Nearly every business today depends critically on computers to function.
Modern manufacturing is entirely computerized. Without computers, or spare computer parts if computers break down, modern manufacturing lines - some of which are robotized, but also others - grind to a halt. You cannot set up replacement manufacturing lines quickly and easily without the computer equipment, and efficient ones - not at all.
Modern agriculture is also largely computerized - it depends on IT infrastructure, drones for surveillance and crop spraying - and the (computerized) manufacturing lines used to build the machinery itself.
Military equipment and the equipment used to manufacture it is computerized, and relies to a large degree on industry standard computing parts and chips.
Power stations, particularly nuclear ones, require sophisticated computer equipment to run.
In summary, without access to Taiwan's semiconductors, we have no computers => we return to a pre-information revolution world. We do not have modern manufacturing lines => we return to a pre-industrial revolution world. We do not have modern agriculture => we return to a pre-agricultural revolution world. By controlling access to TSMC's semiconductors, China would literally possess the power to send us back to the stone age at any time at their will.
You might think that if TSMC suddenly became unavailable to us, we could transfer production to an alternative fabrication facility. But the harsh reality is, we simply cannot do so.
First, here is the capacity of some of the major silicon wafer manufacturers by the number of silicon wafers they can manufacture per month (using numbers from Wikipedia – obtaining more reliable data currently exceeds our resource capacity):
TSMC has a market share of 56% in the global semiconductor foundry market. It manufactures 80% of the world's most advanced semiconductors. Its manufacturing lines are currently not just full but have a nearly 2 year backlog. As is well-known, in 2021, there has been a massive shortage of chips and electronics more generally. TSMC's manufacturing capacity for 2021 and 2022 has already been reserved. There is none spare.
Building a new silicon fabrication facility, to create more manufacturing capacity cannot be done quickly. It takes years and costs billions. TSMC is building a new fab in Arizona - someone in the U.S. has thankfully realized the national security implications - which will offer TSMC's most advanced processes. This fab will cost USD 12bn and take years to build. Until it is built, the West is totally vulnerable. And even after it has been built, it will only represent a fraction of TSMC's current total capacity.
Even if we had manufacturing capacity available elsewhere, assuming comparable technology is available elsewhere, switching to a new fabrication facility is neither an easy process nor one which can be carried out quickly. It is not simply a matter of transferring orders to another manufacturer. Even comparable processes offered by the different manufacturers are different and generally not compatible with each other. To port a chip to a new manufacturer usually requires significant re-design. This can take months or years.
Finally, comparable technology in reality isn't available elsewhere. TSMC offers some advanced processes which are simply not offered by any competitors - all the products we listed above as being made at TSMC (CPUs, GPUs, FPGAs, etc.) are designed in such processes. In 2009, AMD spun out its own silicon wafer manufacturing facility
(GlobalFoundries), but in 2018, GlobalFoundries was no longer able to offer AMD wafers competitive with TSMC, and AMD transferred their fabrication to TSMC. One of the key reasons AMD overtook Intel is that AMD switched to TSMC’s modern 7nm process (i.e. a process with 7 nanometre feature size), while Intel remained stuck at the 14nm node for many years, unable to create its own manufacturable 7nm process. Sometimes it is not a question of money or time, but of being able to overcome the technology hurdles at all.
For now, China still also depends on TSMC's chips and therefore cannot afford being too aggressive towards Taiwan just yet. For the West or the Taiwanese themselves could in extremis potentially sabotage TSMC too. But China have their own high volume fabs and are working on reducing their dependence on TSMC. Huawei’s fabless subsidiary HiSilicon, for example, last year migrated the manufacturing of its Kirin processors from TSMC to SMIC, a large Chinese semiconductor manufacturer . China's ZhaoXin is also able to legally produce Intel Architecture CPUs, having access to VIA's license (this is a descendant of what used to be Cyrix, which used to be the third Western Intel Architecture CPU manufacturer). These are not very good yet, but this may not remain so forever. China has banned the use of U.S.-made hardware and software in its government offices by 2022.
China has also been acquisitive in the semiconductor industry. Wingtech, a state-backed communist Chinese firm, through its Dutch subsidiary Nexperia, recently executed a hostile takeover of the Newport Wafer Fab, the UK's largest semiconductor wafer fab .
But the point will come before too long where China could take over Taiwan, either in a military blitzkrieg attack, through electoral fraud, by bribing local politicians, or just by taking control of TSMC. Provided they did this in a soft way, what could we then do? Starting a kinetic war with a nuclear China ourselves would be an unlikely and dangerous, response. In any such a conflict which took place post-TSMC takeover, time would be against us, considering our supply chains of semiconductors, IT equipment, industrial machinery, agricultural machinery, military equipment, not to mention the rare earths China already controls, would be at China's mercy. Instead, we would effectively be forced into a state of vassalage to China, from which there would be no escape.
Already a year ago, China sent two aircraft carriers into war games near the Pratas Islands, near Taiwan , following on the heels of the Chinese Premier Li Keqiang expressing Beijing’s desire to “reunify” with Taiwan, at the time an apparent policy shift .
Subsequently, Li Zuocheng, China’s Chief of the Joint Staff Department and a member of the Central Military Commission, speaking at Beijing’s Great Hall of the People on the 15th anniversary of the Anti-Seccession Law, said that China would attack Taiwan if there was no other way of stopping Taiwan from becoming independent . Over the past year, China's aggression towards Taiwan has only increased, at an escalating rate. Not only that, China has been bolder still and also released a propaganda video showing a simulated attack on Andersen Air Force Base on the US Pacific island of Guam. In January 2021, a large force of Chinese bombers and fighters flew past Taiwan and launched simulated missile attacks on the USS Roosevelt in the South China Sea. Adm. Phil Davidson, the head of US Indo-Pacific Command, told the Senate Tuesday 9 March 2021 that he believes China might try to annex Taiwan by 2027 . The same article  reports that the US Air Force has been simulating war games over Taiwan. The war games suggest the US would easily lose the war. The recent trend in war games was not just that the U.S. was losing, but was losing faster. With the U.S. Army being headed by a general more interested in transgender rights than in winning wars, perhaps this is not surprising. There is a frightening prospect that a war with China over Taiwan will turn out to be the USA's Suez crisis moment.
The West cannot afford to neglect China's threat to Taiwan. Nor can it afford not to defend Taiwan if it were to be attacked by China. Moreover, we cannot count on China taking over Taiwan in the obvious way. Their recent "unrestricted warfare" ways have demonstrated that they know how to win wars against nominally superior opponents in ways which are clever and so that their opponent does not even know the war is taking place.
 Ralph R. Ortega, “China plans to deploy two aircraft carriers off Taiwan for war games to stoke tensions with Washington as Beijing warns of a ‘new Cold War’ amid virus blame game”, Daily Mail, 26 May 2020