China won’t invade Taiwan – semiconductor chips are far too important

We started this article asking whether the costs of a Taiwanese invasion would be worth it to China. All things considered, I believe the answer is no. My reasoning is based on military/strategic and economic factors.

If Beijing ever gave orders to invade, the PLA would obviously aim for a blitzkrieg-type attack, overwhelming the island before the US could mount a defense. Note this is the same strategy that Putin attempted in Ukraine, with disastrous results. One year in, Russia is no closer to victory.

While China maintains naval superiority in the South China Sea, there are indications that an invasion wouldn’t be so easy to pull off:

Taiwan’s military has fortified defenses around key landing points and regularly conducts drills to repel Chinese forces arriving by sea and from the air… Chinese troops who make it ashore would face roughly 175,000 full-time soldiers and more than 1 million reservists ready to resist an occupation…

“The PLA clearly would have its hands full just dealing with Taiwan’s defenders,” Michael Beckley, who’s advised the Pentagon and US intelligence communities, wrote in a 2017 paper. “Consequently, the United States would only need to tip the scales of the battle to foil a Chinese invasion.

China and Taiwan’s economies are highly integrated so any attempt by Beijing to blockade or even restrict trade with Taiwan would likely cause significant blow-back.

A lot of people claim that Beijing’s end goal in Taiwan would be to seize control of its semiconductor capacity. This is the same reason for the US wanting to defend the island, i.e., preventing China from getting Taiwan’s semiconductors. But as mentioned, if Beijing invades, there is no guarantee it could seize the prized foundries intact. They could easily become a casualty of the fighting, severing the supply of chips to China’s vast electronics industry. Even if the foundries survived a Chinese takeover, they would almost certainly be cut off from a global supply chain essential to their output…

That’s what a lot of people don’t get about these chips; making them is extremely technology-intensive, and their manufacture relies heavily on global supply chains. Even if China wanted to take over semiconductor manufacturing from Taiwan, it doesn’t have the capabilities, and would have to rely on other countries, who would immediately rally around Taiwan, like they did Ukraine. China would be sanctioned and all chip technology transfers halted, if they hadn’t been stopped already.

Remember: The loss of chips from Taiwan would crush Chinese industry. China accounts for 60% of world semiconductor demand. More than 90% of semiconductors used in China are imported or manufactured locally by foreign suppliers. A 2021 report by Foreign Policy Analytics found that China is highly unlikely to achieve independent semiconductor manufacturing capabilities in the next five to 10 years.

We’ve already seen the destructive impacts of a chip shortage on the auto industry. Well over $2 trillion is at risk in the event of a Taiwan blockade, never mind an invasion force. Trillions more in economic activity could be disrupted due to second-order effects that hit industries reliant on Taiwanese chips: “Ultimately, the full social and economic impacts of a chip shortage of that scale are incalculable, but they would likely be catastrophic.”

The bottom line? China’s need for Taiwan’s semiconductor capacity is greater than its desire to end Taiwan’s independence.

The Chinese and US navies will continue to rattle sabers and play war games in the Taiwan Strait but an actual war over the tiny island? I don’t see it. Taiwan is simply too important economically and neither the United States nor China is independent enough of Taiwanese semiconductor control to risk the massive hit to manufacturing that a global chip shortage much worse than the current one would entail.