The People’s Republic of China has always considered Taiwan to be a renegade state that it would have the right to occupy at a time of its own choosing. But a series of steps taken by Presidents Trump and Biden have brought pressure to bear on China, including an effective embargo on advanced technology supplies to communications giant Huawei and to China’s leading chip foundry SMIC.

In the absence of the ability to develop its own leading-edge chipmaking capability China is increasingly looking across the Taiwan Strait for an answer, according to IC Insights.

Taiwan holds the largest share of any country of global chip manufacturing capacity – at about 21 percent. Taiwan and China together hold about 37 percent of global capacity And Taiwan holds about 63 percent of global sub-10nm production capacity.

Monthly installed IC manufacturing capacity for each minimum geometry technology category by region as of December 2020. Source: IC Insights.

China already manufactures about one-third of the world’s electronic equipment but relies on imported ICs. In the IC sector it has a major trade deficit that it wishes to reduce and reunification of with Taiwan provides an immediate solution.

Next: Consequences

The share of IC capacity within the borders of China and Taiwan would represent about 37% of global IC capacity, would be about 3x the amount of IC capacity located in North America. Taiwan holds 22 percent of global 300mm IC capacity, second only to South Korea.

The Taiwanese economy would like collapse if China attempted a military takeover of the island and China’s economy would also suffer, observes IC Insights. The United States has also served as a guarantor of Taiwan’s independence from China for many decades. So military intervention could have many foreseen and unforeseen consequences up to and including world war.

The question is whether China believes the US would go to war to defend Taiwan and whether – if China thinks it would not – China is willing to accept short-term economic pain for the long-term benefit of controlling the major share of the world’s leading-edge IC production capacity for many years to come.

Related links and articles:

News articles:

India asks Taiwan to include wafer fab in trade deal

Report: US, Japan, India, Australia to heap chip pressure on China

US expands Trump’s China ban

SMIC plans for $9 billion Shanghai wafer fab

EU proposes Chips Act to build technology sovereignty

Reports: ARM China makes independent move in autonomous driving

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