REPORT: Taiwan and Microchips — Why a Little Chip Could Determine the Future of the World

Maxime Marquette

2026-06-24 13:09:11

Two Years of Technological Apocalypse

Analysts identify two major scenarios for a supply disruption: a military invasion of Taiwan by China, and a naval blockade. Both would cut off access to TSMC’s factories for global customers. The question is not only whether Beijing would attack—it is also a matter of quantifying the consequences for both sides. And the consequences are so catastrophic that they constitute, in theory, a rational deterrent to action.

The practical reality: Major U.S. tech companies have several months’ worth of semiconductor inventory—the equivalent of a few quarters of normal production. After that period, the global economy begins to collapse in a domino effect. Cars are no longer being manufactured (Taiwan produces one-third of the chips for vehicles and more than half of the memory chips for cars). Hospitals see their medical equipment fail. Telephone networks go down. Global logistics—which rely on hundreds of thousands of microprocessors embedded in tracking and management systems—come to a standstill. The descent into chaos is exponential, not linear.

The Taiwanese Paradox: The Ultimate Shield and the Ultimate Target

Taiwanese strategists have long referred to semiconductors as their “silicon shield.” The idea is that TSMC is so crucial to the global economy that any Chinese attack would trigger global economic retaliation on such a scale that even Beijing cannot afford it. If China invades Taiwan and destroys TSMC, the Chinese economy itself would lose 16% of its GDP, according to the same analysis. It’s a form of assured mutual destruction—the economic version.

But this shield has a crack: China could take Taiwan without destroying TSMC—and use the factories to its advantage. This is the scenario most feared in Washington and in allied capitals. If Beijing controls TSMC, it controls global production of advanced chips. It can ration access to them. It can decide which countries are entitled to the most advanced processors and which are denied access. This is a form of global technological dominance unprecedented in history. Not even the oil reserves of the Middle East, at the height of their geopolitical influence in the 1970s, ever conferred such leverage.

Admiral Philip Davidson said in 2021 that the Chinese threat to Taiwan was “obvious before the end of this decade.” It is now 2026. Many defense analysts believe that Xi Jinping wanted his forces ready by 2027. I don’t know if an invasion will happen. But I do know that the West had not seriously prepared for this risk five years ago. And five years later, it is still too dependent on a single island to sleep soundly.

The Race for Diversification: The United States, Europe, and the Great Panic

The CHIPS Act, TSMC Arizona, and the 10% Goal

This growing awareness in the U.S. has translated into industrial policy with the CHIPS and Science Act of 2022: $50 billion in subsidies to revive domestic semiconductor manufacturing. TSMC has since announced more than $100 billion in investment in Arizona, with several plants planned. Intel has committed up to $100 billion in Ohio. Samsung has pledged $45 billion. The goal: for the United States to produce 20% of the world’s advanced chips by 2030—up from just a few percent today.

The January 2026 trade agreement with Taiwan added another layer: $250 billion in Taiwanese investments in semiconductors, energy, and AI on U.S. soil, plus $250 billion in credit guarantees. The Trump administration has expressed the goal that 40% of Taiwanese production be relocated to the United States, and that U.S. technology companies source 50% of their semiconductors from U.S. factories, or face a 100% tariff on their imports.

Structural Obstacles Hindering Diversification

But industrial reality is holding back these political ambitions. TSMC’s first factory in Arizona produced its first advanced chip in 2025—a historic moment. But its capacity is a fraction of what Taiwan produces. Specialized suppliers in the Taiwanese ecosystem are not relocating simply because a subsidy is available. Taiwanese engineers are reluctant to settle permanently in Arizona. U.S. unions have wage and working condition demands that drive up production costs. Both Intel and Samsung have seen their subsidies reduced and their orders fall short of what was needed to justify their initial expansion plans.

The realistic projection: even if everything goes well, the United States could reach 10% of global production of advanced semiconductors by 2030. That’s not 20%. It’s certainly not self-sufficiency. It’s a reduction in dependence—significant, necessary, but not enough to eliminate vulnerability. Europe, for its part, hopes to reach 20% of global semiconductor production by 2030 under the European Chips Act. Actual progress remains modest.

I don’t want to discourage American and European efforts at diversification. They are both necessary and long overdue. But we must be honest: no one will build a TSMC equivalent in ten years. It’s not a question of money. It’s a question of ecosystem, of accumulated talent, of know-how passed down through generations of engineers. It took Silicon Valley forty years to become Silicon Valley. The same goes for Hsinchu. You can’t cut that path short by throwing billions at it.

China and Semiconductors: The Other Side of the Issue

Beijing Wants TSMC, but Is Building Its Own Factories

Beijing’s semiconductor strategy is two-pronged. On one hand, there is the military threat against Taiwan, which is inextricably linked to the goal of controlling TSMC. On the other hand, there is a colossal domestic program: China is investing hundreds of billions of yuan in its own chip foundries—led by SMIC (Semiconductor Manufacturing International Corporation). SMIC has succeeded in producing 7-nanometer chips—an achievement that Western observers believed was out of reach for the Chinese due to export restrictions on ASML equipment.

Beijing’s stated goal is self-sufficiency in semiconductors. It’s an ambitious goal: producing the most advanced chips (2–3 nanometers) requires EUV lithography equipment that ASML is prohibited from selling to China. But the Chinese are making progress in multi-pass immersion lithography—a less efficient technique, but one that is not subject to sanctions. Experts estimate that China is one to two generations behind TSMC in the most advanced chips. That’s a considerable gap. It’s also a gap that is narrowing.

Huawei Chips and the Mate 60 Pro Surprise

In August 2023, Huawei launched the Mate 60 Pro—a smartphone equipped with a Kirin 9000S chip manufactured by SMIC using a 7-nanometer process. The announcement sent shockwaves through Washington: analysts had believed that sanctions had made this level of advancement impossible for China. That was not the case. The chip was less powerful and less energy-efficient than a TSMC equivalent, but it worked. It was a major wake-up call regarding the actual effectiveness of semiconductor export controls.

In 2025 and 2026, Huawei continued to make progress. Its Ascend 910B and 910C AI chips, manufactured by SMIC, achieve about 60% of the performance of their Nvidia H100 counterparts on standardized tasks. That’s not parity. But it is sufficient for many AI applications deployed at scale. And combined with LineShine—the all-CPU supercomputer that China has just crowned the world’s number one—the message is clear: China is adapting, finding workarounds, and making progress.

The launch of the Mate 60 Pro in 2023 should have triggered a complete reevaluation of the West’s technology sanctions strategy. Instead, people just shrugged it off. They said, “It’s not as good.” It’s not as good, yes. But it works. And in ten years, “not as good” will have become “on par.” That’s the trajectory. Denying it won’t change it.

Conclusion: Taiwan at the Center of Every Battle

The Rock Worth 10,000 Billion Dollars

Taiwan is not just an island. It is the Gordian knot of U.S.-China rivalry, the trade war, the race for AI, Western defense security, and the global economic future. Whoever controls Taiwan—or secures access to its factories—controls the most powerful lever of the 21st-century digital economy. That’s why every Chinese military signal in the strait is being watched with growing anxiety in Western capitals. This isn’t democratic idealism—it’s pure realpolitik.

The correct response is not to panic or capitulate in the face of Chinese pressure. It is to massively accelerate diversification—in Arizona, Ohio, Germany, Japan, and New Mexico—while maintaining a credible defense of Taiwan, a democratic country of 23 million people that has the right to choose its own destiny. Both are necessary. And neither is optional.

The future is being decided in factories, not just in embassies

The geopolitics of semiconductors is, at its core, a story of industrial expertise accumulated over decades, supply chains spanning entire continents, and investment decisions made—or not made—twenty years ago. The West outsourced its chip production to optimize short-term costs. It is now paying the long-term strategic price. The lesson applies to rare earths, batteries, and active pharmaceutical ingredients. Industrial sovereignty is not a form of nationalist nostalgia: it is a condition for survival in a world where supply chains have become weapons. Taiwan has taught us this lesson the hard way. We can only hope that we draw the necessary conclusions before the emergency turns into a catastrophe.

By Maxime Marquette, columnist