Why Taiwan’s tech sector is beyond Beijing’s reach

Excerpt

The recent meeting between Taiwan’s President, Tsai Ing-wen, and House Speaker Kevin McCarthy (R-Calif.) brought predictable threats of “consequences” from Beijing, as China launched military drills off Taiwan’s East coast. A visit last year by then-Speaker Nancy Pelosi (D-Calif.) led to China conducting naval exercises that simulated a blockade of the island state. China’s leader, Xi Jinping, has pledged the “reunification of the motherland,” and the only debate now is whether this will be attempted through military force or bloodless coercion.

If China could acquire and operate Taiwan’s thriving technology sector, including TSMC’s chip fabrication facilities, it would achieve the dominance in advanced chips that has eluded it for so many years.

But if Xi thinks seizing the factories that make 90 percent of the world’s high-end chips means he would control that piece of the supply chain, he does not understand the nature of free-market ecosystems. TSMC is not like a gold mine, where possession of the real estate delivers value to its owner. Rather, TSMC’s factories only have their exceptional value when they are part of a global marketplace of competing, trusting, cooperating companies.

Jon Pelson is an adjunct fellow at the Foundation for the Defense of Democracies and the author of “Wireless Wars, China’s Dangerous Domination of 5G and How We’re Fighting Back.” Follow him on Twitter @JonPelson. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.